The biggest trend in global economy today is regional integration. Counties realize how beneficial it is to form free trade agreements with their neighbors and even to form trade blocks.
After creating NAFTA in 1994,the United Stated wanted to go further and has pursued trade liberalization with its neighbors in South and Central America. It all started when the US and Chile signed a bilateral free-trade agreement, the Central American Free Trade Agreement (CAFTA) was signed in 2005. Besides market access, CAFTA also viewed,from political perspective, as a way for the United States to support freedom, democracy and economic reforms in its own neighborhood. So, CAFTA breaks down trade barriers between the US and five nations of Central America – Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua plus the Caribbean country of Dominican Republic (Carbaugh, 2009).
Critics of CAFTA argue that it is more of a “freer trade” than free trade because not all the barriers are eliminated. But it is definitely beneficial for the countries forming the block, especially for the US, to which about 80 percent of exports to Central America became duty free.
But CAFTA is not the final destination. The United States are lobbying for the creation of a Free Trade Area of the Americas (FTAA) which would unite all of the nations in North and South America except Cuba.
I think that creation of FTAA would be beneficial for all of the countries in a long run, but at the same time there are too many obstacles to be addressed. It is hard to address interests of both developing countries of Latin America and advanced nations like the US and Canada. At the same time, agricultural, intellectual property rights, institutional issues need to be addressed and included in trade talks.
I think FTAA has a future, but it will take time for this ambitious economic initiative to be completed.
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