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Global Trade

December 2011 - Posts

  • ALADI – Promoting the Latin American Common Market


    Where trade agreements such as NAFTA and CARICOM seek to strengthen free trade ties between countries of a shared region - NAFTA for North America and CARICOM for the Caribbean - so the ALADI agreement seeks to meet this goal for much of South American. With its roots in the Treaty of Montevideo in 1980, the nation members of ALADI (Asociación Latinoamericana de Integración, or Latin American Integration Association) work together to foster the success of the Latin American common market while forging positive relationships with similar unions throughout the world.

    As the largest economic association on the continent, ALADI is comprised of twelve primary nation members:

    • Argentina - Largely agricultural in terms of global trade, Argentina exports soy products and grains to their major trade partners, including ALADI nations Brazil and Chile.

    • Bolivia - Much of Bolivia's export product comes from the mining industry. Here one will find one of the largest lithium deposits in the world, as well as natural gas reserves.

    • Brazil - One of the richer nations in this free trade zone, Brazil is known for their production of machinery and transportation equipment. Agriculture, however, remains vital to the economy through their production of coffee and soy.

    • Chile - Copper mining is an important industry here; much of the world became familiar with Chile by way of the courageous rescue of 33 miners trapped in a mine collapse in 2010.

    • Colombia - Colombia is one of the world's top producers of nickel, coffee, and natural fuels. Of the ALADI nations, Colombia exports the majority of goods to Venezuela.

    • Cuba - While not a South American nation, Cuba was accepted into the agreement in 1999 by virtue of their association with Latin America.

    • Ecuador - A country of diverse economic stature, Ecuador relies upon mainly agricultural exports like bananas and shrimp for trade with the United States.

    • Mexico - Mexico benefits greatly in trade through this treaty and NAFTA. Silver is a primary export, along with food and livestock, particularly brands popular in the US.

    • Paraguay - The majority of Paraguay's export trade is done within the continent, with soybeans and cotton among their more popular cash crops.

    • Peru - Precious metals are sought-after commodities from main trade partners China, Canada, and the US. Copper, zinc, and gold mines keep a good percentage of the labor force at work.

    • Uruguay - Nearly forty percent of the country's export product is beef. Dairy also accounts for a significant amount of export income.

    • Venezuela - Unlike her more agricultural neighbors, Venezuela generates revenues mainly through exporting natural gases and chemicals.

    The trade agreement established between the ALADI nations is designed to promote exchange of goods and services across open borders, with preferential treatment given to the less developed member nations as a means of compensating for what they lack to compete with the larger economies on a global scale. Countries within the agreement are obliged to grant each other reductions in tariffs as they might with non-members, while ALADI also works to strength these relations with non-member Latin American countries and beyond.  With ALADI's additional participation in bi-lateral trade agreements - mainly with North America and Asia - the less developed nations of South America have the opportunity to expand their reach. Eventually, one may find ALADI absorbed by similar organizations like MERCOSUR (the Common Southern Market) and the Adean Community of Nations, both of which are designed to establish a common Union of South American Nations, or UNASUR, to resemble the EU model.  Whatever the future holds for ALADI, its place in the South American economy has left an indelible mark.

  • DR-CAFTA – Maintaining Good Trade Relations Between the US and Central America


    When we think of relations between the United States and countries in Central America, the association may spark memory of past US involvement in political unrest (particularly in Nicaragua and El Salvador). In recent years, however, six nations that comprise Central America have come to rely upon the US and each other for economic gain. The Central America Free Trade Agreement, or CAFTA, has proven advantageous for these countries - where many inhabitants live below the poverty level - to make trade inroads with North America.

    The Benefits of DR-CAFTA

    Following the ratification of the North American Free Trade Agreement (NAFTA) during the Clinton Administration, successor George W. Bush sought to expand American trade relations further along the Western Hemisphere. In 2003, the Bush Administration negotiated with four current members to form the agreement, and by the next year DR-CAFTA had been finalized to allowed free trade within the participating nations:

    • Costa Rica - A largely agricultural nation, Costa Rica imports bananas, coffee, sugar and cocoa.

    • The Dominican Republic - Clothing production represents the largest percent of this country's export income.

    • El Salvador - Coffee accounts for nearly a quarter of El Salvador's export revenues, though they also send paper products and sugar to the US.

    • Guatemala - Like Costa Rica, Guatemala exports coffee and bananas, but in recent years has expanded offerings to textiles and cut flowers.

    • Honduras - Coffee, fruits and nuts are among the foodstuffs shipped to the United States and fellow CAFTA nations

    • Nicaragua - The largest of the Central American nations land-wise, Nicaraguan key exports include coffee and shellfish.

    Through this trade agreement, DR-CAFTA nations enjoy tariff-free trade on the majority of US imports and exports nearly a third of their product and services into the United States. The state of Florida, in particular, is important to DR-CAFTA in that the majority of trade and communication passes through this area. With a large Spanish-speaking population and airports that offer direct flights to Central America, Florida assists the DR-CAFTA in expediting trade. Close to $20 billion in goods from DR-CAFTA countries ship to the United States, improving overall prosperity.

    The Challenges

    Despite the economic boost to the poorer nations of Central America, and the potential for American companies to establish international branches and plants without penalization, DR-CAFTA has not operated without its share of detractors. Concern over restrictions with regards to drug testing and quality control of certain products have challenged Central American pharmaceutical companies to produce affordable medicines, while other critics in the economics field like Joseph Stiglitz have suggested the agreement will not necessarily lessen poverty since American imports may threaten the local businesses.

    However one views DR-CAFTA, this agreement may be considered critical to maintaining good relations throughout the Americas - not just in these six Central American countries, but beyond. Their accompanying Environmental Cooperation Program serves to aid Central America in strengthening their conservation efforts, while US involvement in enforcement of International Labor standards seeks to improve working conditions in the country. DR-CAFTA is an important stepping stone towards a more ambitious Free Trade Area of the Americas - encompassing Chile, Colombia, and others - which could create profitable trade between the north and south continents for future generations.

  • CARICOM – Improving Trade Relations in the Caribbean Community



    One can estimate in the near future that economic integration among multiple nations in a specific geographical region will become more commonplace. The last twenty years have seen the progress of the European Union and their common monetary unit, for example, though the EU is hardly the first collaborative economic organization. In the Caribbean, where European influence still remains despite the independence of many island nations, have worked to strengthen equity in trade for nearly four decades. As parts of the Caribbean Community, or CARICOM, fifteen nations and dependencies join forces to encourage good trade relations with Europe.

    Since 1973, when CARICOM came into formation to succeed an earlier free trade agreement which linked the region's primarily English-speaking nations, fifteen full members have joined:

    • Antigua and Barbuda

    • The Bahamas

    • Barbados

    • Belize

    • Dominica

    • Grenada

    • Guyana

    • Haiti

    • Jamaica

    • Montserrat

    • Saint Kitts and Nevis

    • Saint Lucia

    • Saint Vincent and the Grenadines

    • Suriname

    • Trinidad and Tobago

    In addition, five British territories are included as associate members: Anguilla, Bermuda, the Cayman Islands, Turks and Caicos, and the British Virgin Islands. CARICOM trade and economic business is overseen by a general counsel while social relations are the responsibility of a Deputy Secretary-General. The Secretariat serves the chief position in CARICOM from their official headquarters in Georgetown, Guyana.

    Benefits of this union among the Caribbean nations have included:

    • Expedited assistance for underdeveloped nations within the community. One can argue that a common assumption about the Caribbean islands is that most or all are considered "third world." While these countries do not enjoy the industrial advantage of a global power like the United States, the CARICOM nations as a whole represent on average over $90 billion of the world's GDP. Some nations within CARICOM are also more equipped to help others in terms of trade.

    • Civil relations, conflict resolution, and emergency assistance. Through their central headquarters, the CARICOM nations are able to tackle tensions within the community before they become heated. A recent example involving the deposition of Haiti's president in 2004 resulted in the nation's suspension from CARICOM, though the country was ultimately reinstated. Presently, CARICOM members continue to support Haiti following their recent, devastating earthquake.

    • Open borders. The recent establishment of a CARICOM passport allows citizens in twelve of the fifteen member nations to travel easily within the Caribbean. Similarly, CARICOM has made provisions for tourists and visitors to "island hop" during special events such as the Cricket World Cup.

    With regards to relations outside membership, the CARICOM nations have agreements with Cuba, Costa Rica, and the Dominican Republic. Proposed agreements with Canada and the United States would further solidify CARICOM's status with the NAFTA nations, as Mexico is already associated with CARICOM as an observing nation. Should relations strengthen between the US and the Caribbean, we may see an increased benefit through tourism which allows US citizens to travel freely across island borders and, perhaps one day, use a currency common among all CARICOM members that keeps the economy in the islands strong.