Trade Integration for the Americas: What Can Economic Analysis ...

21multilateral trade negotiations requires effective leadership, and there is a public goodsdimension to such leadership. In the past that leadership has been provided by the UnitedStates. However, the American economy is no longer the dominant force in the worldeconomy that it once was, and the US has seemingly abdicated that decisive leadershiprole. Third, and relatedly, one can argue that the US, with its new emphasis on enteringinto RTAs on a worldwide basis, is not only no longer leading but is now underminingmultilateralism. The US seemingly is no longer the champion of multilateralism that itonce was but instead, through its actions, is effectively eroding that system. In addition,the European Union through its own pursuit of preferential arrangements is playing asimilar, nonleadership role.A fourth reason explaining the rise in regionalism, at least as far as Latin Americais concerned, relates to what can be considered as a partial triumph of economicrationality. After years of emphasis on forced import substituting industrialization andaccompanying anti-trade biases in economic policies, recognition grew that those policieswere impeding growth. In backing away from autarchistic policies, there was a growingawareness among Latin American economists and policy-makers that trade is importantfor growth and that trade and other policies also matter. The experience of Chile witheconomic and trade liberalization, along with that of other countries, had an influence. Asa result of this increased economic rationality, Latin American countries began toundertake structural reforms and to emphasize trade more seriously. 24 A corollary to thisgreater economic rationality is an increased acceptance of having to live with the UnitedStates and other developed countries. Indeed those markets are important, and gettingaccess may be more than a matter of simply complaining about protectionism in the moreindustrialized countries. Finally, with many countries liberalizing trade policies and/orentering into RTAs, there has been something of a bandwagon effect. Many countriessimply may have wanted not to be left out of the growing proliferation of RTAs.US policies, as indicated above, have had an effect in promoting the proliferationof regional trade arrangements in recent years. The United States may have drifted intosuch policies rather than pursued them as part of a designed, ex ante strategy. Indeed, theUS was a stalwart defender of multilateralism into the late 1980s. In 1985 it entered intoa bilateral RTA with Israel for presumably largely political reasons; in 1988 a similartrading arrangement was initiated with Canada, this time for mostly economic reasons.An increase in the momentum towards regionalism came when the US entertained andaccepted a proposal from the Salinas Government in Mexico to join the US and Canadain their FTA. The formation of NAFTA marked an important departure for the US; theNAFTA Treaty included an accession clause envisaging NAFTA’s expansion.Subsequently, however, Chilean and CARICOM requests to join NAFTA were refused.This refusal pointed US policies in a somewhat different direction, involving “hub andspokes” RTA arrangements, while at the same time publicly reaffirming the stated USobjectives to pursue the FTAA. If the FTAA was ever a serious US objective, thepiecemeal expansion may have been the best way to proceed. With piecemeal accessions,the pressures would have eventually been high on Brazil (the rest of MERCOSUL and24 See Gurgel and Tyler (2005) for a discussion of the effects of trade policy liberalization in Brazil.