Americas

The factors that increase the complexity in identifying the links between trade liberalization and prosperity owe as much to the successes thus far as they do the perceived failures. The world has come a long way in liberalizing trade, and many — if still far from most — barriers have been removed. As Laura Dawson clearly argues in this edition’s opening article (FOCALPoint  Vol 7, issue 3), the era of easy trade negotiations is over. Alongside the more nuanced and technical difficulties of reaching new agreements, their direct impact in creating prosperity and spurring development becomes less obvious. Past successes, paradoxically, make future ones more difficult to argue.

As for the perceived failures of trade liberalization initiatives hindering further advances, there are two broad explanations: 1) unrealistic expectations, and 2) the muddling of the issue in domestic political debates. A trade agreement can represent many opportunities — beyond trade itself — to improve other aspects of the economy, the governance, and the social conditions of a given country. But these consequences are by no means automatic. Trade agreements were in many cases spun as a panacea for all maladies. False expectations then led to disappointment, and from there it was only one more step to skepticism and open opposition.

Trade liberalization in Latin American countries was seen as an easily identifiable face of the macro-economic structural adjustments known as the Washington Consensus, and so the harshness of the latter was pinned on the former. The political resistance to the adjustments — a discussion equally loaded with misconceptions and misplaced expectations — engulfed the trade agenda. To this day promoting trade remains an uphill political battle in the region, but one that has helped strike a more balanced response. First, there is a greater understanding of trade liberalization for what it is, as well as a clarification of its links with the need to insert local economies in the global stage. Second, and arguably more important, there has been an increased understanding and designing of complementary policies sine-qua-non to enable a wider positive impact.

Governments are no longer seen as relinquishing a role by liberalizing trade, but rather as the necessary co-facilitators of the opportunities it creates. They are becoming the main players in the reforms and social redistributive policies that should be implemented — even in the absence of trade agreements. It is in the current good economic times for the region that the opportunities to better prepare for the downturn in the world economy (that will undoubtedly follow) cannot be missed. A new consensus is beginning to prevail where there is a role for the state: the road to prosperity entails both free markets and social justice. It is no longer a case of choosing one to the detriment of the other, or expecting the former to magically lead to the latter.

But just as the case for trade liberalization regains ground in Latin America, it is in the north of the hemisphere where the ghost of protectionism is once again showing its ugly face. Case in point: the presidential race in the United States, and the Congressional reticence to approve the FTA with Colombia. Both nominees in the Democratic Party have expressed their sympathy to the idea of revisiting the North American Free Trade Agreement, stopping short of making a full commitment to doing so. If NAFTA can be reneged, the message for the rest of the world — and Latin America in particular — is an ominous one. Both nominees, but particularly Barack Obama, have spoken against ratifying the FTA with Colombia, joining the chorus of critics whose opposition has little or nothing to do with trade itself.

Just as they were in Latin America, FTAs are an easy target for political opportunistic stances. The need to cater to the labour unions’ support in some key states leads the nominees to champion jobs that — thanks to globalization — are bound to migrate someplace else anyway, with or without FTAs with countries that desperately need the increased access to the U.S. market.

We are seeing once again how FTAs are portrayed as having a bigger impact than they can have in and of themselves. The antagonists of free trade are appealing to reasons outside the realm of trade. Opposition to trade liberalization is thus fought resorting to human rights, labour, and environmental arguments. Even in the rare instances when their concerns are fact based, and not mere “sound-biting,” these cannot be pinned on FTAs. Trade agreements are neither their cause nor an obstacle to solving them.