Problem with essays

Professor’s Comments

The essay should reflect your interpretation and analysis. In your own
words, comment on the question for this thread, and make the focus your
analysis not on the resources that are integrated. 

While resources should be used to support your analysis and
interpretation, your responses should demonstrate fully your mastery and
understanding of the.  Merely cutting and pasting information does not
meet that criteria--what does is you advancing your arguments and your
analysis. 

Describe the trade relationship between the United States and Latin
American countries during the last half century. How do past Latin
American trade practices affect the region today?

More often the U.S and other countries trade because it is in their
national economic interest to do so. Over the years this has been
supported by theory and practice. Comparative advantage remains the main
focus and principle explaining the efficiency gains that can come from
trade, which have now been recognized for over 200 years. It states that
countries can improve their overall economic welfare by producing those
goods at which they are relatively more efficient, while trading for the
rest. In other words, produce what you are good at, get what you lack
from someone else.



Half a century ago trade relations between Latin America existed but not
to the satisfactory and best interest of the U.S. Central American
countries and the Dominican Republic were allowed to charge very high
tariffs, limited only by the World Trade Organization (WTO) commitments.
Given the slow process by which the World Trade Organization (WTO)
negotiation rounds proceed, the U.S. opted for preferential
arrangements, that is regional and bilateral agreements like NAFTA
(North America Free Trade Agreement) and DR – CAFTA (Dominican
Republic – Central America Free Trade Agreement).

During the mid 1900’s and mid 2000’s Latin America were full of
agreements covered only by WTO which caused debates regarding the extent
to which the U.S could be trade distorting through trade diversion. This
usually occurs when trade is redirected to countries within a limited
agreement that does not take into account countries outside the
agreement, which may in fact be even more efficient producers such as
the U.S. Preferential trade agreements were cumbersome to manage,
requiring extensive rules of origin, among other administrative
complexities.

On the other side of the coin, Latin America debated that the benefits
of trade flow broadly to all Central American countries, but not all
sectors of an economy are affected equally. They felt while consumers
benefit, for example, some industries and workers may actually be hurt
from the adjustments to freer trade and some communities may be
disproportionally affected by changes in trade rules if their economies
are heavily dependent on an import competing industry.

Latin America was faced with clearly implications in the trade
negotiation process for smaller countries’ bargaining leverage when
they chose to negotiate with a large country such as the U.S. in a
bilateral rather than multilateral setting. It realized early on in the
process that there were negotiating issues with which they would have
little or no leverage.

Latin American trade constitutes an important portion of all U.S. trade.
Today a primary U.S. objective in the CAFTA-DR negotiations was to
change the "one-way-street" of duty-free access currently enjoyed by
CAFTA-DR countries on most of their exports into a "two-way-street" that
provides U.S. exporters with access to these markets and levels the
playing field with other competitors. This objective was achieved.

The United States engaged in free trade agreement negotiations with five
Central American countries (Costa Rica, El Salvador, Guatemala,
Honduras, and Nicaragua) in 2003. Negotiations were concluded with El
Salvador, Guatemala, Honduras, and Nicaragua in December 2003 and with
Costa Rica in January 2004. In May of last year, the six countries
signed the United States – Central America Free Trade Agreement.
During 2004, the United States and the Central American countries
engaged in negotiations with the Dominican Republic to integrate that
country into the free trade agreement. On August 5, 2004, the seven
countries signed the Dominican Republic – Central America – United
States Free Trade Agreement (CAFTA-DR). El Salvador ratified the
Agreement in December of last year and Honduras ratified in March of
this year. The Central American - Dominican Republic Free Trade
Agreement (CAFTA-DR) is currently not in effect. The U.S. Congress
approved the CAFTA-DR in July 2005 and the President signed it into law
on August 2, 2005. The CAFTA-DR has been approved by the legislatures in
El Salvador, Guatemala and Honduras. Approval is pending in Costa Rica,
the Dominican Republic and Nicaragua. The agreement shall enter into
force on a date to be agreed upon among the parties. Once implemented,
however, political supporters of it feel that U.S. manufacturers,
workers, farmers and ranchers will benefit from its market opening
provisions.

The CAFTA-DR will supposedly remove barriers to trade with and
investment in the region and will further regional economic integration.
The CAFTA-DR will also require the Central American countries and the
Dominican Republic to undertake needed reforms to confront many of the
problems noted below in areas including: customs administration;
protection of intellectual property rights; services, investment, and
financial services market access and protection; government procurement;
sanitary and phytosanitary (SPS) barriers; and other non-tariff
barriers.

Opposition and anti-CAFTA supporters wanted to stop CAFTA. They felt
that through the proposed Central America Free Trade Agreement, U.S.
corporations will gain control of the region’s biodiversity and
further exploit cheap labor in the maquiladora factories of these
impoverished countries.

It will certainly be interesting to see the effects the agreement has on
both countries.

References:

About CAFTA-DR. Retrieved on August 14, 2005 from:

http://ita.doc.gov/cafta/index.asp

Central America Free Trade Agreement (CAFTA). Retrieved on August 13,
2005 from:

http://www.nopa.org/content/issues/issues.html

Latin America. Retrieved on August 14, 2005 from:



American Intercontinental University Online Cybrary

Trade in Latin America. Retrieved on August 13, 2005 from:

www.ustr.gov

The U.S.-Central America Free Trade Agreement (CAFTA): Challenges for
Sub-Regional Integration. Retrieved on August 14, 2005 from:

HYPERLINK "http://fpc.state.gov" http://fpc.state.gov