Trade Liberalization

The United States and other countries in the Western Hemisphere have been making progress in efforts to liberalize trade. Almost all countries in the hemisphere, including the United States, are proceeding with discussions aimed a creating a Free Trade Area of the Americas. At the same time, various subregional agreements and arrangements have been formed. This report (1) describes the principal existing subregional trade arrangements in the Western Hemisphere, (2) outlines the current status of discussions over the free trade area, and (3) identifies recent developments in regional trade liberalization outside the free trade area process since "fast track" authority lapsed in December 1994 and the implications of these developments for the United States. GAO summarized this report in testimony before Congress; see: Trade Liberalization: Recent Developments in Western Hemisphere Trade Arrangements, by JayEtta Z. Hecker, Associate Director for International Relations and Trade Issues, before the Subcommittee on Trade, House Committee on Ways and Means. GAO/T-NSIAD-97-220, July 22 (12 pages).

GAO noted that: (1) almost all countries in the region participate in at least one subregional trade grouping; (2) there are now six major subregional multilateral trade groupings among countries in the hemisphere; (3) the two most significant trade blocs, the North American Free Trade Agreement (NAFTA) and the Common Market of the South, known as Mercosur, were both established during the 1990's; (4) NAFTA, the only one of these arrangements to which the United States is a party, created the world's largest free trade area and is the most comprehensive trade agreement in the region; (5) Mercosur has followed a different approach than NAFTA to economic integration through the creation of a customs union; (6) in addition to the major multilateral trade groupings, there are more than 20 smaller trade agreements in the region, most of these have been concluded during the 1990's; (7) U.S. Trade Representative (USTR), Organization of American States (OAS), and Inter-American Development Bank (IDB) officials note that the FTAA working groups have made significant progress to support the launching of formal negotiations; (8) according to these observers, progress in the FTAA process thus far exceeds what had been achieved during the first 2 to 3 years of the Uruguay Round negotiations that led to the establishment of the World Trade Organization (WTO); (9) substantial agreement has been reached on several key issues; (10) disagreement remains, however, regarding the pace and direction of negotiations; (11) the United States and most other countries favor immediate negotiations on all issues; (12) in contrast, Mercosur proposes that negotiations on certain issues such as market access, which is a priority for the United States, be delayed until 2003; (13) following the Miami Summit, the 1995 Mexican financial crisis raised concerns in the United States about pursuing further regional trade liberalization efforts; (14) in the meantime, other countries have moved forward with their own trade liberalizations efforts; (15) Mercosur has strengthened its position, concluding free trade arrangements with Chile and Bolivia, and is beginning trade negotiations with Mexico and the European Union; (16) these agreements have created disadvantages for some U.S. exporters' access to markets in the region; and (17) representatives of several countries in the region generally agree that their countries will continue to advance their own regional free trade initiatives regardless of whether the United States participates in further regional trade liberation.