US free trade deals leave bitter taste with Latin Americans

BOGOTA, Colombia
With the rise of China and stiff competition from Europe, the United States has been flexing its economic muscle in its own backyard.

Since 2003, when attempts to secure a hemispheric free trade zone broke down, U.S. negotiators have signed bilateral, free trade agreements with nine Latin American nations. Two more, with Ecuador and Panama, are in the pipeline.

Despite skepticism among U.S. labor groups and Congress, those agreements have been an unqualified success for American exporters. For example, U.S. exports to Chile have almost doubled, to US$5.2 billion last year, in the two years since the two countries signed a deal, the Office of the U.S. Trade Representative said.

But among Latin Americans, the dollar diplomacy has left a bitter taste.

"Nobody who sat across the negotiating table from the United States came out of the talks feeling they got a fair deal," said Peter Hakim, president of the nonpartisan Inter–American Dialogue think tank in Washington. "And many feel they’ve been outright cheated."

Part of the failure to impress is attributable to a surge of leftist leaders in Latin America, who’ve deftly capitalized on the region’s traditional protectionism and mistrust of Washington.

But even economists concede that free trade has barely helped the region reduce widespread poverty, which has remained stagnant for decades.

Moreover, the pacts may end up hurting farmers and rural peasants who make up almost half of Latin America’s 500 million people. By permanently locking in trade preferences, countries entering trade deals are effectively turning a blind eye to the US$17 billion that U.S. farmers receive annually in government subsidies, making it extremely tough to compete.

Not surprisingly, support for U.S. free trade deals in Latin America may be turning.

In Ecuador, Indian protesters last month paralyzed much of the country for nearly two weeks demanding that President Alfredo Palacio suspend trade talks with the United States that have been ongoing for years.

And even the signing of a deal is no guarantee of its implementation. Legislatures in Costa Rica and Peru have yet to rubber stamp recent deals even as calls by opposition politicians for national referendums have grown louder.

Still, despite the push by Argentina and Brazil to create a South American trade zone, for much of the region the price of saying no to Uncle Sam remains too high. Even if that means betraying popular goals of regional solidarity.

The experience of the Andean Community trade bloc – comprised of Bolivia, Colombia, Ecuador, Peru and Venezuela – is a case in point.

The recent trade deals by Colombia and Peru with the United States sounded the death knell for the 39–year–old trade bloc, at least in spirit. For example, in providing a quota for American soy products, Colombia effectively shut out Bolivia from what has been until now its top soy market, worth US$170 million a year.

Citing Peru and Colombia’s defections, President Hugo Chavez of Venezuela, a staunch opponent of U.S. free–trade deals, announced last week that he was pulling out of the trade bloc.

It remains to be seen how strongly the Venezuelan pullout could affect the US$8 billion in annual trade among bloc members, and Venezuela’s commerce minister said over the weekend that the withdrawal would be gradual, over five years.

The Andean Community says that trade among member countries has risen on average by 13.5 percent a year since 1990, when it began gradually lifting tariffs and liberalizing trade.