Government of Chile / CC BY 2.0.
Today’s economic relationships look much different than they did even a decade ago. No longer is trade simply a matter of one country exchanging goods with another, in which the principal barriers are tariffs and quotas. Trade in services has become increasingly important in the Americas, and in the Brazil-US relationship, foreign direct investment has served as a way to evade restrictions on commercial exchange. Trade is now more oriented towards complex global value chains (GVCs), which have taken root across Mexico, Central America and the United States. It is now impossible, in short, to talk about “trade” without delving into other realms such as intellectual property rights (IPR), finance, and labor.
To address these trends, the Dialogue hosted an event with three trade experts: Jeff Hornbeck of Patri, Inc, Osvaldo Rosales of ECLAC, and João Castro Neves of the Eurasia Group. Each had authored a Dialogue report with a unique angle on the trade issue, which were released during the special public session. This conversation was particularly timely given the ongoing negotiations of the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), mega-regional agreements which deal with a broad array of issues beyond tariff levels, including labor laws, IPR, capital controls, state-owned enterprises, and environmental regulations. In this light, participants discussed several areas of concern that may obstruct the Americas from inserting itself into this new global economic order.
One such issue was who gets to sit at the negotiating table. A major concern regarding the TPP and TTIP is that negotiators are re-writing global regulations in favor of more developed, industrialized countries, when these conversations should be taking place at forums like the World Trade Organization (WTO). Generally speaking, countries like the United States favor certain policies, such as restrictive IPR and looser capital controls, that favor US industries. These policies, however, have a negative effect on less-developed countries by raising the costs of patented goods, like medicine, and leaving them more vulnerable to sudden changes in capital flows. Since they span so many important actors and issues, the TPP and TTIP could significantly alter global economic standards, even for those countries that aren’t party to the agreements.
Politics represent another barrier, as demonstrated by the case of Brazil. The country faces serious economic headwinds, such as low productivity and a high cost of doing business, yet many view the prospects for significant trade liberalization as dim. The ruling Workers’ Party has demonstrated scant interest in reducing trade restrictions, such as local content requirements, and with the exception of agriculture, there are few pro-trade lobbies in the country.
Some, however, are at least slightly optimistic. Under the administration of Lula da Silva, there was little pressure to revise Brazil’s economic model. The growth of China buoyed Brazil’s commodity exports while a domestic expansion of credit spurred internal consumption. But under Dilma Rousseff, these favorable economic winds have tapered. While this is certainly bad news for Brazilians nowadays, it may force the administration to make the hard choices in favor of liberalization.
The Dialogue is deeply grateful to Liberty Mutual for its support of this event.
It is not easy to interpret often mixed signals coming from Washington about US foreign policy. But with its wide-ranging agenda, Colombia seems especially complicated.
