Western Hemisphere Free Trade: Why Should Latin America Be Interested?

What Latin America has gained so far from President Bush's proposal for hemispheric free trade is primarily a psychological boost. Future economic and political gains—and losses—depend on events and decisions that have not yet occurred. The provisions of eventual trade agreements are a crucial area of uncertainty. So are the overall architecture of the new trade system and the success of global talks on the General Agreement on Tarrifs and Trade. Nonetheless, important qualitative conclusions can be reached about the benefits of (1) expected export increases from lowered trade barriers without considering changes in production patterns; (2) the insurance effects, that is, the reduction of future risk by locking in policies; (3) greater investment flows; (4) improved economic coordination; and (5) greater political cooperation. The main benefits to Latin America from free trade, however, will come not from the signing of agreements but from internal changes—economic restructuring and political opening—that each country must make to reach and sustain free trade agreements.