FTA is the Way

Trade has been throughout history the cornerstone of relations among states. It has also been a tool to boost economic growth, generate employment, mobilize investment and stimulate social transformation. Over the centuries the world has experienced periods of trade expansion and periods of strong protectionism claiming the need to stimulate local industries, protect employment or simply for domestic political circumstances.

Latin America suffered from 1970 to 1990 a period of extreme protectionism derived from the import substitution policies. Under this theory based on developing strategic sectors, many problems took place. Uncompetitive industries became highly protected, exporters relied on Government subsidies, lack of competition, state capture by economic interests and lack of incentives for industrial transformation, were the common denominator.

During the 90s trade liberalization became a vital element of Policy Reform across the region. Some countries took the wrong approach of unilaterally opening their markets without a coherent policy to expand exports based on stable long-term rules. This approach harmed local industries and more importantly the agricultural sector when facing subsidized competitors. Acknowledging the consequences of unilateral opening, intra-regional trade agreements began to emerge simultaneously with the creation of the WTO in 1995.

During the decade between 2000 and 2010 LAC began to search for more long-term stable trade relations, and in 2003 the FTAA was launched in Miami. Unfortunately the agreement did not evolve due to domestic interest from strong political players in the region. At the same time a Global Agreement under the WTO was not moving at the desired pace.

Considering that the FTAA had derailed and that a Global Trade Agreement lost momentum, a round of bilateral trade agreements became the only feasible route to develop access to markets. Countries like Colombia, Chile, Peru, Mexico, Brazil, the Central American and Caribbean Countries began to engage in bilateral, intra-regional and extra-regional trade agreements.