Latin American unification in the Trump Era?

Latin American unification in the Trump Era?
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At the 2017 Community of Latin American and Caribbean States (CELAC) annual summit, many Latin American heads of state offered joint condemnation towards a new era of U.S. foreign policy in the region. U.S. President Donald Trump plans to see the renegotiation of free trade agreements (FTAs) and the construction of a southern border wall, in the implementation of an America First policy. U.S. protectionism could lead to increased political and economic unity south of the U.S.–Mexico border, as Trump challenges long-standing regional dynamics. 

Trump’s executive order on Border Security and Immigration Enforcement Improvements, released on January 25th, 2017, has promised to “secure the southern border of the United States through the immediate construction of a physical wall.” Although Mexico–U.S. relations are the most heated topic of discussion regarding this policy, many leaders of Latin American countries are also jointly rallying against several of Trump’s protectionist policies.

The CELAC summit, hosted by the Dominican Republic on 24th-25th January, 2017, witnessed the gathering of ten heads of state and thirty-three foreign ministers from Latin America. Representatives debated the implications of a new regional reality, following the inauguration of Trump as President of the United States. CELAC considers the strengthening of multilateralism a priority in the pursuit of economic, social, and environmental development in the region.

At the summit, the President of the Dominican Republic, Danilo Medina, condemned the anti-globalization efforts of not only the U.S., but also of Europe and China, as catalysts of poverty: “It doesn’t seem reasonable to think that the United States and the developed countries, after years of encouraging globalization […] now abandon these policies that have contributed to increase hope in the progress of all of our peoples.” This sentiment was echoed by most other representatives, with the Chilean chancellor, Heraldo Muñoz, emphatically declaring, “in front of the walls, we must build bridges.”

In the context of concerns on anti-globalization, the probability of renegotiation or retraction of several U.S.–Latin American FTAs also contributed to expressions of anxiety at the summit. FTAs exist to reduce trade barriers and create stability and transparency in trade and investment between participating nations. In Latin America, most of these agreements were fashioned from the mid-1990s onwards. At the time, a process of regional integration was deemed necessary to confront escalating problems of foreign debt.

In more recent years, multilateralism has proliferated for the purpose of political relations rather than economic matters. As a cloud of uncertainty now forms in regards to U.S.–Latin American FTAs, commercial interests are likely to regain a seat of priority at the debating table, particularly at future summit meetings such as CELACs. Great economic potential exists in the negotiation of a successful FTA. According to data provided by the U.S. International Trade Administration, 47% of U.S. goods exports in 2015, with a value of $710 billion, ended up in the twenty countries with which the U.S. holds FTAs. The share of U.S. exports in FTA countries has steadily increased over the past few years.

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Mexico, as a result of the North American Free Trade Agreement (NAFTA), has become one of the largest U.S. trading partners, with a $236 billion export value in 2015. Nonetheless, Trump has condemned this agreement, signed between the U.S., Mexico, and Canada, as “the worst trade deal the U.S. ever signed.” Trump cites the loss of U.S. jobs as a major factor. The Dominican Republic Free Trade Agreement (CAFTA-DR), a multilateral free trade deal signed in 2004 between the U.S., Costa Rica, El Salvador, Guatemala, Nicaragua, Honduras, and the Dominican Republic, will likely also appear on Trump’s agenda, and is also at risk of being overturned. Combined, CAFTA-DR partners form the second largest market for U.S. exports in Latin America.

Evidently, the U.S. has an enormous economic stake in these agreements. Collectively, Latin American countries hold considerable political clout on the matter, and are likely to display this in the months and years ahead. As the heat of uncertainty rises, there will be no running for the shade.

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The relationship, both economic and political, of Latin American countries with the new U.S. administration, was not on the original agenda for the CELAC summit. Yet Mexico and the CAFTA-DR partners in particular have become greatly alarmed at how fast Trump is seeking to implement policies that will seemingly test the stability of the region. The Mexican economy has already devalued amidst fears of a NAFTA revocation.

The executive secretary for the Economic Commission of Latin America, Alicia Barcena, speaking at the CELAC summit, emphasized the need for regional integration in the face of “uncertainty.” The commission urged Latin America’s heads of state to set up economic mechanisms to shield against future U.S. protectionist policies. It remains to be seen if such mechanisms will be adopted, and if so, in what capacity they will form.

Undeniably, the rhetoric at the 2017 CELAC summit hints at the prospect of much greater multilateralism for the region in the near future, as market opportunities begin closing between Latin America and the United States. As one door shuts, windows will be thrust open.

Graphs from: U.S. International Trade Administration

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