A WILD CARD NOT ANTICIPATED BY EITHER
supporters or opponents of the FTA was President
Bush’s June 27 unveiling of his “Enterprise for the Americas
Initiative.” For ten years, White House preaching about the
virtues of a unified economy from “the Yukon to the Yucatan”
had fallen on deaf ears. Mexico suddenly reversed its stand
last year, primarily because it hoped to secure exclusive
access to the U.S. market for its exports. On June 10,
Presidents Bush and Salinas met in Washington to formally
order negotiations for a bilateral free zone. Then, just two
weeks later, Bush publicly proposed extending the FTA all
the way to Antarctica. Bush said he foresaw the day when the
countries of North, Central, and South America would all be
“equal partners in a free trade zone stretching from the port
of Anchorage to Tierra del Fuego.”
Mexico kept its reservations quiet. The Salinas Admini-
stration could hardly be seen publicly opposing freer trade
for the rest of Latin America, especially since it has been
strongly advocating an aggressive liberalization of the intra-
regional tariff structures governed by the 10-year-old Latin
American Integration Association (ALADI), which oversees
intra-regional tariff arrangements. And the Mexican govern-
ment also understood that the initiative was intended to
reassure the rest of the region that Washington was not
cutting an exclusive deal with Mexico.
Yet the promise of exclusivity for Mexico had in fact been
implicit in earlier U.S. policy statements. And in Canada’s
case, special access to the U.S. market was promised explic-
itly by the Mulroney government when it was pushing for
acceptance of its bilateral U.S. free trade accord.
The initial favorable reaction to the initiative in Latin
America was quickly replaced by hard questions about U.S.
political and financial commitment to the plan. Doubts
intensified in August, when Bush canceled a scheduled
South American tour, citing budget negotiations with Con-
gress. Moreover, there were no immediate moves to push
Congress for the appropriations or discretionary debt reduc-
tion authority needed to take action on the initiative.*
By contrast, the administration pressed forward on the
U.S.-Mexico pact, notifying Congress of its intention to
negotiate and dispatching Commerce Secretary Robert
Mosbacher on a week-long promotional tour in October with
his Mexican counterpart, Jaime Serra Puche. Serra said the
reaction among the U.S. business groups they addressed
during the five-city U.S. tour was almost uniformly positive,
with only a few mild questions about textiles and automotive
job losses. In New York, Serra recalled, he and Mosbacher
were also questioned about possible negative repercussions
of the pact for Canada, but concern seemed to him to be
confined to the Northeast.
Presidents Bush and Salinas and their trade and finance
ministers met in Nuevo Le6n in November in a further effort
to build support for the U.S.-Mexico pact. And in Washing-
ton, emissaries from countries like Chile and Uruguay that
sought to take up Bush’s free trade invitation were told to
wait until the Mexican agreement is concluded. As a practical
matter, administration officials acknowledge that this means
waiting until and if Bush is inaugurated for a second term.
OBBYISTS TRACKING THE NAFTA DEBATE
say many members of Congress may favor making
Mexico another special case like Canada: both have a long
land border, deeply rooted historic and cultural ties, plus an
overwhelming dependence on U.S. investment and trade.
But they would balk at extending the same market access to
more distant major economies like Argentina and Brazil,
where the risk of retaliation is too great and the rewards too
small. As a trading partner, Latin America-minus
Mexico-is not important enough.
It is far from clear that the same assemblage of North
American business interests would battle on the Southern
Cone’s behalf. Steel companies fear Brazilian competition
more than Mexican. Detroit auto firms have nowhere near the
same degree of investment commitment to South America
that they do to Mexico. Export-oriented manufacturing in-
vestment has been booming in Mexico, reinforcing the ranks
of Mexico’s corporate advocates abroad. By contrast, most
Brazilian and Argentine foreign investment dates back to the
inward-looking 1960s and 1970s and is still aimed primarily
at the domestic market.
The numbers are telling: the U.S. share of foreign invest-
ment in Mexico is equivalent to its share of foreign trade:
70%. In Brazil and the Southern Cone, the former is twice as
high as the latter: 40% compared to 20%. The axiom notwith-
standing, trade does not always follow investment. Transna-
tional corporations are more interested in pushing market
reform below the equator than they are in improving South
American access to foreign markets.
While the North American economies are seen as essen-
tially complementary, Brazil and Argentina offer substantial
direct competition for the U.S. economy in agriculture
(soybeans, citrus, wheat, sorghum, grapes) and industry
(high-grade steel, small aircraft, military equipment). Com-
plaints over Brazilian intellectual property rights rules make
it unlikely that the U.S. electronics hardware and software
industries enthusiastic backers of NAFI’A would fight in
Washington for its incorporation into a hemispheric bloc.
Bankers frustrated by Brazilian and Argentine debt arrears
are unlikely to go to bat for either country.
After NAFTA, the “CBI countries” of Central America
and the Caribbean are expected to renegotiate their special
relationships with the expanded North American bloc. The
Caribbean Basin countries echo Mexico’s arguments about
emigration and cultural ties, proximity, and (through allu-
sion, rarely directly articulated) neo-colonial responsibility.
Together, the CBI economies (Central America, Hispaniola
and Caricom) are barely one-third the size of Mexico. The
four-country Mercosur bloc (Brazil, Argentina, Uruguay, and Paraguay), by contrast, is equal to two-and-a-half Mcxi-
cos, with a hefty combined GDP of $437 billion and a
population of 187 million.
Latin America’s southern hemisphere is simply not a
first-rank supplier of goods or people to the United States,
nor a major purchaser. Neither do Brazil and the Southern
Cone have the history of direct U.S. political and military
presence that typifies the Caribbean Basin. On all those
grounds, a better case from a North American perspective
could be made for the inclusion of the Philippines in an FTA,
or Taiwan or Korea.
Nor is it clear that giving preferential market access to
U.S. goods and investors would be in South America’s long-
term economic interest. Brazil and the Southern Cone coun-
tries would be well advised to put at least equal energy into
fortifying their traditionally strong trading ties with Europe and Japan. The Enterprise Initiative could perpetuate a cycle
of dependency and paternalism in U.S.-Latin American
relations that neither side needs and which the thawing of
the Cold War might otherwise have ended. Most danger-
ously, the promise of greater North-South American interde-
pendence could prove illusory. Lasting trade alliances must emerge from economic reality. They cannot be created by
fiat.
* The budget Bush submitted in January called for a $100 million
appropriation for the initiative’s business promotion fund and
authorization to write off some outstanding debt to the U.S. govern-
ment and its agencies. Yet there are strong doubts that Congress will
authorize the appropriation unless the European Community and
Japan first ante up equal contributions.
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