U.S. President Joe Biden delivers remarks at the inaugural ceremony of the Ninth Summit of the Americas, Wednesday, June 8, 2022. Source: Erin Scott/White House Photo.
Last week, the Biden administration launched its “Americas Partnership for Economic Prosperity” or APEP. However, Latin American governments remain skeptical that the “Made in America” administration in Washington is serious about promoting regional economic integration. Nevertheless, it would be a mistake for our hemispheric neighbors to simply walk away from the bargaining table.
During diplomatic preparations for the IX Summit of the Americas last June in Los Angeles, the Biden administration resisted undertaking any robust measures to promote regional trade and investment. In sharp contrast, at the very first summit in 1994 the Clinton administration embraced the visionary Free Trade Area of the Americas as the centerpiece at the Miami conclave. At the last minute in Los Angeles—under some pressure from Latin American leaders who see international commerce as vital to their future prosperity—U.S. diplomats circulated the first APEP draft. The APEP paper contained a laundry list of contemporary economic issues for “discussion.” It was a unilateral offering, not a negotiated text. Rather, it was wrapped in classic Biden political rhetoric advocating an ill-defined “worker-centric,” “bottom-up and middle-out” commercial strategy.
Six months later, Latin Americans were still complaining about APEP’s lack of definition. There had been disappointingly little communications from Washington. Last week the administration finally announced the “launch” of APEP, even as it still stopped short of initiating formal negotiations. Simultaneously, twelve nations, including the United States and Canada, issued a joint declaration essentially regurgitating the topics set forth by the United States in Los Angeles. The multinational declaration offered few details on substantive goals—nor did it lay out a negotiating format or timetable.
The published list of participating nations, however, contained a surprise. The Biden administration had managed to split the left-leaning regimes of South America. While the administration has successfully wooed Chile and Colombia, Brazil and Argentina remain outside of the emerging APEP club. The ten participating Latin American and Caribbean countries also include Barbados, Costa Rica, the Dominican Republic, Ecuador, Mexico, Panama, Peru, and Uruguay. With the exceptions of Ecuador, Barbados, and Uruguay, the United States already has free trade agreements with these nations. The exceptions are notable however as both Ecuador and Uruguay are currently governed by pro-business center-right governments, and Barbados represents the English-speaking Caribbean within this forum. The government of Luis Inácio “Lula” da Silva surely was not pleased as APEP threatens to disrupt Brazil’s aspirations to lead a South American bloc in global affairs.
As envisioned by the Biden administration, APEP will be built upon four pillars: regional competitiveness (customs procedures, regulatory practices); resilience (supply chains); shared prosperity (labor standards, financial inclusion); and inclusive and sustainable investment (reinvigorating the Inter-American Development Bank, responsible investment practices).
Yet, many Latin American governments continue to fret that APEP is merely a diplomatic feint by the Biden team aimed at dulling criticism that the U.S. is less than fully engaged in its own hemisphere. The ten participating governments from the region may be motivated at least in part by FOMO—fear of missing out. It is better to be at the table and in the know than left standing out in the cold. Plus, participating in the APEP negotiations is an easy, low-cost opportunity to win points with Washington. Savvy Latin American negotiators understand that within the vast U.S. government there is a perennial struggle between those focused on the region—who generally favor Western Hemisphere economic integration—and those tilted toward traditional allies in Europe and the economic powerhouses of East Asia. Consequently, the smart gambit for Latin America is to add weight to those within the U.S. government who share their interests in regional integration. The best way to do so is to embrace almost any opening, such as APEP, and proceed to stock it with carefully curated, meaty proposals.
That was the successful strategy of astute Latin American leaders during the run-up to the 1994 Miami Summit. Contrary to conventional wisdom, it was Latin America, not the United States, that pressed for the Free Trade Area of the Americas. To ensure a successful summit meeting in Miami, the Clinton administration acquiesced to Latin American desires and signed on to negotiate the FTAA. While the full version of the FTAA remains unfulfilled, the free trade agreements that are the building blocks for APEP are off-springs of that ambitious regional vision.
Many doubt that the Biden administration will risk any headline-grabbing trade and investment accords as the 2024 elections draw near. With Florida and Texas increasingly appearing to be out of reach for the Democratic Party, the path to the White House runs through the rust-belt states where politicians eschew any positive mention of international investment and trade—associated there with economic dislocation and job loss—like the plague.
However, there are several topics within the draft APEP proposal that might make for a mutually profitable agenda. For example, relocating global supply chains from Asia to the Western Hemisphere arguably improves U.S. national security while creating good jobs in Latin America. The Biden administration has been discussing the implications of the Chips Act and the Inflation Reduction Act with allies in Europe and East Asia. But why can’t supply chains producing microchips, electric vehicles, and batteries also reach more deeply into the Western Hemisphere? Armed with billions in subsidies, the executive branch has the levers to reorient commerce toward the region.
Why not begin to stitch together existing FTAs among neighboring economies in the Western Hemisphere? Supply chains could benefit from removing remaining barriers to commerce between the US-Mexico-Canada (USMCA) trade accord and the Central America (CAFTA-DR) accord. A blended USMCA and CAFTA-DR would lay the foundations for a more integrated and prosperous Greater Caribbean Basin economic zone and a more secure U.S. southern border.
Furthermore, labor standards tend to be higher in Latin America than in much of Asia. Why not develop a Western Hemisphere agreement on a high-standards labor code of conduct guaranteed by a strong, transparent system of on-site audits and internet information displays? Gender equality and women’s workforce participation could be among these more specific, measurable goals.
Additionally, much of the proposed APEP agenda falls well within the scopes of the Inter-American Development Bank and the World Bank. A more concerted effort by the U.S. government to energetically mobilize multilateral bank financial and technical resources behind supply chain relocation and related goals including massive infrastructure construction and intensive workforce development would add much needed heft to APEP’s credibility.
If Latin American governments push forward a well-focused, politically pragmatic agenda, the Latin Americanists lying in wait in the administration can be counted upon to pick up the ball. Even working together, this cross-border alliance may not succeed at first, but it remains a worthy task as it can lay the policy foundations for future U.S. administrations.
Richard E. Feinberg is professor emeritus at UC San Diego, a member of Global Americans’ International Advisory Council, and the book review editor of the Western Hemisphere section of Foreign Affairs magazine. While serving on the National Security Council, he was a principal architect of the 1994 Miami Summit of the Americas and is author of Summitry in the Americas: A Progress Report (The Peterson Institute for International Economics).