It’s not going be easy. But, with Donald Trump digging in his heels on his misguided antipathy to international trade, Latin American countries may have little choice but to look toward one another for greater commercial integration.
Indeed, it may be an opportunity, even if an awkward one, for the region’s largest economies to begin looking at one another more as allies than rivals.
Already, Mexico has entered talks with Argentina and Brazil for a possible deal on duty-free corn imports, a preemptive response to the Trump administration’s promise to rip up the North America Free Trade Agreement and to impose tariffs on good produced in Mexico.
The presidents of Brazil and Argentina have reaffirmed a commitment to regional integration, with Mauricio Macri saying South America’s trading bloc Mercosur, would seek closer links with Mexico, along whose border Trump has threatened to build a security wall.
“This change in scenario will make Mexico turn to the South with more conviction,” Macri said in a recent statement. Trump has already affirmed his antipathy to free trade by abandoning the long-fought TransPacific Partnership agreement between 12 nations that included Mexico, Canada and Japan.
Meanwhile, Chile is courting Argentina to enter its own Pacific alliance.
A new report from the International Monetary Fund emphasises the potential benefits of closer relations among nations of the Americas minus the United States.
“Latin American and the Caribbean can reap important growth benefits from further trade integration,” the IMF report says. “With trade integration below that of other regions, there is scope for the region to increase trade as an engine of growth and help offset the weaker economic outlook without adversely affecting overall income inequality.”
The IMF also emphasises, perhaps having learned from the sometimes troubled experience of richer nations, that “strengthened social safety nets can help lessen adjustment costs linked to further integration and promote an equitable distribution of gains from trade.”
A new book from the World Bank comes to a similar conclusion. It points to the more integrated experience of East Asia and the Pacific as an example for Latin America, which has often had more fractured and protectionist commercial relations internally.
“This book proposes a renewal of ‘open regionalism’ in Latin America and the Caribbean aimed at achieving the region’s goals of high growth with stability,” the authors write. “The forces of geography imply that pro-growth global integration cannot be achieved without building a strong neighbourhood. The regional economic integration agenda needs to go well beyond the current spaghetti bowl of preferential trading arrangements.”
Brian Winter, editor-in-chief of Americas Quarterly, also believes “a more insular United States may push Latin American countries to seek greater trade with each other. That could mean a deepening of the Mercosur trade bloc, for example — or an eventual deal between Mercosur and the Pacific Alliance.”
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