U.S. Foreign Policy and Trade - Essay Example

?U.S. Foreign Policy and Trade In this work, we examine how United s foreign policy impacts on U.S. trade relations. How do the objectives of U.S. foreign policy affect U.S. trade relations with Latin America? How is NAFTA tied into the broader U.S. foreign policy towards Mexico? Has the implementation of NAFTA led to the U.S. being restricted in the foreign policy realm or was NAFTA part of the broader foreign policy objectives of the United States? What generalizations can be made between U.S. foreign policy and trade? Overview A country’s trade policy unavoidably implements a country’s foreign policy. This is because, at minimum, international trade reflects state recognition. This fact alone circumscribes foreign trade policy under a country’s overall foreign policy. In international trade, goods and services are exchanged. Conventional economic theories on international trade say that international trade promotes development and development in turn promotes equity consistent with Kuznets’s inverted U hypothesis (Todaro and Smith, 212). The choice of trade partners always implies a choice what countries the U.S. wants to have accelerated development. At the same time, trade has its own dynamics. The World Trade Organization, for example, was established precisely to depoliticize trade and make trade subject to multilateral rules rather than beholden to the unilateral rules of powerful nations. Although U.S. foreign trade policy will always be an extension of her overall foreign policy, international trade has its own dynamics and can influence or even subvert U.S. foreign policy. This means, for example that US influence can decrease as multilateral trade organizations assert their collective decisions even if the original intent of U.S. foreign policy is for the U.S. to increase its influence through the promotion of the policy. U.S. Foreign Policy and Trade with Latin America Latin America is the “largest supplier of foreign oil to the United States and a strong partner in the development of alternative fuels” (Barshefsky et al., xi). The country is also “the biggest supplier of illegal drugs” into the United States (Barshefsky et al., xi). Moreover, “Latin America is also the largest source of U.S. immigrants, both documented and not” (Barshefsky et al., xi). Thirty percent of U.S. oil imports come from Latin America compared to only 20 percent from the Middle East (Barshefsky et al., 6). Latinos constitute about 15% of the U.S. population (Barshefsky et al. 6). For the said reasons, Latin America is extremely important for the U.S. as well as a significant source of problems. It is important for America to influence Latin America but Barshefsky and colleagues emphasized that “the era of the United States as the dominant influence in Latin America is over” (xi). Latin American regard for U.S. “global and hemispheric leadership is at its lowest level” (Barshefsky et al., 7). This is shown by data: Latin Americans who favor U.S. political ideas were only 29 percent in 2007 compared to a high 45 percent several years ago in 2002 (Barshefsky et al., 7). The Monroe Doctrine provided the guiding principle for U.S. policy on Latin America for more than 150 years (Barshefsky et al., 5). The Monroe Doctrine asserts U.S. power in Latin America but U.S. policy for Latin America can no longer work under that assumption in view of changes in the political situation, particularly with regard to U.S. dominance over the region (Barshefsky et al., 5). Barshefsky and colleagues pointed out that “if there was an era of U.S. hegemony in Latin America, it is over” (5). During the years in which the U.S. enjoyed hegemony in Latin America, particularly from 1996 to 2006, “total merchandise trade in Latin America grew by 139 percent, compared to 96 percent for Asia and 95 percent for the European Union (EU)” (Barshefsky et al., 6). During the 1980s, as the Cold War started to subside, U.S. policy in Latin America moved from “containing communism and combating left-wing insurgencies to three priorities: opening markets, strengthening democracy, and stemming the flow of illegal drugs” (Barshefsky, 7). According to Barshefsky and colleagues, the three priorities are reflected in agreements “such as the Caribbean Basin Initiative (1983), the Andean Trade Preference Act (1991), and the North American Free Trade Agreement (NAFTA, 1993)” and in the negotiations for a Free Trade Area of the Americas (FTAA) begun in 1994. Barshefsky and colleagues also pointed out that the President Clinton-inaugurated Plan Columbia had the goal of “not only eliminating cocaine production but also bolstering the Columbian government’s efforts to defeat a drug-fuelled guerrilla insurgency” (8). More than anything else, the perspective of Barshefsky et al. is clearly indicative that U.S. trade policy for Latin America dovetailed on U.S. foreign policy. Writing in 2008 and for the Task Force on Latin America created by the U.S. Council on Foreign Relations, Barshefsky and colleagues recommended that U.S. foreign policy for Latin America should be founded on four cornerstones: “1) poverty and inequality; 2) citizen security; 3) migration; and 4) energy security and integration” (Barshefsky et al., 10). Barshefsky and colleagues argued that the large poverty rate of Latin America at 37 percent can lead to political polarization and social unrest, social violence, and hinder economic growth in the region (10). In turn, the social unrest that will be created will only diminish support for democracy and the United States (Barshefsky et al., 10-11). In re-articulating their foreign policy recommendations, Barshefsky et al. argued that foreign policy in Latin America must hinge on democratization, economic growth, and drug control (11). Meanwhile, Weisbrot argued that there are no fundamental differences between Obama’s foreign policy and that of Obama’s presidential predecessor (7-8). Hornbeck reported in February 2011 that although Latin America has not been the largest regional trade partner of the U.S., it is the region with which the U.S. has the fastest growing trade (summary page). According to Hornbeck, “between 1998 and 2009, total U.S. merchandise trade (export plus imports) with Latin America grew by 82% compared to 72% for Asia (driven largely by China), 51% for the European Union, 22.1% for Africa, and 64% for the world” (summary page). Although a hemisphere-wide Free Trade Areas of the Americas (FTAA) has not yet been realized, by 2011 the U.S. has signed 11 trade agreements and implemented 9 of the 11 for the last 15 years (Hornbeck, 1). Thus, to the extent that trade promotes development and as benefits of development trickle down and promote equity, America’s trade with Latin America implements the concerns of Barshefsky and colleagues. Hornbeck strongly confirmed that free trade agreements with Latin America “support U.S. foreign policy, which has historically viewed much of the region as a strategic ‘backyard’” (1). According to Hornbeck, among the free trade agreements in Latin America that support U.S. foreign policy are the Caribbean Basin Initiatives (CBI) and the Andean Trade Preference Act (ATPA). Data shows while Latin American countries had a 7.2% share in U.S. total trade of $1,414 billion in 1996, the Latin American share increased to 8.3% of the total U.S. trade volume of $2,616 billion in 2009 (Hornbeck, 3). U.S. Foreign Policy, NAFTA and Mexico Mexico’s share in U.S. merchandise trade was about 11.7% by 2009 (Hornbeck, summary page). Mexico is also the largest Latin American trade partner in Latin America “accounting for 58% of the region’s trade with the United States” (Hornbeck, 4). Although causation is difficult to establish, one can say America’s foreign and trade policy with Mexico has resulted to a Mexico that is opened to world trade. Immediately available data indicate that Mexico belongs to the countries of Latin America with the most open economy. For instance, while the percentage of international trade in the gross domestic product of Brazil and Argentina are only, 13.1% and 17.0%, respectively, the percentage for Mexico is a high 55.8% (Hornbeck, 4). U.S. foreign and trade policy for Latin America and Mexico is to pursue trade liberalization through multilateral, regional, and bilateral negotiations (Hornbeck, 5). The U.S. NAFTA policy, therefore, is the regional (or sub-regional) component of the overall foreign and trade policy for Canada and Mexico. As early as 2008, for example, the U.S. Department of Agriculture has reported that through the NAFTA, the last of “transitional restrictions” governing U.S.-Mexico and Canada-Mexico agricultural trade had been removed (1). By this, the U.S. Department of Agricultural actually meant that the U.S. and the member countries of the NAFTA removed “thousands of barriers to regional agricultural trade” (U.S. Department of Agriculture, 3). Conclusion Based on the foregoing we can affirm that U.S. trade policy has been dovetailing on U.S. foreign policy. One of the objectives of U.S. foreign policy has been to promote trade liberalization in Latin America and evidence indicated that trade liberalization has been progressing well in the region. Data indicate that the foreign policy objective on trade liberalization has led to an increasing openness to trade in Latin America. NAFTA is indeed tied or part of the broader policy of the United States towards Mexico and towards the world as a whole. As pointed out by Hornbeck, the U.S. foreign and trade policy is for the world to move towards trade liberalization. This foreign policy objective also applies to the NAFTA. In the future, as in the case of every country that is part of the World Trade Organization, NAFTA would restrict the U.S. to the foreign policy realm minus trade policy. This is because multilateral organizations have lives of their own that require compliance among countries. Thus, we can generalize that although foreign policy shapes trade policy, trade can restrict the scope of foreign policy. This means that some aspects of U.S. foreign policy will have to give way to the decisions of multilateral bodies as trade liberalization deepens. Work Cited Barshefsky, Charlene, James Hill, Shannon O’Neil, and Julia Sweig. U.S.-Latin America Relations: A New Direction for a New Reality. United States Council on Foreign Relations: Independent Task Force on Latin America, 2008. Hornbeck, Jeff. “U.S.-Latin America Trade: Recent Trends and Policy Issues.” U.S. Congress: U.S. Congressional Research Service, 8 February 2011. Holmes, Kim. “Defining the Obama Doctrine, Its Pitfalls, and How to Avoid Them.” Backgrounder 2457. Washington: Heritage Foundation, 1 September 2010. Todaro, Michael and Stephen Smith. An Introduction to Economic Development. 9th ed. Boston: Pearson Addison Wesley, 2006. U.S. Department of Agriculture. “NAFTA at 15: Building on Free Trade.” Outlook WR-09-03. U.S. Department of Agriculture: Economic Research Service, March 2009. Weisbrot, Mark. “Obama’s Latin America Policy: Continuity Without Change.” Washington: Center for Economic and Policy Research (CEPR), May 2011. Read More