Free Trade Agreements: who works with who?

As the world becomes more globalized and intertwined, more and more logistical agreements and alliances are made among countries. These agreements reflect the growing presence and importance of “free trade,” the unrestricted flow by a government of imports and exports between countries.

Latin America, a region greatly cultivated for its vast amounts of resources, is involved in many of these free trade agreements, but the importance here is what multilateral relations are being made within these agreements. The eyes of the world have slowly begun to linger over to Latin America as greater conflicts have arisen in previous regions of interest. So what are some examples of the logistical agreements in which Latin America has gotten involved in?

One of the most important trade agreements involved with the Latin American region is the Asia-Pacific Economic Cooperation, APEC. APEC was created in 1989 with the hope of creating a stronger Asia-Pacific community. It was established between 21 countries that are as follows:  Australia; Brunei Darussalam; Canada; Chile; People’s Republic of China; Hong Kong, China; Indonesia; Japan; Republic of Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; The Republic of the Philippines; The Russian Federation; Singapore; Chinese Taipei; Thailand; United States of America; Viet Nam.

‘“APEC has 21 members – referred to as “member economies” – which account for approximately 40 percent of the world’s population, approximately 55 percent of world GDP and about 44 percent of world trade,”’ according to APEC’s website analysis.

Agreements and commitments by APEC are created on a voluntary basis. Unlike other multilateral trade bodies like the WTO, within APEC, there are no treaty obligations required of participants.

APEC Nations
APEC Nations

Another very important multilateral trade organization involved with Latin America is the Organization of Petroleum Exporting Countries, OPEC. OPEC consists of: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.

OPEC was originally created in a Baghdad Conference in 1960 between the founding five: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The OPEC alliance seeks to “secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.”

PDVSA's El Palito refinery in Puerto Cabello, Venezuela.
PDVSA’s El Palito refinery in Puerto Cabello, Venezuela.

There is much debate, whether OPEC is an effective cartel, or an irrelevant alliance that actually has minimal effect on the fluctuation of the prices of oil. Between the 1960’s to the 80’s, OPEC began to gradually raise their prices which eventually led to the switch to alternate energy sources such as natural gas by buyer countries. This in turn hurt the petrodollar. Although prices had gone down during the 90’s, in the 21st century due to the conflicts in the Middle East and a political crisis in Venezuela, the demand for oil inevitably declined.

Despite the decline, Venezuela has been looked at as one of the leading crude oil producers within Latin America.

APEC and OPEC are just two examples of alliances made with countries in Latin America. Among these, there is also the: Central America-Dominican Republic Free Trade Agreement (CAFTA-DR), Andean Community (CAN), Caribbean Community and Common Market (CARICOM), Free Trade Area of the Americas (FTAA), Global System of Trade Preferences among Developing Countries (GSTP), Southern Common Market (MERCOSUR).

Most of the agreements are metaphors for the alliances and multilateral relations that are connected by trade. With more recent developments, like the BRICS New Development bank that consists of: Brasil, Russia, Indonesia, China, and South Africa, Latin America’s dominance and importance has switched. This demonstrating Russia and China’s fancy to different aspects of the region, the bigger power of influence won’t just be the United States anymore.

The real analysis comes in asking, does the increase in free trade agreements have more advantages or disadvantages? The main benefits being, the increase in productivity and economic growth, but it is commonly known that most of the countries, especially Latin American countries struggle with an equal distribution of wealth despite the presence of recent economic growth.

This goes into the disadvantages, of economies, like those of Latin America that become especially dependent on international trade cycles. With every negotiation, setting the standard of a trade agreement, does not mean there is a level playing ground. For example the agricultural/cultivation sector of production where the actual resource (example: coffee) is bought for cheap within a country (example Brasil) and distributed by private enterprises at a greater price, is an illustration of exploitation. Simple trade agreements fail to protect the value of a product at its original cultivation.

Despite these factors, the number of free trade organizations that Latin America has joined have only grown.  These relations will continue to be monitored.

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