Gains for the United States from Hemispheric Free Trade

Abstract

If the prospective North American Free Trade Area can be extended to the rest of Latin America and the Caribbean, the United States will gain from increased exports and employment in about the same dimensions as the benefits of free trade with Mexico alone. Ironically, however, the United States should want Latin America to keep its tariffs toward the rest of world low, so that the inefficiency of too sweet a deal for the United States does not create a drag on Latin America's growth. In the long run, the United States earns more from rapidly growing Latin American economies than it would from an oversized margin of preference for U.S. goods in a regional free trade area. The grand Enterprise for the Americas strategy can be successful for the United States and Latin America if it helps consolidate Latin America's historic economic reforms, including its opening to global competition.