The Free Trade Area of the Americas: American-Domainated Trade, American-Dominated Finance?

Abstract

Before being overtaken by events of 11 September 2001, the topic of the Free Trade Area of the Americas occupied much attention in the US and Canada. The subject was approached as primarily a trade barrier agenda. However we here argue that globalisation and open markets have also been facilitated by issues of currency exchange rates and the fight against inflation. This, in turn, forces considering of the enduring hegemonic status of the US dollar as world numeraire. Floating exchange rates arrived when, in 1971, US President Richard Nixon unilaterally closed the Gold window at the Fed. This effectively ended the postwar Bretton Woods system of the dollar–gold relationship. That action also gave rise to the raging inflation of the 1970s. As inflation has been a problem for economic alignment, we need to look closely at how matters financial – as well as those of trade – affect prospects for the Free Trade Area of the Americas.