By the early 1990s, almost all countries in the hemisphere were engaged in multilateral or bilateral efforts to liberalize trade. Western Hemisphere Trade Arrangements

The six major multilateral trading arrangements among countries of the Western Hemisphere are NAFTA, Mercosur, the Andean Community, the Caribbean Community, the Central American Common Market, and the Latin American Integration Association (LAIA). 1 and 2.) The United States is a party only to NAFTA. Mercosur currently functions as a customs union, providing not only for a free trade area but also for the establishment of a common external tariff. Other Major Multilateral Agreements

Besides NAFTA and Mercosur, there are four older subregional multilateral trade groupings in the Western Hemisphere. Smaller Trade Arrangements Involving NAFTA Partners

In addition to the larger trade blocs previously discussed, there are more than 20 smaller multilateral and bilateral trade accords among the countries of the Western Hemisphere. Many of these were established during the 1990s. FTAA Working Groups

The areas of responsibility assigned to the 12 FTAA working groups reflect some of the priorities of the United States and other countries in the hemisphere (see table 1). At the ministerial, consensus was reached on several key issues advanced in these proposals. Still, there is disagreement among participating countries on the pace and direction of formal negotiations. Recent Developments in Regional Trade Liberalization Outside the FTAA Process

Adverse economic developments in Mexico in the months immediately following the 1994 Miami Summit raised U.S. concerns about pursuing further free trade initiatives in the region. In practical terms, lack of U.S. participation in shaping these agreements has created disadvantages for some U.S. exporters’ access to markets in the region. According to representatives of several Western Hemisphere countries, regardless of whether the United States resumes a more active role in shaping regional trade liberalization efforts, their countries will continue their own initiatives toward free trade and economic integration, even if these efforts do not coincide with U.S. interests. In the intervening period, fast track authority lapsed. Other Countries Have Moved Forward With Their Own Trade Initiatives

While debate continues in the United States regarding further regional trade liberalization efforts, other countries in the region have proceeded to negotiate new trade agreements and deepen their participation in existing arrangements. Mercosur has been another focus of subregional trade initiatives since the Miami Summit. In addition to the arrangement with Chile, Mercosur has concluded a free trade agreement with Bolivia and is engaged in negotiations to widen its reach to other Andean Group countries. 3). In contrast to the NAFTA partners and Chile, the Mercosur countries’ vision of the FTAA differs significantly from that of the United States. Thus, Brazil has proposed that FTAA negotiations on market access be deferred until 2003, while the United States would like to see this matter addressed as soon as negotiations begin in 1998. For our discussion on the status of FTAA negotiations and recent trade developments in the region outside the FTAA process, we interviewed officials from the OAS, IDB, USTR, the U.S. International Trade Commission, and the U.S. Department of State; representatives from five other Western Hemisphere nations at the forefront of regional trade negotiations; and academicians and other experts on the process of regional economic integration. North American Free Trade Agreement

Established in 1994.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on efforts to liberalize trade among the countries of the Western Hemisphere, focusing on: (1) the principal existing subregional trade arrangements in the Western Hemisphere; (2) the current status of Free Trade Area of the Americas (FTAA) discussions; and (3) certain recent developments in regional trade liberalization outside the FTAA process since "fast track" authority.

What GAO Found

GAO noted that: (1) almost all countries in the region participate in at least one subregional trade grouping; (2) there are now six major subregional multilateral trade groupings among countries in the hemisphere; (3) the two most significant trade blocs, the North American Free Trade Agreement (NAFTA) and the Common Market of the South, known as Mercosur, were both established during the 1990's; (4) NAFTA, the only one of these arrangements to which the United States is a party, created the world's largest free trade area and is the most comprehensive trade agreement in the region; (5) Mercosur has followed a different approach than NAFTA to economic integration through the creation of a customs union; (6) in addition to the major multilateral trade groupings, there are more than 20 smaller trade agreements in the region, most of these have been concluded during the 1990's; (7) U.S. Trade Representative (USTR), Organization of American States (OAS), and Inter-American Development Bank (IDB) officials note that the FTAA working groups have made significant progress to support the launching of formal negotiations; (8) according to these observers, progress in the FTAA process thus far exceeds what had been achieved during the first 2 to 3 years of the Uruguay Round negotiations that led to the establishment of the World Trade Organization (WTO); (9) substantial agreement has been reached on several key issues; (10) disagreement remains, however, regarding the pace and direction of negotiations; (11) the United States and most other countries favor immediate negotiations on all issues; (12) in contrast, Mercosur proposes that negotiations on certain issues such as market access, which is a priority for the United States, be delayed until 2003; (13) following the Miami Summit, the 1995 Mexican financial crisis raised concerns in the United States about pursuing further regional trade liberalization efforts; (14) in the meantime, other countries have moved forward with their own trade liberalizations efforts; (15) Mercosur has strengthened its position, concluding free trade arrangements with Chile and Bolivia, and is beginning trade negotiations with Mexico and the European Union; (16) these agreements have created disadvantages for some U.S. exporters' access to markets in the region; and (17) representatives of several countries in the region generally agree that their countries will continue to advance their own regional free trade initiatives regardless of whether the United States participates in further regional trade liberation.