The Latin American trading arrangements just got more complex as Colombia and the US moved one step closer to signing a free trade agreement (FTA), despite the US Congress’ increasingly anti-free trade stance.  The agreement follows on a raft of recent Latin American free trade agreements including the US – Peru FTA, the US - Central American Free Trade Agreement (CAFTA), which later incorporated the Dominican Republic as a member, and the Chilean – US agreement signed in 2002.  The US was also negotiating a free trade agreement with Ecuador until 2006.  As Massimiliano Calì mentioned in his recent ODI opinion on Evo Morales, the decision of both Colombia and Peru to pursue FTA’s has upset partners in the Andean Community of Nations (CAN), Venezuela in particular.  

Latin American trade is getting increasingly complex.  The proliferation of FTAs is predicted by the domino effect often explored in the literature on the political economy of trade: if my neighbour signs a free trade agreement with a state with whom I also trade, I am inclined to pursue an agreement as well so as not to lose out on the access that such an agreement brings.  This is particularly true when the state is the US, with its large market and purchasing power.  The problem is of course that each additional free trade agreement makes the others less valuable – having free access to the US market if good for Colombia only if other countries which have a similar export profile do not enjoy this access.

The problem is that a myriad of bilateral agreements is not always the best deal for development as such agreements often require more concessions on the part of the smaller partner than do regional or multilateral agreements.  All of this frantic signing of FTAs can be seen as symptomatic of the lack of progress in other regional and multilateral trading environs.  The Doha Development Round of the WTO is still on ice and the Free Trade Agreement of the Americas is dead.  Regional integration in Latin America enjoys rhetorical support in some areas (e.g. Mercosur which recently expanded to include Venezuela) but has suffered real problems in increasing trade and economic integration across the region.  Until these larger trade issues are addressed, the stampede towards FTAs with Latin America’s northern neighbour is likely to continue apace, despite the questionable development impacts of such agreements.