free trade of the americas: issues and prospects the andean group jaime malaga department of...
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Free Trade of The Americas: Issues and Prospects
The Andean Group
Jaime MalagaDepartment of Agricultural and Applied Economics
Texas Tech University
Free Trade of the Americas, the WTO and New Farm LegislationSan Antonio, May 2002
Overview
• The Economic Dimension of the Andean Countries
• The “Andean Community” FTA-Customs Union
• US-Andean Countries Trade
• Socio Political Environment
• FTAA: Issues and Perspectives
Andean Countries (AC) Indicators
(2000)
AC MERCOSUR MEXICO
POPULATION 119 236 101
GDP $ BILLIONS 578 1816 915
GDP/CAPITA 5.0 7.7 9.1
TRADE (X + M) 100’ 209’ 344’
TRADE/GDP 17.3% 11.5% 37.5%
The Andean Community ACN (Former Andean Pact)
• Created 1970• Free Trade Area: Completed in 1993 (Except Peru)• Customs Union: Partially in 1995 – Expected
Completion: 2003• Common Market: Target year : 2005• Bilateral Trade Agreements with Chile and Mexico• Free Trade Agreements under negotiation with Mercosur,
EU.
The Andean Community ACN (Former Andean Pact)- Results
• 0 Intra-region tariff since 1993 (except Peru)
• Intra-region exports grew 47 TIMES (1970-2000) while exports to ROW grew 10 times.
• Common External Tariffs under negotiation: four levels expected: 0, 5, 10 and 20 %
• System of “Price Bands” applied to 13 agricultural commodities (since 1995)
Andean Countries Total Imports by Origin (2000)
USA 32%
EU16.4%
MERSUR 9%AC14%
MEX
CHILE
JPTotal Imports 40 US $ Billion
Andean Countries Total Imports Average Annual Growth Rate 1991-
2000 (%)
05
1015202530354045
%
6.3%4.0%
15.6 %15.3%
1.2%
Annual Direct Investment on Andean Countries by Origin 1991-2000
(US $ Mill)
0500
100015002000250030003500400045005000
91 92 93 94 95 96 97 98 99 0
US
EU
CAN
US Ag. Exports to South America 1990-2000
0
500
1000
1500
2000
2500
3000
90 91 92 93 94 95 96 97 98 99 0
AndeanChilePa/UrArg.Brazil
ANDEAN COUNTRIES 70%
US- AC Ag.Trade Balance 90-00
0
500
1000
1500
2000
2500
90 91 92 93 94 95 96 97 98 99 0
US IMPUS EXP
Andean Countries Import High % of US Ag. Exports to South America
(2000)
• SOYBEANS 100%• SOYBEAN OIL 100%• CORN 90% • WHEAT 89%• RICE 86%• FRUITS 82%• SOYBEAN MEAL 62%• COTTON 55%
US Share (%) of AC Ag. Imports 1998-99
0
10
20
30
40
50
60
Bolivia Colombia Ecuador Peru Venezuela Total
38%
Problems and Issues
Political Instability– Ecuador in 1999-2000– Peru in 2001– Venezuela: 2002
Social Unrest/Conflicts - Colombia guerrrilas - Colombia and Peru Drug Production
Different Levels of Market Liberalization/Policies - Market oriented: Peru and Bolivia
-Government intervention: Ecuador Venezuela - Dollarization in EcuadorATPA extension
Latin Am. GDP Growth Rates 2001 (%)
-4-3-2-10123456
%
Bol
ivia
Col
ombi
aE
cuad
or
Per
u V
enez
uela
AN
DE
AN
LA
TIN
AM
Arg
enti
na
Bra
zil
Mex
ico
Chi
le
1.9 0.7
Latin AM. GDP Growth Rate Expected 2002 (%)
-10
-8
-6
-4
-2
0
2
4
%
2.51.0
Potential
Net Exporter of OIL (Venezuela, Colombia and Ecuador) Immense Natural Gas Resources for Export ( Bolivia, Peru) Large Mining Projects under implementation (Peru, Bolivia). Vast Fishing Resources ( Peru , Ecuador) Except Bolivia, scarce areas to expand agricultural frontier If they are able to successfully address their political problems
investment and economic growth are possibleFTAA may generate basis for additional growth. Income growth would result in food and agricultural import
demand.
Summary
• Andean Community (AC): More population than Mexico and 50% of Mercosur
• GDP is 60% of Mexico’s• Represents 70% of US Ag.Exports to South America• US market share declining• Political problems impede faster growth• Large non-ag resource base • Potential fast growth in demand for food imports• Free Trade under negotiation with Mercosur and EU
BOLIVIABRAZIL
CANADA
UNITED STATES
U S
FTAA: ESTIMATED EFFECTS ON AGRICULTURAL EXPORTS Two Cases: With or Without the U.S.
$US Millions 1992
US
Canada
Mexico
Argentina
Brazil
Chile
C Am/Carib
Andean Group
Rest of world
-400 -200 0 200 400 600 800 1,000
FTAA + U.S.
FTAA - U.S.