Fifteen Eighty Four

The international economic order is in a state of flux. Major political and economic developments are reconfiguring globalization as we know it: The World Trade Organization (WTO) is on life-support, a new era of economic statecraft has sparked confrontations between major trading countries, and domestic backlash has led to the emergence of globalization-skeptical parties and candidates.

Nowhere is this era of reconfiguration clearer than in Latin America. This region is composed of a diverse slate of countries with varied interests and strategies. This diversity is on full display with Latin American countries’ engagement with preferential trade agreements (PTAs) – some countries, such as Chile and Mexico, have among the world’s most dense PTA networks, whereas others, such as Bolivia and the Dominican Republic, have remained largely on the sideline. Moreover, Latin America is crisscrossed with regional and mega-regional agreements such as MERCOSUR, the Andean Community, the CPTPP, the Pacific Alliance, and CAFTA-DR, which have transformed regional and global trade patterns.

In this new era of change, countries in Latin America are rethinking and reconfiguring their exposure to PTAs. Some are forging ahead with ambitious attempts to integrate their economies more fully using PTAs, while others are revising and adding new issues to their existing PTAs. Others are reconciling how to manage their trade to better reflect domestic political developments. Importantly, Latin America can be seen as a laboratory to better understand how countries around the world are dealing with new challenges. Key questions include: how do countries decide “with whom” to negotiate PTAs? How do they decide what to include in their PTAs? What impacts do PTAs have on economic, political, and social developments within a country once they are signed?

In a new edited volume, “Globalization in Latin America: The Law, Politics, and Economics of Preferential Trade Agreements,” we seek to better understand how Latin American countries are navigating the challenges of a new era of globalization. The 13-chapter volume brings together a diverse array of scholars from the fields of economics, political science, and law to uncover important dynamics in how Latin American countries are forging ahead.

The volume is divided into three substantive areas, each yielding important new insights to help scholars and practitioners understand the current era. Although the book focuses on Latin America, we think there are lessons to be learned at a global level. In the first section, we seek to understand broad patterns in PTA design as well as the political and economic drivers of design choices.

• Chapter 2, by Manfred Elsig, Kirthana Ganeson, Andrew Lugg, and Marine Roux, highlights the significant variation in PTA design in Latin America and shows that there is no single template followed by the majority of countries. More broadly, this chapter points to an important empirical reality: countries sign PTAs for a variety of reasons, and these PTAs often reflect this variety in their design. There are patterns, but design choices change over time, and depend on partner choice and country preferences, which are rarely static.

• Chapter 3, by Andreas Dür and Robert Huber, delves more deeply into the politics of PTA partner choice. Using novel data, they investigate public opinion and elite preferences towards PTA partners across Latin America. Among the many important takeaways is that the ideology of elites and citizens is a strong determinant of PTA partner preferences. This is important, as it can help explain why a generalized preference for or against trade is not the same as “with whom to trade”.

• Chapter 4, by Amrita Bahri, highlights how Latin American countries have been at the forefront of designing gender commitments and integrating gender mainstreaming into their PTAs, including stand-alone chapters and dedicated implementation mechanisms. Yet, at the same time, Bahri notes that there are significant new commitments that can still be made, which are likely to be determined in part by political will and partner choice in the future.

• Chapter 5, by Julieta Zelicovich, Juliana Peixoto, Leticia Daibert, and Valentina Delich, demonstrates how Latin American countries have contributed to the creation and spread of “special and differential treatment” (S&DT) clauses in PTAs, ensuring that developing countries can pursue their economic development priorities with sufficient “policy space.” The authors find that S&DT clauses in Latin America appear as a “patchwork” of exclusions, which often vary on a case-by-case basis, but are influenced by countries’ initial insistence on development at the outset of negotiations and the bargaining asymmetry between partners.

• Chapter 6, by Sebastian Klotz and Christian Ugarte, examines the link between digitalization and sustainability in PTAs. The chapter traces the initial genesis of environmental provisions in PTAs in the early 2000s, finding that digitalization and sustainability clauses often go together. However, they do not find strong support that these provisions lead to a significant change in trade flows in the aggregate.

The next section of the book considers the impact of PTAs on LA countries, with ample lessons for the region and globally.

• Chapter 7, by José Manuel Álvarez Zárate, Maria Camila Camargo Moncayo, Sofía Urrea Zuluaga, and Diana Beltrán Vargas, examines food security through an in-depth case study of the compatibility of food security provisions contained in the Colombian Government’s 2016 Peace Agreement with the Fuerzas Armadas Revolutionaries de Colombia (2016) with existing trade law in PTAs and the WTO. Their overarching conclusion is that Colombia does have such policy space.

• Chapter 8, by Dorotea López and Andres Bórquez, examines public opinion towards PTAs by reviewing the case of Chile – a country that has made PTAs a centerpiece of its trade-led development model. They find that trade skepticism has increased in recent years and plays a more prominent role in public debate – including the significant politicization of the TPP in 2019 – but that, by and large, elites and citizens accept the use of PTAs as necessary for the Chilean development model.

• Chapter 9, by Felipe Muñoz and Javiera Cáceres, looks at the impact of services provisions in PTAs on women. Econometric analyses of the effects of Chilean PTAs indicate that deep services provisions positively impact women’s employment and potentially reduce gender gaps in the workforce.

• Chapter 10, by Víctor Saco, looks at the issue of food labeling and its compatibility with and inclusion in PTAs. The core finding is that public health provisions of this type are compatible with many PTAs and that trade forums and entrepreneurial countries, can help diffuse this type of legislation, which serves as an example of countries balancing trade and health concerns.

• Chapter 11, by Julia Calvert, looks at the controversial inclusion of investment protection provisions in PTAs. She shows that countries have responded to criticisms of provisions viewed as overly investor-friendly in a number of ways. Domestic political concerns have led to experimentation and reform in investment protection clauses in Latin America; however, this experimentation can paradoxically reduce the clarity of existing obligations, potentially exposing some countries to new risks.

• Chapter 12, by Nicolas Albertoni and Carol Wise, examines the rise of protectionist, non-tariff measures (NTMs) in PTAs through an exploration of NAFTA and MERCOSUR. They show that NTMs have risen within NAFTA and MERCOSUR, a notable emergence of “murky protectionism.” They also demonstrate how the rise of China has impacted Mexico and Brazil, noting that both countries can benefit from trade with China if they work to dismantle existing tariffs and NTMs in their regional agreements.

• Chapter 13, by Daniela Campello and Francisco Urdínez, examines the impact of trade with China in the case of Brazil. They investigate the impact of localized income shocks from trade with China on Brazilian citizens’ views of China. They find that districts hit by import shocks view trade with China as risky but that districts who export to China do not view this trade with China as beneficial, even though they are likely to have benefited. This points to a wider puzzle in current studies – citizens are often influenced by perceived losses but potentially unaware or unconvinced of the gains – that likely underlies much of the existing backlash against globalization.

Collectively, the contributions in this volume demonstrate that Latin America has many lessons for those interested in the future of globalization. Specifically, they highlight not only the diversity of approaches adopted by Latin American countries with respect to their PTAs, but also highlight the many ways in which PTAs have an impact that goes well beyond trade flows. Several lessons are worth highlighting as they matter for the region and globally in the 21^st century. First, the design of PTAs is not static. Rather, design features are determined by dynamic political economy considerations, including the preferences of citizens and elites, as well as the bargaining context of negotiations, geopolitics, and global shocks. Moreover, something uniquely highlighted by this volume is that these preferences are rooted in both the real and perceived impact of PTAs on countries that sign them. Second, the impact of PTAs is similarly dynamic. New economic flows generated by PTAs create winners and losers, and these outcomes are affected by the design of PTAs in ways intended and unintended. Moreover, as is often the case, unforeseen developments, such as the dramatic rise of China, the COVID-19 pandemic, or the politicization of trade and investment domestically by populist politicians, can lead to both new opportunities and new challenges. One enduring lesson, therefore, is that PTAs are likely to continue to be a core feature of the modern global political economy. Their flexibility of design and the readiness with which they can be adapted and updated means that they are exactly the type of policy device that countries can use to pursue their interests, even in uncertain times like today.