Trade Core - Berkeley 2013

8/13/2019 Trade Core - Berkeley 2013

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Multilateral vs. Bilateral Trade



Bilateral Trade Good



Bilateral Trade Good – General

Bilateralism is key to addressing state concerns.Thomas Rixen & IndoRohlfing ; 2005 (Thomas Rixen, political scientist and economist, is a senior

research fellow in the research unit “Transnational Conflicts and International Institutions”. He holds aPhD from Jacobs University Bremen (with distinction), where he was affiliated with the CollaborativeResearch Center (Sfb) “Transformations of the State.” Ingo Rohlfing, PhD Assistant Professor CologneGraduate School in Management, Economics and Social Sciences Faculty of Management, Economicsand Social Sciences, University of Cologne. TranState Working Papers, “The Political Economy ofBilateralism and Multilateralism: Institutional Choice in International Trade and Taxation”http://academia.edu/700228/The_Political_Economy_of_Bilateralism_and_Multilateralism_Institutional _Choice_in_Trade_and_Taxation)

Based on stylized institutional histories of both cases we develop simple game theo-retic modelsincorporating domestic level considerations. Building on these models we then go on to explain theinstitutional choice between bilateral and multilateral coopera-tion. We show that state concerns forthe distribution of benefits can be best achieved under bilateral bargaining in both regimes. However,in order to lower transaction costs there are also elements of multilateral bargaining. Agreement ismultilateral in trade in order to overcome a free-rider problem that results from an interaction ofconcerns for distribution and enforcement. Since such a problem of free-riding does not exist in taxa-tion, there is no need for binding multilateral agreement.

http://academia.edu/700228/The_Political_Economy_of_Bilateralism_and_Multilateralism_Institutional_Choice_in_Trade_and_Taxation






Bilateral Trade Good – Econ

Bilateralism is key for American manufacturing – allows access to foreign consumers.The National Association of Manufacturers , 2011 (“Manufacturing and Trade – Bilateral Trade”

http://www.nam.org/Issues/Trade/Manufacturing-And-Trade-Bilateral-Trade.aspx)

Ninety- five percent of the world’s consumers live outside the U nited States. Manufacturers in Americamust be able to reach those consumers to grow their businesses and create jobs .¶ Manufacturers relyon bilateral free trade agreements (FTAs)as a proven, practical way of eliminating foreign tradebarriers and creating new markets for American products. The passage of FTAs with Colombia, Panamaand South Korea in October 2011 opens these markets for U.S. exports by removing tariff and non-tariff barriers. The legal process for implementation of these agreements necessary for U.S.manufacturers to take advantage of the benefits is underway. As soon as it is available, the NAM willprovide information on how you can take advantage of these three new agreements. ¶ FTAs account fornearly one-half of U.S. manufactured goods exports. They lower the price for consumer goods in theUnited States as well as the costs U.S. businesses pay for imported materials. Bilateral FTAs also openforeign markets to U.S. goods, increasing employment in those export sectors. The Census Bureaureports that over the past two years, U.S. manufacturers had a $50 billion surplus with theircounterparts in FTA partner countries. Conversely, in the same time period, the U.S. trade deficit inmanufacturing goods with the rest of the world was an astounding $820 billion .¶ The United Statesalready has FTAs in force with 17 nations.Utilizing the preferential benefits of these existing FTAs canbe a powerful factor in increasing manufactured goods exports for companies large and small. TheNAM and its members are strongly encouraging key players in the Administration, Congress and theinternational community to move forward on some of the most pressing trade agreements, includingthe Trans-Pacific Partnership regional trade agreement; passing Permanent Normal Trade Relations withRussia to receive the benefits of its World Trade Organization accession; and launching new bilateral andregional trade initiatives. Additionally, the NAM leads an advocacy effort for a strong, proactive U.S.

Bilateral Investment Treaty (BIT) program.¶ Without these critical tools in the fight to open foreignmarkets, U.S. manufacturers are at a significant competitive disadvantage.

Bilateralism accesses the economic benefits of free trade while remaining easy toexecute.Joynal Abdin , 6/19/ 2009 (Assistant Secretary, The Federation of Bangladesh Chambers of Commerceand Industry (FBCCI), TheFinancial Express, “Advantages of bilateral free trade agreement (BFTA)”http://www.thefinancialexpress-bd.com/2009/06/19/70203.html)

Currently the world economy is experiencing a very serious economic crisis. World's leading economiesare suffering badly and working hard to overcome this crisis. Governments around the world offered

special rescue packages to help the entrepreneurs so that the economic recession may not destroy theirindustrial sectors. The government of Bangladesh has also taken a comprehensive package to tackle thepossible effect of recession. But we must remember that day comes after night. This recession maycreate opportunities for the growing economies to have newer market access around the world. ¶

Presently countries are to share mutual strengths and overcome mutual weaknesses through combinedefforts. As a result, countries are coming closer through various trade agreements like regional freetrade agreements, bilateral free trade agreement even through cross-regional free trade agreements.Geographical distance is not an issue to act as a barrier today. ITC facilitates one touch connection

http://www.nam.org/Issues/Trade/Manufacturing-And-Trade-Bilateral-Trade.aspx

http://www.thefinancialexpress-bd.com/2009/06/19/70203.html

http://www.thefinancialexpress-bd.com/2009/06/19/70203.html

http://www.nam.org/Issues/Trade/Manufacturing-And-Trade-Bilateral-Trade.aspx



between two cross-regional business interests. ¶ Signing bilateral free trade agreement is not onlycreating the condition for closer relations among the nations but also providing a common platform toact in a united fashion in other multilateral platforms like, multilateral trade negotiation in the WorldTrade Organisation (WTO) and even in the global political arena under the UN.On the other hand,executing bilateral free trade agreement is comparatively easier than the regional or multilateralones.¶ It facilitates resource sharing and to have a unique voice in the other forums. For example,during 11-17 May, 2009, this writer participated in an international workshop on "South Asian EconomicIntegration: Ways, Tools and Methods" in the Orchard Hotel, Singapore jointly organized the AsianDevelopment Bank (ADB) and the Federation of Indian Chambers of Commerce and Industry (FICCI).During dummy trade negotiation session he found that, the young trade negotiators of Sri Lanka andIndia are talking from a common ground. Each of them is supporting strongly the argument of the other.¶ It is because they are now closer to each other than any other South Asian States . Theyhave abilateral trade agreement in action and they are going to further expand it into agreements oninvestment and labour movement very soon. So it is quite clear that they will act together in real tradenegotiation table under the South Asian Free Trade Agreement (SAFTA) or in the WTO. As a result smallSri Lankan economy will get a strong support from giant India in these arenas. ¶ The BFTAs also facilitatetechnology transfer and free flow of investment for the least developed countries (LDCs) likeBangladesh. These two are core elements of development of a country. ¶ You may hardly get a singlecountry except Bangladesh that is not having a bilateral free trade agreement with any neighbours. Notonly neighbours, currently countries are signing cross-regional free trade agreements to ensure marketaccess for their products abroad. This scribe may cite the example of the Singapore-USA free tradeagreement here. Our neighbouring country India is also negotiating one bilateral free trade agreementwith Singapore. Hopefully it may be concluded this year and will be executed from the next year. ¶

Currently, Bangladesh has three proposals for signing bilateral free trade agreements. Those are Indo-Bangla FTA, Bangladesh-Sri Lanka FTA and Pak-Bangla FTA. It is not known why our government is in astate of indecision in connection with these BFTAs. From our past experience we can say that indecisionis always harmful for us. For example, when submarine cable offer came, we neglected it or somehowavoided it. Similarly, the offer for the Asian Highway came. But we were dithering then and now it is

depending on Indian and Thai decision, whether we may get connectivity with the Asian Highway.Usefulness of both the offers have been proved today and now we are ready to spend for the same. ¶

Bangladesh's experience regarding the regional trade agreements: Bangladesh is involved in fourregional preferential trade agreements. Those are: ¶ Asia Pacific Trade Agreement (APTA)¶ SAARCPreferential Trading Arrangement (SAPTA)¶ Trade Preferential System among the Countries of OIC (TPS-OIC)¶ Preferential Trading Arrangement among Developing-8 Countries (D-8 PTA)¶ We had one bilateralpreferential trade agreement (PTA) with Islamic Republic of Iran i.e. "Preferential agreement BetweenBangladesh and Iran". We are a member of two Free Trade Agreements (FTAs). These are - South AsianFree Trade Area (SAFTA) and Bay of Bengal Initiatives for Multi-Sectoral Technical and EconomicCooperation (BIMSTEC FTA)¶ None of the above is functioning well. So far as individual trade agreementis concerned, APTA is still in a negotiation stage, SAPTA has been transformed into SFTA, TPS-OIC and D-8 PTA would not be effective due to Turkey factor. ¶ The only hope is AFTA, but until now intra-SAARCtrade under SAFTA is less than 5.0 per cent and countries are not fulfilling SAFTA commitments asstated. A long negative list, some non-tariff barriers (NTBs), technical barriers to trade (TBTs) and geo-political factors are involved behind the ineffectiveness of SAFTA.¶ From the above discussion it is clearthat, implementing RFTAs has involved a slow process and the progress may be halted by any country.On the other hand, implementing BFTA is quite easy and depends only on two signatory states. So weshould give more concentration on BFTAs rather than waiting for multilateral or RFTAs.



Bilateral Trade Good – War

Bilateralism prevents war – trade gains are more in comparison to multilateralism.Philippe Martin et al ; 2006 (Phillipe Martin is a Professor of economics Sciences Po, Chairman of the

department of economics, Member of the Conseil d'Analyse Economique of the Prime Minister; ThierryMayer is a Professor of Economics at Sciences-Po, Scientific advisor in CEPII, Research Fellow at CEPR(International Trade Programme) ; Mathias Thoenig is Professor of Economics at the University ofGeneva and associate researcher at Paris School of Economics and research affiliate at CEPR in theinternational trade and macro programmes; “Make Trade Not War?”http://www.ecore.be/Papers/1177063947.pdf)

This paper analyzes theoretically and empirically the relationship between military conicts ¶ and trade.We show that the intuition that trade promotes peace is only partially true even in a ¶ model where tradeis benecial to all, military conicts reduce trade and leaders take into account ¶ the benets of p eace.When war can occur because of the presence of asymmetric information, the¶ probability ofescalation is lower for countries that trade more bilaterally because of the opportunity¶ costassociated with the loss of trade gains. However, countries more open to global trade have a¶ higherprobability of war because multilateral trade openness decreases bilateral dependence to any¶ givencountry. We test our predictions on a large data set of military conicts on the 1950 -2000¶ period. Usingdifferent strat egies to solve the endogeneity issues, including instrumental variables, ¶ we nd robustevidence for the contrasting effects of bilateral and multilateral trade openness. ¶

Multilateralism leads to an increase in war when compared to bilateralism.Philippe Martin et al ; 2006 (Phillipe Martin is a Professor of economics Sciences Po, Chairman of thedepartment of economics, Member of the Conseil d'Analyse Economique of the Prime Minister; ThierryMayer is a Professor of Economics at Sciences-Po, Scientific advisor in CEPII, Research Fellow at CEPR

(International Trade Programme) ; Mathias Thoenig is Professor of Economics at the University ofGeneva and associate researcher at Paris School of Economics and research affiliate at CEPR in theinternation al trade and macro programmes; “Make Trade Not War?”http://www.ecore.be/Papers/1177063947.pdf)

We test the theoretical predictions that bilateral and multilateral trade have opposite effects on ¶ theprobability of military conicts on the 1950 -2000 period using a data set from the Correlates Of ¶ War(COW) project, that makes available a very precise description of interstate armed conicts. ¶ Themechanism at work in our theoretical model rests on the hypothesis that the absence of peace ¶ disruptstrade and therefore puts trade gains at risk. We rst test this hypothesis. Using a gravity -type¶ model oftrade, we nd that bilateral trade costs indeed increase signicantly with a bilateral conict. ¶ However,multilateral trade costs do not increase signicantly with conict. Second, using a theory¶ grounded-econometric model, we test the predictions of the model related to the contradictory effects ¶ ofbilateral and multilateral trade on conict. In the pooled regressions, we control for potential ¶

contamination by co-determinants of conict and trade. We also control for possible country pair ¶ xedeffects. Finally, we use an instrument that exerts a positive shock to multilateral trade and ¶ a negativeone to bilateral trade, without directly interacting with armed conicts. We choose the ¶ GeneralizedSystem of Preferences (GSP) which are schemes of tariff preferences granted by developed ¶ countries todeveloping countries. Our results are robust to these different estimation strategies, and ¶ arequantitatively substantial: historically, between 1960 and 2000, the increase in bilateral openness ¶ for

http://www.ecore.be/Papers/1177063947.pdf






the median country pair separated by less than 1000kms, has led to a decrease in the probability ¶ ofmilitary conict by 22%. However , during the same period, the growth in multilateral openness has ¶

led to an increase in this same probability by 66%.

Trade patterns affect the probability of war – proximate countries are mostly at risk.Philippe Martin et al ; 2006 (Phillipe Martin is a Professor of economics Sciences Po, Chairman of thedepartment of economics, Member of the Conseil d'Analyse Economique of the Prime Minister; ThierryMayer is a Professor of Economics at Sciences-Po, Scientific advisor in CEPII, Research Fellow at CEPR(International Trade Programme) ; Mathias Thoenig is Professor of Economics at the University ofGeneva and associate researcher at Paris School of Economics and research affiliate at CEPR in theinternational trade and macro program mes; “Make Trade Not War?”http://www.ecore.be/Papers/1177063947.pdf)

The previous specication has the drawback of dropping most of the sample. As an alternative, ¶ we usethe whole sample in column (3) but add interaction terms between distance and the two ¶ tradevariables.14 In this regression, both trade variables have the right sign and are signicant at ¶ 1%. Theinteraction variables also have the right sign and are signicant. An increase in bilateral¶ opennessdecreases the probability of MID [militarized interstate conflict] but less so for distant countries . Ahigh multilateral¶ openness raises the probability of MID mostly for proximate countries. This isconsistent with our ¶ theoretical framework and suggests that trade patterns (bilateral and multilateraltrade openness) ¶ affect the probability of military conicts mostly for proximate countries becausethey mostly affect ¶ the probability of escalation rather than the probability of disputes. Hence if, assuggested by our ¶ theory, globalization increases the probability of escalation for any given pair ofcountries (through ¶ facilitated global trade ows), it does so mostly for countries that have a highprobability of disputes, ¶ i.e. proximate countries. This, we argue, may be an explanation for the trendtowards more local ¶ conicts as illustrated by Figure 2.

Bilateral trade deters war whereas multilateral trade opens doors to regional conflict.Martin, 2005Philippe Martin, Thierry Mayer and Mathias Thoenig, September 2005. All at the Centre for Economic PolicyResearch, researcher at Ecole Nationale des Ponts et Chaussées, researcher at Université Paris I Panthéon-Sorbonne, and Centre for Economic Policy Researcher and Department of Political Economics at the University ofGeneva. "Make Trade not War?" CEPR Discussion Paper No. 5218 Available at(http://www.ecore.be/Papers/1177063947.pdf )

Our paper is the rst, to our knowledge, to highlight the opposite eff ects of bilateral and multilateraltrade on the probability of war and to base the empirical analysis on testable predictions generated by atheoretical model. Our results are somewhat ambivalent on the impact of trade and more generally ofglobalization on the prevalence and the nature of war. We have shown that even in a model where

trade increases welfare and war is Pareto dominated by peace, higher trade ows may not lead topeace. The intuition that trade promotes peace is only partially right: bilateral trade , because itincreases the opportunity cost of bilateral war indeed deters bilateral war . However, multilateraltrade openness, because it reduces the opportunity cost of going to war with any given country,increases the probability of war between any given pair of country. Trade globalization also aff ects thenature of war: multilateral trade openness increases the probability of local wars and deters globalconicts. This last point is important: our paper should not be interpreted as suggesting that tradeglobalization leads to war. Given that World Wars are certainly the most costly in terms of human









welfare, this is not a small achievement. We interpret more our paper as a word of caution and apossible explanation of the changing nature of wars.



Bilateral => Multilateral Trade

Bilateral commerce inevitably leads to multilateral tradeHLWG 2/11 (Final report from High Level Working Group on Jobs and Growth as part of the executive office of the president and UnitedStates Trade Representative, February 11, 2013) http://www.ustr.gov/about-us/press-office/reports-and-publications/2013/final-report-us-eu-hlwg Given the size and influence of the transatlantic partnership, the HWLG also supports the aim of developing rules in several areas that wouldnot only be relevant to bilateral commerce, but would also contribute to the progressive strengthening of themultilateral trading system. To this end, negotiations shall address:

http://www.ustr.gov/about-us/press-office/reports-and-publications/2013/final-report-us-eu-hlwg








Multilateral Trade Bad – War

Multilateral trade leads to war – increases vulnerability to disruptionsKinne 12

Brandon J Kinne, 2012,assistant professor of political science at The University of Texas at Dallas, PhD in political sciencefrom Yale University, “Multilateral Trade and Militarized Conflict: Centrality, Openness, and Asymmetry in the Global TradeNetwork” ¶

http://journals.cambridge.org/download.php?file=%2FJOP%2FJOP74_01%2FS002238161100137Xa.pdf &code=26756df0ac55f890a239898b8d35813a

This dyadic logic is directly extensible to multilateral trade. Increased integration corresponds toincreased trade partners, strengthened trade ties, and shorter commercial distances to nonpartners. Each of these aspects of t rade increases a state’s sensitivity to market dynamics and its vulnerabilityto disruptions in the global trade network. As Dorussen and Ward observe, dyadic conict ‘‘generatesexternal effects on the system of states, ’’ including reductions in trade ¶ (2008: 195). An extensive arrayof trade partners (breadth) creates potential disruption points in a¶ state’s trade relations, and strongertrade ties (depth) increase the costs of those disruptions . Commercialproximity to nonpartners (closeness) also increases costs for conict . Referencing Angell (1933), Gartzke asserts that‘‘interdependence ensures that damage inicted on one economy travels through the global system,aficting even aggressors ’’ (2007, 170). Similarly, Maoz argues that states avoid conict even againstenemies they do not trade with, as the ¶ ‘‘uncertainty and instability associated with conict may causetheir trading partners to look for other markets ’’ (2009, 225). These indirect costs may disrupt globalvalue-added chains or intrarm trade by, for example, affecting availability and costs of intermediategoods and other productive inputs . When states use force, even toward nonpartners , they riskdisrupting the complex economic linkages that feed their domestic industries and drive demand fortheir own products (cf. Brooks 1999). Thus, by ex ante increasing opportunity costs,multilateral tradeunilaterally inhibits uses of force.

http://www.utdallas.edu/

http://journals.cambridge.org/download.php?file=%2FJOP%2FJOP74_01%2FS002238161100137Xa.pdf&code=26756df0ac55f890a239898b8d35813a








Multilateral Trade Good



Multilateralism Now

Latin America has a history of multilateral deals that attempt to assert autonomy overthe US – America’s weakened state provides the avenue for Latin America to form

these deals. Thomas Legler & LesleyBurns , September 2010 (Thomas Legler, FOCAL Fellow and Professor ofInternational Relations at the Universidad Iberoamericana, Mexico City; Lesley Burns joined FOCAL tomanage the governance and civil society portfolio. Prior to joining FOCAL she conducted researchthroughout Latin America on democratic stability, democratic institutions, elections, Canadian-LatinAmerican relations, international trade and peace agreements and taught international relations.Canadian Foundation for the Americas, “Latin American ¶ Multilateralism: ¶ New Directions”http://www.iadb.org/intal/intalcdi/PE/2010/06396.pdf)

This compilation paints the picture of a ¶ dynamic multilateralism with a number of ¶ distinctivecharacteristics, but one also fraught ¶ with challenges. For one, Latin American ¶ multilateralism is

heavily state- or even ¶ executive-centric , with a clear preference for ¶ presidential summits. Second, it ispro tempore, ¶ in the sense that it favours arrangements in ¶ which national leaders take periodic turns ¶

chairing organizations over creating strong, ¶ independent secretariats. Currently, Latin ¶ America nmultilateralism has a strong emphasis ¶ on promoting spaces for political dialogue ¶ and concentrationinstead of investing in ¶ regional public goods, regional governance and ¶ development. It also rests on along tradition of ¶ defensive multilateralism, one that participates ¶ in the struggle to assert LatinAmerican ¶ autonomy vis-a-vis the U nited States while also ¶ defending the exclusive sovereignprerogative ¶ of states to formulate foreign policy unimpeded ¶ by neither domestic nor foreignactors. Future ¶ research must determine to what extent these are Latin American multilateralidiosyncrasies ¶ or whether in fact they are common to different ¶ regional contexts. The authors concurthat these ¶ defining attributes often represent the limits or ¶ deficiencies of Latin Americanmultilateralism; ¶ some point out that this illustrates the gap ¶ between multilateral aspirations and the ¶

reality. As Andrés Serbin states in his overview¶ of the main principles and challenges to Latin ¶ Americanmultilateralism, the next test for ¶ the region will be to move from formal to ¶ substantive co-operation.

Multilateralism has grown rapidly in Latin America.Andres Serbin , September 2010 (Dr. Andrés Serbin is the Executive Director¶ of CoordinadoraRegional de Investigaciones¶ Económicas y Sociales (CRIES), Chair of the¶ International Coalition for theResponsability to ¶ Protect (ICRtoP), Member of the Global Partnership ¶ for the Prevention of ArmedConflict (GPPAC)¶ directorate, and Councillor of the Argentine Council ¶ of Internacional Relations (CARI).Canadian Foundation for the Americas, “Latin American ¶ Multilateralism: ¶ New Directions”http://www.iadb.org/intal/intalcdi/PE/2010/06396.pdf)

This past decade, a large number of multilateral ¶ forums, organizations and spaces have been ¶deployed in Latin America and the Caribbean. ¶ Among them is a growing abundance of summits ¶ ofall stripes, both strictly regional and broader, ¶ such as the Summit of the Americas, the IberoAmericanSummit and the EU-Latin America and ¶ Caribbean Summit. There was also a marathonlike successionof four summits involving ¶ presidents from Latin America and the Caribbean ¶ in Brazil in December2008; these summits lay the ¶ foundations for the recent Cancún Summit and the ¶ creation of theCommunity of Latin American and ¶ Caribbean States (known by its Spanish acronym ¶ CELAC).The

http://www.iadb.org/intal/intalcdi/PE/2010/06396.pdf






summits have also been associated ¶ with the creation of new multilateral organizations ¶ working onagreements and co-ordination related ¶ to a diverse regional agenda. Parallel to these ¶ summits arethe social summits convened by civil ¶ society and non-governmental organizations.¶ Further, the last10 years have been witness ¶ to the birth of several multilateral spaces with ¶ economic-financial orintegration goals : the ¶ Bolivarian Alliance for the Peoples of Our America¶ (ALBA), the Union of SouthAmerican Nations ¶ (UNASUR), the Bank of the South, the South¶ American Energy Summit, and theSummit of ¶ Latin America and the Caribbean on Integration ¶ and Development (CALC); these overlapwith older ¶ multilateral spaces such as the Rio Group, the ¶ Latin American Integration Association(ALADI),¶ the Latin American and Caribbean Economic¶ System (SELA), the Central American Integration¶ System (SICA), the Caribbean Community¶ (CARICOM), the Andean Community (CAN), the¶ SouthernCommon Market (MERCOSUR), the¶ Andean Development Corporation (CAF) and the¶ Association ofCaribbean States (ACS).

The increase in Latin American multilateralism has excluded the US from activity in thearea.Andres Serbin , September 2010 (Dr. Andrés Serbin is the Executive Director¶ of Coordinadora

Regional de Investigaciones¶ Económicas y Sociales (CRIES), Chair of the¶ International Coalition for theResponsability to ¶ Protect (ICRtoP), Member of the Global Partnership ¶ for the Prevention of ArmedConflict (GPPAC)¶ directorate, and Councillor of the Argentine Council ¶ of Internacional Relations (CARI).Canadian Foundation for the Americas, “Latin American ¶ Multilateralism: ¶ New Directions”http://www.iadb.org/intal/intalcdi/PE/2010/06396.pdf)

There is also a series of endogenous factors ¶ that have contributed to the proliferation of ¶multilateral organizations. These factors include ¶ the reconfiguration of the political and geopolitical ¶ maps of Latin

America and the Caribbean through ¶ the election of progressive or populist governments ¶ in many countries, theemergence of regional ¶ leadership with the aspiration of backing distinct ¶ regional projects , and newand different visions ¶ for regional integration that have contributed to ¶ heterogeneity and fragmentation. Other relevant ¶ endogenousfactors include the growing role of ¶ social movements —especially through the rise to ¶ power of left-wing and centre-left governments — ¶

that aspire to influence the regional agenda. ¶ Another factor is the weakening of the state and ¶ its effective political,territorial and institutional ¶ reach, especially after structural reforms in the ¶ ’90s, and the recurrence of internal andsecurity ¶ crises at different levels; these crises contributed ¶ to the weakening of the process ofdemocratic ¶ consolidation that , despite failures in poverty ¶ and inequality reduction , is still prevalent in the ¶ region.

Finally, the emergence of new challenges ¶ and threats to regional security and public safety ¶ due to transnational crime and

drug trafficking, ¶ which both question and limit the traditional ¶ principle of national sovereignty and eventually ¶ lead to thereconsideration of the principle of nonintervention, has also factored in.¶ The reconfiguration of theregion’s geopolitical ¶ map is due to both the lack of U.S. attention toward ¶ the region , and the election ofleft-wing and centreleft governments in most of its countries. One of ¶ the goals of these governments is to strengthen ¶ their autonomy fromthe United States, be it ¶ through more independence and clearly limited ¶ co-operation, or through direct confrontation as ¶ a form ofdifferentiation and pressure exertion. ¶ Brazil is a clear example of the former approach, ¶ and Venezuela of the latter. Through their different¶ ideological and political perspectives, both countries play a clear leadership role in creating ¶ autonomous multilateral spaces in accordance¶ with their respective visions of a regional project ¶ that fosters a multi-polar international system. ¶ The most representative initiatives areUNASUR ¶ led by Brazil and ALBA led by Venezuela. This ¶emergent leadership has generated a significant ¶ increasein the efforts to promote multilateral ¶ spaces that exclude the United States ; these ¶ efforts sometimesoverlap or compete against one ¶ another as they vie to become the hard nucleus of ¶ regional integration promoting different political ¶ andideological orientations. These efforts were ¶ differentiated from, and eventually rivalled, the ¶ Organization of American S tates’ (OAS) visionfor ¶ the hemisphere. ¶ In addition, the emergence and development of ¶ social movements and their will to influence the ¶ policies anddecisions —or at least the agendas — ¶ developed in these multilateral spaces have led to ¶ diverse attempts at participation. In the framework¶ of new and emergent multilateral organizations, ¶ the main opportunity for the participation of ¶ civil society and social movements inparticular ¶ is achieved through various social summits that ¶ eventually generate dialogue with governments. ¶ However, beyond theparticipation of the private ¶ sector in trade agreements in the ’90 s, citizenry ¶ has been conspicuously absent from emerging ¶ multilateralorganizations, both because of its own ¶ diversity and heterogeneity, and because of the ¶ lack of institutional mechanisms for participation. ¶





For example, during the marathon-like succession ¶ of summits in Costa do Sauipé, Brazil in December ¶ 2008, and despite the precedent setby the South ¶ American Community of Nations (CSN), the ¶ involvement of civil society was inexistent and ¶ there was no effective interactionwith participating ¶ governments. ¶ Further, the weakness of some states has become ¶ a relevant endogenous factor. Their political and ¶institutional limitations increase the chances that ¶ any crisis or conflict that takes place will affect the ¶ stability and sec urity of a country’sneighbours. ¶ That is why it has become necessary to develop ¶ and consolidate specific multilateral mechanisms ¶ that can effectively defuseor mediate in inter- or ¶ intra-state crises to bring forward less polarized positions. This was done by the Group of Rio after ¶ the Colombia-Ecuador crisis of March 2008 and ¶ by UNASUR in the 2008 Pando crisis in Bolivia. ¶ However,many of the current threats to

regional ¶ security are not the work of clearly identifiable ¶ state or domestic actors, but that of transnational ¶ actors, such asparticipants of organized crime. ¶ These threats require transnational policies ¶ and strategies that can only be co-

ordinated by ¶ multilateral organizations or forums . Beyond their ¶ effective accomplishments, these venues become ¶ acrucial factor to co-operate and co-ordinate ¶ the necessary policies to fight new transnational ¶ security threats. This is exemplified by thecreation ¶ of a series of UNASUR mechanisms, most notably ¶ the South American Defence Council. ¶ The last endogenous factor relates topolicy coordination and lies in the need to face specific ¶ challenges brought about by particular sectors, ¶ such as: finance, which is particularlysensitive ¶ to globalization; energy; the development of ¶ regional infrastructure that allows for greater ¶ interconnection and bettercommunication; and ¶ policies in public health, poverty eradication and ¶ environmental protection, which often go beyond ¶ the nationallevel and display transnational ¶ characteristics. The co-ordination of these ¶ policies seeks to create regional public goods that ¶ transcend thenational sphere and necessarily ¶ becomes a fundamental element in the creation ¶ and development of multilateral organizations, as ¶evidenced by the Initiative for the Integration of the ¶ Regional Infrastructure of South America (IIRSA), ¶ UNASUR’s Health Council, and thecreation of the ¶ Bank of the South.

A decline of US hegemony in Latin America has increased multilateral deals with otherworld powers - energy has increased influence.Thomas Legler, September 2010 (Thomas Legler, FOCAL Fellow and Professor of InternationalRelations at the Universidad Iberoamericana, Mexico City. Canadian Foundation f or the Americas, “LatinAmerican ¶ Multilateralism: ¶ New Directions” http://www.iadb.org/intal/intalcdi/PE/2010/06396.pdf)

R¶ ecent events may well be adding up to a ¶ dramatic redefinition and even possible ¶ transformation ofthe inter-American system. ¶ Having endured successive periods of foreign ¶ domination undercolonialism and postindependence, states from Latin America and ¶ the Caribbean (LAC)are presentlypassing ¶ through an unprecedented historical moment ¶ in which not only have they won hard-fought ¶ autonomy vis-a-vis existing regional and global¶ powers, but they also have the potential to ¶

take charge decisively over their own regional ¶ governance agenda. ¶ An important part of this story isthe gradual ¶ decline of U.S. hegemony in the region such ¶ that now we can speak accurately of aposthegemonic moment in the region’s history. ¶ Concurrently , as even conceded recently by ¶ Secretaryof State Hillary Clinton,we see the ¶ rise of a multi-polar regional order, in which ¶ Argentina, Brazil,Chile, Mexico and Venezuela ¶ enjoy considerable regional influence (although ¶ not necessarilyequally) alongside the United ¶ States. Importantly, for the first time, Brazil, ¶ Chile and Mexico are all inthe process of joining ¶ the international club of official development ¶ assistance donors. Bolivia, Braziland Venezuela ¶ possess vast natural gas and oil reserves with ¶ the potential to convert thesecountries into ¶ international energy powers along the lines of ¶ their Middle East counterparts. ¶ Inpractical terms, LACstates have successfully ¶ diversified their international relations to ¶ such an extentthat they now currently enjoy ¶ hitherto unknown foreign policy autonomy and flexibility. This often

translates into a situation ¶ where individual countries continue existing ¶ trade and investmentarrangements with ¶ the United States while pursuing expanding ¶ ties with such non-traditionalactors as the ¶ European Union and its individual member ¶ states, Canada, China, India, and Venezuela¶ through its petro-diplomacy initiatives.






US backed organizations are losing power to regional multilateral organizations.Thomas Legler, September 2010 (Thomas Legler, FOCAL Fellow and Professor of InternationalRelations at the Universidad Iberoamericana, Mexico City. Canadian Foundation for the Americas, “LatinAmerican ¶ Multilateralism: ¶ New Directions” http://www.iadb.org/intal/intalcdi/PE/2010/06396.pdf)

The traditional, U.S.-dominated pillars ¶ of the inter-American system, that is, the ¶ Organization ofAmerican States (OAS), the ¶ Inter-American Development Bank (IDB), the ¶ Rio Treaty, and theSummit of the Americas, ¶ face increasing competition and mandate ¶ overlap from a strikingproliferation of new ¶ sub-regional and regional integration schemes ¶ and multilateral forumscharacterized by their ¶ “U.S. -free” membership. On top of the Andean ¶ Community, the SouthernCommon Market ¶ (MERCOSUR), the Caribbean Community¶ (CARICOM), and the System for the Central¶ American Integration (SICA), the long list also¶ includes the Rio Group, the Bolivarian Alliance¶ for thePeoples of Our America (ALBA), the¶ Union of South American Nations (UNASUR)¶ and the Ibero-American Summits. The Cold¶ War relic of the Rio Treaty has come under ¶ serious challenge, first byMexico’s withdrawal ¶ in 2003 and then by the creation of an ALBA¶ military alliance and a new SouthAmerican ¶ Defense Council linked to UNASUR. For its¶ part, the Summit of the Americas faces a new ¶

challenger: the Summit of Latin America and ¶ the Caribbean on Integration and Development ¶ (CALC),which held its second meeting in Mexico ¶ City in February 2010. Further, the Banco del¶ Sur couldeventually pose competition for the ¶ IDB. Finally, the OAS struggles to maintain its¶ relevance in thecontext of a rapidly expanding ¶ and increasingly complex inter-American ¶ governance architecture.

Non-US multilateral blocs are experiencing growing influence in the region at theexpense of the US due to increasing activism of regional multilateral forums. Thomas Legler, September 2010 (Thomas Legler, FOCAL Fellow and Professor of InternationalRelations at the Universidad Iberoamericana, Mexico City. Canadian Foundation for the Americas, “LatinAmerican ¶ Multilateralism: ¶ New Directions” http://www.iadb.org/intal/intalcdi/PE/2010/06396.pdf)

It is noteworthy that “U.S.-free” multilateral forums have increasingly taken the lead ¶ in efforts toresolve pressing problems on ¶ the regional agenda. In March 2008, Latin¶ American leaders that hadgathered for the Rio ¶ Group Summit held in Santo Domingomanaged ¶ to diffuse the crisis triggeredby the incursion ¶ of the Colombian military into Ecuadorian ¶ territory, which targeted theRevolutionary ¶ Armed Forces of Colombia (FARC) presence in¶ the neighbouring country. In September2008, ¶ UNASUR held a fruitful emergency session ¶ to address the worrisome political crisis in ¶Bolivia. In 2009, SICA, ALBA, MERCOSUR, the¶ Rio Group and UNASUR all responded rapidly¶ and withdetermination to the June 28 coup ¶ d’état in Honduras. In August 2009, UNASUR ¶ convened anotherspecial session to confront ¶ the growing regional tensions triggered by the ¶ recent announcement thatthe United States ¶ had reached an agreement with Colombia to ¶ sustain and possibly expand its militarybases ¶ in that country.

Multilateralism in Latin America will grow – declining US influence has freed up thearea.Michael Shifter , September 2010 (President of the Inter-American Dialogue, a Washington-basedcentre ¶ for policy analysis and exchange on Western Hemisphere affairs. He also directs the Andeanprogram at the Inter-American Dialogue. ¶ Prior to joining the Inter-American Dialogue; CanadianFoundation for the Americas, “Latin American ¶ Multilateralism: ¶ New Directions”http://www.iadb.org/intal/intalcdi/PE/2010/06396.pdf )












T¶ he Western Hemisphere cannot be justly ¶ accused of lacking regional and multilateral ¶ mechanismspurportedly aimed at strengthening ¶ co-operation. Drawing up a full inventory of ¶ such mechanisms,and explaining their purpose ¶ and role, is in itself a considerable task. ¶ The proliferation of regionalgroupings stems ¶ in part from a longstanding aspiration in ¶ Latin America and the Caribbean forgreater ¶ unity and integration. In some ways, this is ¶ an old and familiar story. But in the age of ¶globalization, that aspiration also derives from ¶ the determination of such countries as Brazil¶ andVenezuela to assume more active regional ¶ leadership —along with the relative decline ¶ of U.S.

influence in hemispheric affairs. As ¶ Latin American countries face a widening ¶ range of foreignpolicy options they also seek ¶ increased breathing space and distance from ¶ the hemisphere’sdominant power. ¶ While it is preferable to have weak institutions ¶ than no institutions at all, it wouldbe better still ¶ to have regional and sub-regional groupings ¶ that are able to effectively tackle common ¶

problems and challenges, from drugs, security ¶ and democracy and human rights to trade, the ¶

environment and migration. What is striking ¶ about the hemisphere’s current multilateral ¶arrangements is the extent to which they have , ¶ on balance, underperformed. This is particularly¶ so inlight of the gravity of the shared agenda, ¶ and the expectations created in the early post Cold War years

about vigorous co-operation. ¶ The obstacles have been fundamentally ¶ political, both withincountries —the United ¶ States included — and among nations. The ¶ notion of collective action onkey policy¶ challenges that would gradually erode barriers ¶ of sovereignty has given way to thesalience ¶ of nationalism, resulting in high degrees of ¶ tension, fragmentation and disarray. ¶ Oneconomic, technological, demographic and ¶ cultural fronts integration is moving forward, ¶ albeit by fitsand starts, and absent the idea ¶ of an all-encompassing Free Trade Area of ¶ the Americas. But asbilateral strains mount, ¶ drug-fueled violence spreads, and democratic ¶ safeguards and the rule of lawin some countries ¶ erode, the mobilization of the hemisphere’s ¶ political resources has beendisappointing.

Countries are moving towards multilateralism - it promotes trade liberalization andattracts resources.Sam ChoonYin, October 2004 (Sam Choon Yin is the Head of the School of Business at PSB Academy.“Multilateralism, Regionalism, and Bilateralism” http://choonyin.tripod.com/multilateralism/)

However, it is useful to note that RTAs and FTAs are complimenting rather than replacing multilateralnegotiations. They are tapped when there is a possibility of the trading system falling side ways andbackwards (the realisation of the bicycle theory). Fred Bergsten (1996) from the International forInternational Economics has pointed out that contemporary regionalism and bilateralism initiativeswere necessary to keep up with the momentum of trade liberalisation after the conclusion of theUruguay Round.[1]¶ Furthermore, contemporary RTAs and FTAs are welcomed for they respond to theprocess of competitive liberalisation (a term coined by Fred Bergsten (1996)). More countries areessentially moving towards regional and bilateral trade negotiations because of their desire to attractinvestments, jobs and technology so as to perform economically better than others. This appears to betrue if one is look at Mexico’s experience. For instance, in view of the positive prospect of NAFTA,leaders of Singapore and Malaysia had led government and business delegations to Mexico in early1992 to discuss cooperative opportunities in trade and investment while Japanese, Korean andTaiwanese investors announced plans to locate new production facilities in Mexico (Snape, Adams andMorgan, 1993, p. 167).¶ In the process of competitive liberalisation, more countries would be pressuredto liberalise trade further so as to avoid being left behind by others who had gone ahead with tradeliberalisation either bilaterally or regionally. Andrew Stoler (2003) provided an example. He credited the

http://choonyin.tripod.com/multilateralism/





NAFTA for helping to push the Uruguay Round toward a successful conclusion. In arguing for AUSFTA,both the Canberra and Washington offices had also used the term ‘competitive liberalisation’ to explainthe demonstration effect of the FTA in helping achieving the WTO objectives. This is pointed out inStoler (2003, p. 25) in response to an argument put forward in the ACIL report (prepared for Australia’sRural Industries Research and Development Corporation). The ACIL report had argued that the US mightfeel that it had done enough in meeting Australia’s demand in the AUSFTA such that it became ‘lessinterested in meeting those demands in the WTO conte xt’ (ACIL, 2003, p. vii).*2+





In the absence of world or regional ¶ governments, multilateralism is an anchor for ¶ diversegovernance schemes, from addressing ¶ international economic crisis to combatting ¶ transnationalcrime to countering global ¶ warming. In theory, as the main embodiment ¶ of multilateralism, formalinternational ¶ organizations contribute in practical ways to governance challenges , such as the abilityto ¶ centralize collective activities for member states ¶ or to serve as independent and neutral thirdpartyarbiters in conflict resolution. Informal ¶ and formal multilateral groupings can promote ¶ the creationof new norms and the construction ¶ of new international regimes, as well as enhance ¶communications, share knowledge, and coordinate approaches among member states.

Multilateral trade solves Latin American instabilityThomas Legler, September 2010 (Thomas Legler, FOCAL Fellow and Professor of InternationalRelations at the Universidad Iberoamericana, Mexico City. Canadian Foundation for the Americas, “LatinAmerican ¶ Multilateralism: ¶ New Directions” http://www.iadb.org/intal/intalcdi/PE/2010/06396.pdf)

On a number of occasions the Americas’ ever ¶ more complex regional and sub-regional ¶ multilateralarchitecture has been advantageous. ¶ For example, in the 1996 political crisis in ¶ Paraguay, theefforts of MERCOSUR leaders ¶ complemented the OAS response to procure a ¶ quick resolution. During the mounting crisis ¶ in Haiti in 2003-2004, CARICOMleaders ¶ assumed an important role in co-ordinating ¶ with the OAS the search for a political solution. ¶ During the current crisis ignited by theJune ¶ 28, 2009 coup in Honduras, SICA, the OAS¶ and the United States jointly proposed Costa ¶ RicanPresident Óscar Arias as chief dialogue ¶ facilitator. The sub-regional groupings of the ¶ AndeanCommunity, CARICOM, the SICA ¶ and MERCOSUR have also served as caucuses ¶ in the OASPermanent Council and General ¶ Assembly which have facilitated the crafting of ¶ resolutions.

Multilateralism is efficient and cost effective for developing countriesPowell 3 (Lindsey, Yale Center for Environmental Law and Policy New Haven, CT- paper prepared for: Global Environmental Governance:the Post-Johannesburg Agenda on 23-25 October 2003) http://www.yale.edu/gegdialogue/docs/dialogue/oct03/papers/Powell.pdf

That analysis falls short, however, when multilateralism is viewed in a broader context. In fact,multilateralism offers developed nations a solution to the aforementioned problem by arranging for competingstates to synchronize their implementation of such regulation. As a result, heavily polluting nations can begin theabatement process with minimal fear regarding the loss of their respective competitive advantages, since those nations most likely to be theircompetitors – other developed, heavily polluting nations – will be required under a multilateral framework to abate as well. Clearly, the samecannot be said for a nation that decides to abate unilaterally . Multilateral cooperation thus allows developed nations, if

they are truly serious about their commitment to an improved environment, to work toward that end in a much more efficient,predictable, and ultimately more cost-effective manner than would a series of disjointed, unilateraldecisions to reduce pollution.

MDB’s are empirically better than bilateral agencies

Ratha 1 (Dilip, from Economic Policy and Prospects Group at The World Bank “Complementarity Between Multilateral Lending and PrivateFlows to Developing Countries: Some Empirical Results” December2001)http://elibrary.worldbank.org/docserver/download/2746.pdf?expires=1372544934&id=id&accname=guest&checksum=BF6B5ED755EF9157812DD823CEE5A240

Besides transferring funds when countries do not have access to private capital, lendingfrom multilateral development banks (MDBs) is supposed to contribute to building infrastructure,institutions and public policy in developing countries.1 The not-for-profit and multilateral nature ofthese lending institutions has some distinct advantages in comparison to private lenders and bilateral



http://www.yale.edu/gegdialogue/docs/dialogue/oct03/papers/Powell.pdf



http://elibrary.worldbank.org/docserver/download/2746.pdf?expires=1372544934&id=id&accname=guest&checksum=BF6B5ED755EF9157812DD823CEE5A240










agencies: these agencies have access to a wealth of information on developing countries that can be useful forinvestors undertaking new investments in a developing country; they also provide a unique forum for international policycoordination, and if necessary, for designing and exercising policy conditionalities in a borrower country. It is expected, therefore, thatmultilateral lending should encourage private flows to developing countries.

Multilateral trade is key to US LeadershipSutherland 12 (Peter is Special Representative of the Secretary General of the UN for Migration and former Director General of theWTO. “The Bilateral Threat to Free Trade” published: December 31, 2012 )http://www.project-syndicate.org/commentary/the-doha-round-and-the-decline-of-the-world-trade-organization-by-peter-sutherland#FP8IS6zpbUXEv5IK.99

Successful multilateral trade negotiationshave significantly shaped the world in which we live and have dramatically enhanced the lives of millions of people.Between 1960 and 1990, only one person in five lived in an economically open society; today, nine in ten do.

But if we are to move forward rather than revert to earlier, more dangerous times, the US, in particular, must reassert a

constructive role in multilateralism. The US must lead again, as it did in the past. And now it must do so with China at itsside.

http://www.project-syndicate.org/commentary/the-doha-round-and-the-decline-of-the-world-trade-organization-by-peter-sutherland#FP8IS6zpbUXEv5IK.99








Inequality DA



Inequality Turn



1NC Inequality Turn

Uniqueness – Inequality gap decreasing in Latin America since 2000Light 13

“The U.S. is Now More Unequal than Much of Latin America” ¶ January 29, 2013 by John Light articlefrom MOYES AND COMPANY.com

The vast gap between rich and poor in Latin America has long been notorious. In fact, it grew even moreduring the 80s and 90s. But over the last decade, income inequality in Latin America has been rapidlydecreasing , while inequality in the U.S. has skyrocketed in the other direction, as the top 1 percent ofearners pulls further and further away from the middle class and poor. ¶ over the last half a century,income inequality in the U.S. has grown more than in any other western country. As a result, the U.S. isnow one of the more unequal countries in the Americas, according to the U.N. Economic Commissionfor Latin America and the Caribbean’s Statistical Yearbook, released earlier this month. Incidentally,the most equal country on the list, Uruguay, is led by a president who lives on his wife’s farm andgives 90 percent of his salary to charity, leaving himself with an income of $775 a month — in linewith the average Uruguayan. ¶ he relative supply and a decrease in ¶ the relative demand for skilledlabo r. In the case of Argentina, the demand-side of the story ¶ dominates while in Mexico, the supply-side one does; in Brazil, both appear to be equally ¶ important . In turn, the increase in the relativesupply of skilled labor seems to be associated ¶ with a push in the coverage of basic education, whichmade low-skilled labor relatively less ¶ abundant. The distribution of human capital became moreequal and —everything else the ¶ same--the gap in returns to schooling by level narrowed . Changes indemand for labor by ¶ skill level also moved favorably towards the unskilled. There is some evidence thatpositive¶ terms of trade had something to do with this change. The exact mechanism, however, ¶ remainsto be identified.

Link – increased trade causes income inequality in

Economist’s View 2007 (Mark Thoma, “Trade and Inequality” June 15, 2007<http://economistsview.typepad.com/economistsview/2007/06/trade_and_inequ.html>).

If you haven't heard about it, Vox EU is a new blog from the Centre for Economic Policy Research and it has an impressive list of contributors. Inthis entry, Paul Krugman adds to his discussion in "Divided Over Trade" and "Winners and Losers from Trade" on the increasing role of trade asa source of inequality:¶ Trade and inequality, revisited, by Paul Krugman, VoxEU: Trade and inequality, revisited Paul Krugman 15 June 2007Print Email Comment Republish¶ It’s no longer safe to assert that trade’s impact on the income distribution inwealthy countr ies is fairly minor. There’s a good case that it is big, and getting bigger. I’m not endorsing

protectionism, but free- traders need better answers to the anxieties of globalisation’s losers.¶ During the 1980sand 1990s, there was considerable concern about the possible role of globalisation in contributing to rising income inequality, especially in theUnited States. This concern was based on standard economic theory: since the 1941 Stolper- Samuelson paper, we’ve known that growing tradecan have large effects on income distribution, and can easily leave broad groups, such as less-skilled workers, worse off. ¶ After economistslooked hard at the numbers, however, the consensus was that the effect of trade on inequality was probably modest. Recently, Ben Bernanke

cited these results – but he recognised a problem: “ Unfortunately, much of the available empirical research on the

influence of trade on earnings inequality dates from the 1980s and 1990s and thus does not address

later developments. Whether studies of the more recent period will reveal effects of trade on the

distribution of earnings that differ from those observed earlier is to some degree an open

question.”¶ But the question isn’t really that open. It’s clear that applying the same models to current data that, for example, led WilliamCline of the Peterson Institute to conclude in 1997 that trade was responsible for a 6% widening in the college-high school gap would lead to amuch larger estimate today. Furthermore, some of the considerations that once seemed to set limits on the possible inequality-promotingeffects of trade now seem much less constraining. ¶ There are really two key points here: the rise of China, and the growing fragmentation of



production.¶ First, thanks to the rise of China, OECD imports of manufactured goods from developing countries have continued to rise rapidlysince the early 1990s. Cline’s estimate of income distribution effects was based on data from 1993, when US imports of manufa ctures fromdeveloping countries were approximately 2% of GDP; now that number is close to 5%, and rising rapidly.¶ At the same time, the rise of Chinahas prevented, for the time being, a development that I and others expected to mitigate the effects of trade on income distribution: up-skillingby the developing country exporters. “As newly industrializing countries grow,” I wrote in 1995, “their comparative advantage may shift awayfrom products of very low skill intensity.” And that’s exactly what happened – for the countries that were the major exporters of manufacturedgoods to the OECD then. As John Romalis has shown, the exports of the original group of Asian newly-industrialising economies have shifteddramatically away from labour-intensive toward skill-intensive products. ¶ But along has come China, which is far more labour-abundant nowthan the NIEs were then. A simple indicator is relative wage rates: in 1990, according to the US Bureau of Labor Statistics, the original four AsianNIEs had hourly compensation costs that were 25% of the US level. Now the BLS estimates that China’s labour costs are only 3% of US levels. ¶ In1995 I also believed that the effects of trade on inequality would eventually hit a limit, because at acertain point advanced economies would run out of labour-intensive industries to lose – moreformally, that we’d reach a point of complete specialisation, beyond which further growth in tradewould have no further effects on wages. What has happened instead is that the limit keeps beingpushed out, as trade creates “new” lab our-intensive industries through the fragmentation ofproduction. ¶ For example, the manufacture of microprocessors for personal computers is clearly a highly sensitive, skill-intensive process.Intel’s microprocessor production, however, now takes place in two stages: the “fabs,” which print the circuits on disks of silicon, are all locatedin high-wage advanced countries, but the assembly and testing, in which those disks are cut into individual chips and tested to be sure that theywork, is conducted in China, Malaysia, and the Philippines.¶ Outsourcing of services, in both directions, adds to the possibilities of unequalisingtrade. The skill-intensive pieces of production processes that mainly take place in the third world are often now located in the OECD – forexample, Lenovo, the Chinese computer company, has its executive headquarters in North Carolina. ¶ What all this comes down tois that it’s no longer safe to assert, as we could a dozen years ago, that the effects of trade on incomedistribution in wealthy countries are fairly minor. There’s now a good case that they are quite big, andgetting bigger. ¶ This doesn’t mean that I’m endorsing protectionism. It does mean that free -traders need better answers to the anxietiesof those who are likely to end up on the losing side from globalisation.¶ Dani Rodrik adds:¶ A new mainstream consensus on trade and wages?:Krugman was the co-author of a well-known 1994 paper (called "Trade, Jobs, and Wages") which laid out the case for trade's relativeinsignificance. Interestingly, his co-author on that paper, Robert Lawrence, does not see much of a footprint of t rade behind the recent rise ininequality. In fact, he argues the case is even less compelling now... ¶ How to reconcile the two perspectives? I think Lawrence is right to theextent that the skill premium has stopped rising since 2000, and therefore the type of approach that Cline and others used ... would not actuallyexplain current inequality... But there are other (non-Stolper-Samuelson) models, based on bargaining for example, that could. ¶ In any case,... [w]hat is remarkable is that a growing number of prominent economists--Bernanke, Summers,Krugman-- are now willing to give globalization a starring rather than supporting role in the recent riseon inequality.¶

Internal link – income inequality structurally constrains growth and leads to economicdecline and instability – the internal link outweighs the turnNYT 2012 (October 16, “Income Inequality May Take Toll on Growth”http://www.nytimes.com/2012/10/17/business/economy/income-inequality-may-take-toll-on-growth.html?pagewanted=all&_r=0&pagewanted=print)

Income inequality has soared to the highest levels since the Great Depression, and the recession hasdone little to reverse the trend, with the top 1 percent of earners taking 93 percent of the income gainsin the first full year of the recovery. ¶ The yawning gap between the haves and the have-nots — and thepolitical questions that gap has raised about the plight of the middle class — has given rise to anti-WallStreet sentiment and animated the presidential campaign. Now, a growing body of economic researchsuggests that it might mean lower levels of economic growth and slower job creation in the yearsahead , as well.¶ “Growth becomes more fragile” in countries with high levels of inequality like theUnited States, said Jonathan D. Ostry of the International Monetary Fund, whose research suggests thatthe widening disparity since the 1980s might shorten the nation’s economic expansions by as much as athird.¶ Reducing inequality and bolstering growth, in the long run, might be “two sides of the samecoin ,” research published last year by the I.M.F. concluded. ¶ Since the 1980s, rich households in theUnited States have earned a larger and larger share of overall income. The 1 percent earns about one-sixth of all income and the top 10 percent about half, according to statistics compiled by the respected

http://www.nytimes.com/2012/10/17/business/economy/income-inequality-may-take-toll-on-growth.html?pagewanted=all&_r=0&pagewanted=print






economists Emmanuel Saez of the University of California, Berkeley and Thomas Piketty of the ParisSchool of Economics.¶ For years, economists have thought of such inequality in part as a side effect ofpolicies that fostered the country’s economic dynamism — its tax preferences for investment income,for instance. And organizations like the World Bank and the I.M.F., which is based in Washington, havegenerally not tackled inequality in the world head on. ¶ But economists’ thinking has changed sharply inrecent years. The Organization for Economic Cooperation and Development this year warned about the“negative consequences” of the country’s high levels of pay inequality, and suggeste d an aggressiveseries of changes to tax and spending programs to tackle it. ¶ The I.M.F. has cautioned the United States,too. “Some dismiss inequality and focus instead on overall growth — arguing, in effect, that a rising tidelifts all boats,” a commentary by fund economists said. “When a handful of yachts become ocean linerswhile the rest remain lowly canoes, something is seriously amiss.” ¶ The concentration of income in thehands of the rich might not just mean a more unequal society , economists believe. It might mean lessstable economic expansions and sluggish growth .¶ That is the conclusion drawn by two economists atthe fund, Mr. Ostry and Andrew G. Berg. They found that in rich countries and poor, inequality

strongly correlated with shorter spells of economic expansion and thus less growth over time .¶ And

inequality seems to have a stronger effect on growth than several other factors , including foreign

investment, trade openness, exchange rate competitiveness and the strength of political institutions. ¶

For developing economies, the channels through which inequality might drag down growth seem clear.Inequality might foster political instability and lead to violence and economic destruction, forinstance, a theme that fits for Arab Spring countries, like Egypt and Syria.



Uniqueness Ext.

Historical turn around for Latin American inequality gapGasparini 12

The rise and fall of income inequality in Latin AmericaLeonardo Gasparini (is director of CEDLAS, the Center for Distributional, Labor and Social Studies atUniversidad Nacional de La Plata)ECINEQ WP 2011 – 213

The income distributions in the Latin American countries experienced two distinct trends in the period1980-2008. During the so- called “lost decade” of the 1980s, the structural reforms of the 1990s, andthe crises at the turn of the century, income inequality increased in most countries for whichcomparable data are available. Starting in the late 1990s in a few countries and in the early 2000s forthe rest, inequality began to decline . Between 2002 and 2008, income inequality went down

significantly in almost all Latin American economies. This chapter documents this pattern of rise andfall of income inequality in the region and comments on some plausible explanatory factors. After anoverview of the regional trends and comparisons with other regions of the world, it focuses on threecountries for which substantial analysis is available: Argentina, Brazil and Mexico.

Inequality decreasing for Latin America, recent decade provesBirch 07Declining Poverty in Latin America? A Critical Analysis of New Estimates by International InstitutionsAnn Helwege and Melissa B.L. Birch Tufts University September 2007

“The last four-year period (2003 –2006) has thus seen Latin America’s best performance , in terms ofsocial indicators, for 25 years. For the first time the poverty rate has come below the figure for 1980,

when 40.5% of the population was classified as poor, while the indigence rate is now more than threepercentage points below the 18.6% figure for that year. Moreover, the new figures show a reductionfor the third consecutive year in the absolute numbers of poor and indigent, which is unprecedented inthe region.”

Latin American inequality gap decreasingLusig 12Nora Lustig, Luis F. Lopez-Calva, and Eduardo Ortiz-Juarez. 2012. “Declining Inequality ¶ in LatinAmerica in the 2000s: The Cases of Argentina, Brazil, and Mexico.” CGD ¶ Working Paper 307.Washington, DC: Center for Global Development.¶

http://www.cgdev.org/content/publications/detail/1426568Inequality is a distinctive feature of Latin America due to its high level and persistence.1 After rising inthe 1990s, however, income inequality in the 2000s unambiguously declined in the majority ofcountries2. From an (unweighted) average of 0.530 in the late 1990s, the Gini coefficient for householdper capita income 3 fell to 0.497 in 2010.4 Of the 17 countries for which there is (reasonably) comparabledata, 13 experienced a decline (while the Gini increased in other parts of the world) (Figure 1). 5 Existing



analysis suggests that the decline in inequality is robust to the selection of the time interval, incomevariable, inequality measure, and data source .6



Link Ext. – Wages

Trade causes income inequality through creating a wage gapTasini ‘08

Jonathan has been a union leader and organizer, a social activist, and a commentator and writer onwork, labor and the economy. From 1990 to April 2003, he served as president of the National WritersUnion (United Auto Workers Local 1981).He was the lead plaintiff in Tasini vs. The New York Times, thelandmark electronic rights case that took on the corporate media's assault on the rights of thousands offreelance authors. ¶ “BREAKING: Corporations Admit Trade Is About Lower Wages (Duh)”, Huff Post,6/18/08 ¶ http://www.huffingtonpost.com/jonathan-tasini/breaking-corporations-adm_b_107773.html

I meant the "breaking" as a snark, in case it wasn't obvious. For everyone but the pro- so-called "freetrade" crowd (economists, elites and too many Democrats), it's been crystal-clear that the driving force

behind trade is wages , not efficiency, a better product, lower prices for consumers and all the othernonsense you read. Today, even some business people are admitting it , albeit, not intentionally.¶ TheNew York Times has a piece today that describes how companies are now fleeing China , or at leasthedging their bets, because --get this--labor costs are TOO HIGH: ¶ China remains the most populardestination for foreign industrial investment in the world, attracting almost $83 billion last year. But agrowing number of multinational corporations are pursuing a strategy that companies and analysts call"China plus one," establishing or expanding Asian bases outside China, particularly in Vietnam.¶ A longlist of concerns about China is feeding the trend: inflation, shortages of workers and energy, astrengthening currency, changing government policies, even the possibility of widespread civil unrestsomeday. But most important, wages in China are rising close to 25 percent a year in many industries,in dollar terms, and China is no longer such a bargain . [emphasis added]¶ And if you can't keep wagesdown, well, let's just cut the number of workers : ¶ "We will maintain our capacity in China, but wewill make it more automatic and reduce the number of employees," said Laurence Shu, the chief

financial officer of Shanghai-based Texhong , one of the world's largest makers of cotton and spandexfabric.¶ To limit labor costs, Hanesbrands is building a largely automated factory in Nanjing. But thecompany is also building a factory in Vietnam, in addition to a factory it bought here, and two more inThailand. [Emphasis added]¶ What does the labor cost issue mean?¶ In coastal provinces with readyaccess to ports, even unskilled workers now earn $120 a month for a 40-hour workweek, and oftenconsiderably more; wages in inland provinces, where transport is costlier, are somewhat lower but alsorising fast. While Chinese wages are still less than $1 an hour, factory workers in Vietnam earn as littleas $50 a month for a 48-hour workweek, including Saturdays .¶ Texhong estimates that average laborcosts for each textile worker in China will rise 16 percent this year, including increases in benefits costs --on top of a 12 percent increase last year. New regulations are making it harder for companies to avoidpaying for benefits, like pensions, further increasing labor costs.¶ When those increases are combinedwith a currency rising against the dollar at an annual pace of up to 10 percent, labor costs in China arenow climbing at 25 percent a year or more.¶ Got it. Imagine that: China labor is no longer a bargain.Chinese workers are putting in 48-hour workweeks (and we thought we worked too hard) and stillearning less than $1 an hour--AND THAT COST IS GETTING TOO HIGH FOR CORPORATIONS.¶ Yes, I amyelling. Because despite the fact that it is painfully obvious (thanks to a good article by The Times, apaper I regularly criticize for its bias towards so-called "free trade") that wages is the overriding, and, inmany case, sole factor driving trade, we still have to hear the gibberish about those who are for so-called "free trade" are enlightened while those who oppose so-called "free trade" are backwards .¶



Perhaps we could have a public debate and ask: what is the lowest wage, taking into account differencesin prices of goods, workers around the world should expect in the future? Is there a floor?

The benefits of trade are unequally distributed – it causes unemploymentGiglio 12 Joseph M. Giglio is a professor of strategic management at Northeastern University’s College of BusinessAdministration. “Free trade: Bad for Us, Good for Them”, Economy in crisis, 8/26/12http://economyincrisis.org/content/free-trade-bad-for-us-good-for-them

The natural human instinct to trade is obvious from a very early age. You know, “I’ll trade you one of mySuperman comic books for two of your Captain Marvels.” But why do nations trade? ¶ We are told thatfree trade is the best strategy for advancing world economic development, reducing poverty, raisingliving standards and achieving world peace. There is a lot to be said on behalf of the utopian dreamsof free traders – if you disregard the realities of everyday life .¶ To say that everyone benefits in

principle is a touch misleading . For example, data from the U.S. Department of Commerce shows

that U.S. multinational corporations , the big brand-name companies that employ one-fifth of allAmerican workers, cut their domestic workforces by 2.9 million during the last decade while increasingemployment abroad by 2.4 million .¶ Any wonder why 15 percent of all American workers aredesperately seeking either full-time work or any work at all? ¶ The answer depends on which circles yourun in. Economists, businessmen and politicians say technological advances lead to increasedproductivity, which means fewer workers are needed to get the job done. Yes, we have substitutedcapital for labor. But we have also substituted cheap offshore labor for American labor. Both strategieshave the same result : Americans are losing jobs and their wages are stagnating .¶ So how countriestrade and whether they benefit from it are important questions. Starting with Adam Smith, economistshave emphasized specialization and exchange as essential to increasing productivity and higher livingstandards. ¶ Free-trade theory is based on the notion of comparative advantage developed by DavidRiccardo in 1817. His quaint theory, which built on Smith’s work, remains the cornerstone of free tradeeconomics.¶ So what in simple terms is comparative advantage? ¶ Let’s assume that Lady Gaga, the world -famous entertainer, also happens to be a world- class typist. Rather than both entertaining and typing,she should specialize in entertaining where her comparative advantage is greatest and she couldmaximize her income. This key insight is still endorsed today by the overwhelming majority ofeconomists. ¶ But there are some basic objections to free trade, especially when it comes to how gainsand losses from it are distributed. Although we are told that nations benefit from free trade in theaggregate, these gains are often unevenly distributed. ¶ Cheaper labor, for example, means cheapergoods . But who is going to pay for these goods, if Americans keep losing jobs and the middle class keepsgetting squeezed? ¶ What does moving production overseas and offshoring jobs have to do withcomparative advantage? Or is this really labor arbitrage? Arbitrage is about pursuing absoluteeconomies; it has been around since the time of the Phoenicians. In this case, firms are taking advantageof cross-country differences in labor costs. Thus, U.S. brand names sold in America are produced inChina.¶ American employees who lose their jobs are becoming less rich so people in foreign countriescan be less poor. In the global aggregate, people are better off, but American workers bear the loss. ¶ The gains in trade are often widely dispersed, while the losses are concentrated . The extent to whichlabor arbitrage or offshore outsourcing is responsible for some of our current labor-arket woes hasbecome highly contentious in recent years. ¶ Perhaps it is time to consider Michael Corleone’s view of theworld embodied in the 11th commandment: Never go against the family. Never! Mel Brooks would tellyou this commandment was on the third tablet Moses got from God, the one he accidently broke



coming down from Mount Sinai.¶ Let’s adopt a national strategy that can make the American economygrow fast enough to produce decent jobs for every member of the American family who wants to work.How about we start investing in our broken-down infrastructure so it can generate economic growthinstead of hamstringing it? We could start educating our children so that they become world leaders insomething besides sports. ¶ Then we just might become internationally competitive again, and restoreour economy to full employment while we’re at it.

Trade deals bad for the public Kling, 6-14Michael, President at Kling Publications, former editor at Zackin Publications, former reporter at TheHerald, "Economist Dean Baker: Trade Deals Are 'Bad News'", Money News, 6-14-2013 08:13 AM,http://www.moneynews.com/Economy/Baker-trade-agreement-deals/2013/06/14/id/509931#ixzz2Xe3J9zrI The two major trade deals in the works would most likely be "bad news" for most Americans , arguesDean Baker, co-director of the Center for Economic and Policy Research. "Most of the people living inour partner countries are likely to be losers too ," Baker writes in an article for Truthout. One deal in theworks is the Trans-Pacific Partnership with Japan, Australia and several other East Asia and LatinAmerican countries. The other is with the European Union. Importantly, the deals are mainly aboutregulations — not trade topics like cutting tariffs, Baker, an assistant professor at Bucknell University,points out . The trade pacts would most likely limit national and local powers by restricting health,safety and environmental rules that nations can enact. That's unwarranted, he argues. For instance,suppose a country decided to ban a particular pesticide, believing it poses a health risk. If its riskswere negligible, the country banning it would be the one suffering from less productive agricultureand higher food prices. "Is it necessary to have an international agreement to prevent this sort of'mistake?'" The trade deals will probably strengthen copyright and patent protection, especially forprescription drugs at the urging of the U.S. pharmaceutical industry. That would mean much higherdrug prices for our trading partners. "The difference in prices can be quite large," Baker notes."Generic drugs, with few exceptions, are cheap to produce. When drugs sell for hundreds or thousands

of dollars per prescription it is because patent monopolies allow them to be sold for high prices. " Thatwould mean less revenue for other U.S. industries and fewer job opportunities for everyone frommanufacturing workers to workers in the tourism business, he warns. " The public may not have thepower to stop the high-powered lobbyists from getting their way on these trade pacts, but it should atleast know what is going on," he states. "These trade deals are about pulling more money out of theirpockets in order to make the rich even richer ." Not knowing what's going on in the negotiations is anissue for others. Sen. Elizabeth Warren, D-Mass., is urging greater transparency for the Trans-PacificPartnership talks. Specifically, she is requesting the White House reveal the "composite bracketed text,"which has proposed treaty language from the United States and other countries. "The lack oftransparency is this area is troubling because, as you know, the bracketed text serves as the focal pointfor actual negotiations," Warren writes in a letter to the White House.

http://www.moneynews.com/Economy/Baker-trade-agreement-deals/2013/06/14/id/509931#ixzz2Xe3J9zrI







Link Ext. – General

Trade increases inequality between countries with different economic and socialstructures- empirics prove

ECLAC 2012(“Terms of Trade” Economic Commission for Latin America and the Caribbean, Date found under copyright to the UnitedNations at the bottom of the webpage, <http://prebisch.cepal.org/en/XXIcentury/terms-trade>).One of the most famous and most controversial components of Raúl Prebisch’s thinking was his conviction that there had been acenturies’ long deterioration in the terms of trade of commodities and food vis -à-vis industrializedgoods. Since the developing countries specialize in commodities and food, the downtrend in the value of these products would lead to a

worsening of their terms of trade. ¶ A worsening of the terms of trade means that i f export volumes remainstable, these countries will see a decline in the purchasing power of these exports in relation to thevalue of goods and services imported from abroad. ¶ These ideas are referred to in the literature as the Prebisch-Singer

thesis, since the two analysts -Hans Singer and Raúl Prebisch- came up with very similar ideas at the same time. ¶ This thesis has afundamentally empirical basis, dating back to the end of the First World War, but especially the 1930s.This trend continued up to the late twentieth century, when relatively speaking commodity pricesstarted to move up. ¶ Prebisch’s interpretation of these trends was based on a series of rationaltheories. One of them is how income is distributed and how the fruits of technological progress areallocated in countries with different economic and social structures. The prices of exports from thecentre and the periphery are based on highly uneven wages, which generate sharp inequalities andlow wages in the periphery. Moreover, since the income elasticity of demand for commodities is low, demand for goods of this kinddoes not keep pace with income. Thus, developing countries are competing more intensely with each other for markets for their commodities,and they handle this by reducing prices; these price reductions are achieved not only by increasing productivity but also by the difficultiesassociated with appropriating these productivity gains domestically by raising wages and raising State capital. This problem of elasticities iscompounded by the impact of technological progress on the replacement of natural goods by artificial and synthetic goods, which was one ofthe factors in the demand for goods such as textiles, nitrates, natural rubber, etc. ¶ Another component of the Prebisch thesis on the terms oftrade has to do with a pressing issue that attracted his attention: the wide fluctuations of the business cycles in the countries of the periphery.The basic idea was that when the world economy is booming, the demand for raw materials and food soars, pushing up prices sharply in theshort term, whereas in the downswing, prices for these goods plummet; owing to the social reasons referred to above, no institutionalmechanisms existed for stemming this decline. These fluctuations may mask underlying trends, but at the end of each cycle, the deterioration iseven greater.

Trade causes inequality and manipulationWilliams 1985 (Kristen M. Williams, American Embassy Beijing “Is Unequal Exchange a Mechanism for Perpetuating Inequality in theModern World System?” September 1985, ESBCO <http://link.springer.com/content/pdf/10.1007%2FBF02687082.pdf>).

It the past ten years a new sociological approach to analyzing nat ional development has emerged? Utilizing some concepts from ¶ dependencytheory, the world system model has steadily gained adherents, while earlier approaches, such as various forms of moderniza tion theory, havebeen criticized. The central assumption of world ¶ system theory is that there is a world system of capitalism with one ¶ international division oflabor and separate political boundaries. An ¶ important element of the theory, borrowed from dependency theory¶ (Frank, 1966), is that the processes of development and "underdevelopment" are intrinsically related. As certain countries specialize in "core ¶ activities," others are manipulated to specialize in "peripheralac tivities?' In this view, the capitalist process continually reproduces a ¶ world-wide division of laborrather than each country following a rela tively independent evolutionary path of development. If theworld system view is to be accepted, there should be explanations of how the ¶ political and economicrelationships between countries tend to per petuate the division of labor rather than leading todevelopment for all. ¶ Instead of looking at each individual country's development separately, ¶

relations between countries, particularly between rich and poor ones, ¶ must be investigated. Mechanisms must be found that contribute to the ¶ process of underdevelopment. ¶ There has been empirical research that has attempted tospecify these ¶ mechanisms. One hypothesis that has received some empirical support ¶ is that foreign



investment, i.e. multinational corporations' penetration ¶ into the economies of peripheral countries,has a long-term negative ¶ impact on growth (Chase-Dunn, 1975; Bornschier, Chase-Dunn and¶ Rubinson, 1978; Gobalet andDiamond, 1979; Bornschier, 1980). This¶ article investigates another hypothesized process: unequal exchange. ¶ The question posed is whetherthere is evidence that exchange, or trade, ¶ tends to benefit rich countries while impoverishing poor ones. The ¶ predictions of an unequalexchange model will be empirically examined in comparison with those of two other models. ¶ E UNEQUAL EXCHANGE MODEL¶ The idea thattrade may not be equally advantageous to all countries ¶ is not a new one. Smith and Toye (1979) identify three approaches to ¶ trade: (1) tradeis mutually beneficial; (2) it is structurally biased; and¶ (3) it induces global polarity. It is the third point of view that underlies ¶ the unequal

exchange model. Others have conducted empirical studies ¶ testing other possible mechanisms that might induce polarity, such as ¶ thecomposition of trade (raw materials vs. manufactured goods) or ¶ trade partner concentration (see Rubinson and Holtzman (1981) for a ¶ review of these studies). The unequal exchange model differs from past ¶ studies of trade in that the type ofproducts traded (agricultural, raw ¶ materials, manufactured goods, etc.) is not seen as beingimportant. ¶ The key element is the wages paid to the persons who are producing ¶ certain products .When the United States produces wheat, for example, ¶ the important question is the amount ofmoney paid to U.S. farmers to ¶ produce wheat, not the fact that it is an agricultural product. Although¶ Wallerstein (e.g., 1978:220) and other word system theorists have referred to the issue of unequalexchange, it is Emmanuel (1972) who has ¶ provided a theoretical basis for it. ¶ According to Emmanuel,

unequal exchange arises in the present ¶ world economy because of the wide disparity in wage ratesthroughout ¶ the world. His thesis is that surplus value is transferred from low-wage ¶ countries to high-wage countries through trade.

How does this occur? ¶ Wages and profits are the independent variables in Emmanuel's theory. ¶ Instead of the prices ofcommodities being determined by supply and ¶ demand, they are determined by the costs ofproduction (1972:28). The costs of production consist of constant capital (raw materials, equipment,etc.) and wages. He assumes that the capital costs needed for ¶ producing a particular product areroughly uniform and that profit ¶ rates are similar throughout the world. Wage rates, however, differconsiderably from country to country. Therefore, the prices of commodities are basically determinedby wage costs. 2 How are wages ¶ determined? As with other commodities, wages are determined by the ¶ costs of production. Thecommodity is labor power and the cost of ¶ producing labor power is the food, clothing, and other necessities required to produce the worker,i.e. the means of subsistence or standard ¶ of living. Since the standard of living in a country changes relatively¶ slowly, wages do not changequickly. Although Emmanuel allows for¶ some impact from societal pressure, the "moral element" ¶ (1972:116-120), trade unions (1972:120-122), and skill differences Williams 49¶ (1972:138), wages are thought to be historically determined. Therefore, ¶ when a country with highlabor costs trades with a country with low ¶ labor costs, surplus value resulting from low labor costs is transferred to ¶ the country with highlabor costs from the country with low labor costs. ¶ Consequently, the former gains from its trade with the latter. In conclusion, "[D]evelopmentthen appears not as the cause but as the effect ¶ of high wages" (Emmanuel, 1972:124).¶ 1 have derived two empirical predictions from this

theory. One is ¶ derived directly from his theory. If unequal exchange is operating, trade ¶ between countries with a wage difference shouldhave a positive effect ¶ on the economy of the high-wage country and a negative effect on the ¶ economy of the low-wage country. The otherprediction is derived indirectly from Emmanuel's disagreement with the neoclassical model and ¶ will be discussed below. Although there havebeen criticisms of Emmanuel's theory on other grounds, 3 no attempt has been made to test ¶ whether the implications of his theory aresupported empirically.

Free Trade allows US companies to take advantage of lesser economies in a race tothe bottom; this kind of system is not sustainable. Tonelson 2002 (Alan Tonelson, an American economist who is a Research Fellow at the U.S. Businessand Industry Council Educational Foundation. He has written extensively on the trade deficit betweenthe United States and other countries. “The Race to the Bottom: Why a Worldwide Worker Surplus andUncontrolled Free Trade Are Sinking American Living Standards” Published Apr 29, 2009)

All three followed what might be called the NAFTA model of¶ trade . As explained in The Race to theBottom, these agreements, ¶ with some of the world's most poverty-stricken countries, were ¶ neverdesigned mainly to expand U.S. exports. The markets involved were simply too small because the vastmajority of the people in these countries were simply too poor. Instead, the objective¶ was to help U.S.multinational companies set up factories in these¶ countries, take advantage of very low labor costsand very weak¶ or nonexistent regulations, and manufacture products to be sold in¶ the UnitedStates .¶ Not only did these agreements vastly increase U.S. imports on ¶ net instead of exports, theyhelped U.S. companies remove American workers from key phases of the manufacturing processes for ¶





Aff Answers



Trade Reduces Inequality

Trade reduces inequality – Latin America provesMontecino 2011 ¶ Decreasing Inequality Under LatinAmerica’s “Social Democratic” and “Populist”

Governments: ¶ Is the Difference Real?¶ Juan A. Montecino (PhD Student in Economics at University ofMassachusetts Amherst ¶ Washington D.C. Metro Area) October 2011

Latin America has undergone major changes throughout the last two decades. Where once

authoritarian regimes of one form or another ruled most of the region, democracy has now become

the rule rather than the exception .2 Perhaps more remarkably, beginning around the end of the1990s, the consolidation of democracy was accompanied by a marked shift to the left of the politicalspectrum. Starting with the 1998 election of Hugo Chávez in Venezuela, left and center-leftgovernments were repeatedly elected across the region. With the election of Ricardo Lagos in Chile in2000, Lula da Silva in Brazil in 2002 and then Evo Morales in Bolivia in 2005, by the middle of lastdecade, the majority of the region was ruled by left of center governments with explicit redistributiveplatforms.3 As the number of left-of-center governments increased, however, some scholars andcommentators began to distinguish between what they saw as two lefts: a moderate left with respectfor property rights and market forces, and an “undemocratic” left rooted in the region’s populist past.4The former, according to these narratives, is modern, technocratic, and delivers on its promises becauseof well-designed policies. The latter type, on the other hand, has simply benefitted temporarily from acommodity boom and their policies will eventually prove unsustainable. These changes in the political realm coincided with sustained improvements in social indicators,

including significant reductions in inequality in most countries of Latin America .5 Figure 1 comparesthe levels of inequality, as measured by the Gini coefficient, for the 2007-2009 period and for 2001-

2003. The farther a country appears below (above) the 45-degree line, the more it decreased (increased)inequality between the two periods. Thus , by the end of last decade most countries for which data is

available managed to reduce inequality, and in some cases by considerable amounts.



Protectionism => Inequality

Economic Protectionism as opposed to free trade has dire effects on economies.Krueger 2010 (Anne O. Krueger, former World Bank Chief Economist from 1982-1986 and First

Deputy Managing Director of IMF from 2001-2006. Better Living through Economics, 2010,HarvardUniversity Press)

A half century ago the non-Communist world was regarded as consisting of two blocs: the industrial countries and the“underdeveloped” countries, as they were then called. The economies of the industrial part of the world were growing at anunprecedented pace. In developing countries (as I shall call them), by contrast, growth was generally at lower rates than in therich countries. In addition, most developing countries were experiencing rates of population growth that were very high andoften rising.¶ Most assessments of the prospects of the developing countries were therefore pessimistic: with rates of growthof per capita income in industrial countries above those of all but the highest-income group of developing countries, itappeared that not only the absolute gap between living standards but also the relative gap would continue increasing.1 Therewas great pessimism about the possibility of declining rates of population growth, which seemed to exacerbate the outlook.¶This can easily be seen from numbers given in the early 1960s. Although there was considerable variation from country tocountry, only two countries (both in Africa) were estimated to have grown at rates per capita above 6%, while only ninecountries were in the 4%-6% range. Forty-three countries had experienced growth rates less than 2%, and twenty-six were inthe 2%~4% range.2 From 1950 to i960, low-income countries (then defined as having a per capita income of $265 or less) hadexperienced falling per capita incomes at an average annual rate of 1.4%, and middle-income (per¶ capita incomes of $266 to$520) and upper-middle-income (per capita incomes of S521 to $1,075) countries had grown at average annual rates of 2.2and 2.4%, respectively, while higher-income developing countries had experienced per capita income growth of 3.2% annuallyduring the decade. These numbers contrasted with an average annual 3.0% growth rate among the industrial countries.Moreover, in the 1960s per capita incomes in the industrial countries accelerated to an average annual growth rate of 4%, whilethe developing countries did little better, and some groups did worse, than they had in the preceding decade.3¶ To be sure,there were some signs of progress in important dimensions in many countries. Life expectancies, which had been abysmallylow— thirty-two years in India, for example—had increased significantly. Health and nutrition indicators also suggested at leastmodest improvement in most countries. School enrollments, although still low, had risen.¶ But overall, living standards wereunimaginably low by Western standards. Infant mortality rates were over 100 per 1,000 in many developing countries andover 200 per 1,000 in some. Malnutrition was pervasive, especially in rural areas, and waterborne and other diseases wereprevalent. Safe drinking water was available only in major cities, albeit often errati- cally, and it was generally unavailable inrural areas and urban slums.¶ During the quarter century to 1975, there had been a remarkable simi- larity of policies in thedeveloping countries. Almost all developing countries had large rural populations, and a large fraction—typically 60% to¶70%—was engaged in agriculture, which usually accounted for half or more of gross domestic product (GDP). There was awidespread view, if not total consensus, that developing countries had to develop their industry andwould not, at least initially, be able to compete with manufacturing industries in the industrialcountries. It was also thought that without the development of industry, developing countries wouldremain poor. Industrialization was equated with development and modernization. ¶ It was generallybelieved that economic development and rising living standards should be a major, if not the primary,objective of government policy. Given the consensus on that belief and the need for industrialization,policies were adopted to foster the growth of new industrial activities. Although the details varied, theoverall thrust of these policies was similar in all countries: they in effect prohibited imports of goods

that might compete with newly established industries . Sometimes prohibitive tariffs were imposed.In other instances import licensing was required , and licenses were granted only when it wasdetermined that there was no domestic source of supply available. Often these (very strong) incentivesfor establishing new industries were supplemented by domestic-content requirements (so that a ¶

producer of, say, automobiles would be required to obtain a certain percentage of his parts andcomponents from domestic sources), thus requiring the development of suppliers to manufacturingindustries.¶ These import-substitution policies were consistent with, and part of, a developmentstrategy that assumed government ownership or regulation of most modern economic activities .



Foreign-trade and exchange controls were a necessary background against which these otherinterventions could be effective, and they contributed to the difficulties that followed. Spacelimitations prevent elaboration of the myriad regulations and controls that surrounded economicactivity in the “formal economy” of most countries. The interested reader can consult the World Bank’sDoing Busi- ness (2008) or a similar source to glean some idea of the extent of these regulations.

Bureaucratic delays of many months could shut down a factory or factories for want of an importlicense for a particular spare part or replacement machine. Smuggling became widespread, andcorruption in the issuance of licenses was the rule rather than the exception. Adminis- trative effortsto thwart smuggling and misrepresentation on licenses often resulted in reduced production becauseof delays in receiving raw materials and other needed inputs. ¶ The effects of import-substitutionregimes did not immediately become ¶ evident, but over time would-be entrepreneurs knew that theirstart-ups would be protected. Accordingly, they paid little heed to cost controls. Resources available forinvestment were channeled into new industries, sometimes in state economic enterprises andsometimes by rationing scarce credit to private-sector firms that would develop the desired products.Producers inevitably found new monopoly positions more attractive than expanding capacity in theirexisting lines of activity. It was also more profitable for an entrant to establish its own monopolyposition than to compete with rivals in an already-existing import-substitution industry. The result wasthat industries were established that sold their products on the domestic market at prices often farabove those of competing imports; meanwhile, the monopoly positions held by producers oftenmeant that quality was poor and costs very high. ¶ At first, many of these activities appeared sensible :assembly of radios and bicycles, production of garments and later of textiles and footwear, and similaractivities. They were intensive in the use of unskilled labor, had relatively large domestic markets, atleast in the more populous countries, and did not place excessive burdens on scarce engineering andtechnical skills or limited capital resources. But as the drive for “import substitu - tion” continued,because of the small size of the domestic market, lack of skilled workers, and other difficulties, it wasgenerally necessary to move ¶ into activities where costs were intrinsically higher in tiny domestic mar-kets than those prevailing internationally , and there could be either one firm that met market demandwith a monopoly position or several small firms, each of which was so small that it had high costs. New

industries were often increasingly capital intensive, despite the fact that developing countries had verylittle capital per person relative to industrial countries. The fact that sheltered producers had littleincentive to seek productivity improvements compounded the inefficiencies. ¶ All these factorscontributed to very low productivity growth in developing countries; in some countries it was even

negative . Artificially cheap capital goods imports (for those fortunate enough to receive import li-censes) encouraged the use of capital-intensive means of production . That, in turn, led to very lowrates of growth of employment in the very industries in which growth was to be concentrated. Moreover, in most countries “informal sectors” emerged and grew rapidly; these were economicactivities that avoided the bureaucratic controls and regulations that gov- erned economic activity in thenew import-substitution industries. They were labor intensive, but generally had very low productivity,lacked access to imported machinery or equipment, and were generally very small in scale. ¶ Moreover,export earnings grew at much lower rates than the demand for imports. This was in significant partbecause incentives were so highly directed toward producing goods that would compete with importsthat few investments were made in exportable production. Even if there were potentially exportablelines of activity, the requirement that producers use domestic inputs (usually of inferior quality and highcost) and the great attractiveness of investing in import-competing sectors generally discour- agedexport growth. ¶ In consequence, balance-of-payments crises were frequent among the developingcountries. Almost all these countries (just like the industrial countries) adhered to fixed nominalexchange rates and were reluctant to change them, even though inflation rates were generally higher,



and often much higher, than in industrial countries. As inflation proceeded, exporting became less andless profitable at constant nominal exchange rates, while imports of permitted items —the machinery,equipment, raw materials, and intermediate goods used in production of import-competing goods —were becoming relatively cheaper. The authorities usually at first resorted to tighter quantitativerestrictions on imports, permitting entry only for those goods deemed “essential” for domesticproduction. But even with those restrictions, the day came when it was clear that there was no way tofinance even essential imports.

Global trade raises incomes, decreases inequality, and ultimately betters the quality oflife for everyone worldwide.Irwin 2010 (Douglas A. Irwin, the John Sloan Dickey Third Century Professor in the Social Sciences inthe Department of Economics at Dartmouth College, Research Associate of the National Bureau ofEconomic Research and has also served on the staff of the President's Council of Economic Advisers andthe Board of Governors of the Federal Reserve System. Better Living through Economics, 2010, HarvardUniversity Press)

Of course, these critics are wrong. Economists do not advocate trade ¶ liberalization for crassmaterialistic reasons but because it can demonstra- ¶ bly improve people’s lives . Economists are focusedon a higher goal than ¶ simply raising income. Thehigher income that comes with more trade is¶ not anend in itself. Rather, it is what higher incomes can purchase that ¶ is important: better nutrition, better

health care, longer life expectancy, ¶ higher literacy and better education, lower infant mortality, and

less child ¶ labor. The reduction of poverty and the tangible improvements in the ¶ quality of people’slives in China and India over the past two decades have ¶ been simply awe inspiring. Trade liberalizationhas played a key role in ¶ making that reduction in poverty and those improvements possible .¶ Thereare additional, unquantifiable benefits of freedom to trade . Ama-¶ rtya Sen’s (1999) Development asFreedom argues that freedom is equally ¶ as important a component of development as materialwelfare, if not more ¶ so. Trade creates opportunities that can powerfully change people’s lives .¶ Thesociologist Ching Kwan I-ce (1998) investigated sweatshops in China¶ and asked young women why theywanted to work there. Aside from the ¶ enormous economic benefits (their incomes were seven to eighttimes greater ¶ than their parents’ income in their rural village), there was one consistent ¶ response: theyoung women wanted to get away from their fathers, who ¶ would otherwise run their lives, telling themwhom to marry and what they ¶ could do. These young women valued the independence, theautonomy, ¶ and the sense that they could create their own destinies and shape their ¶ own lives byworking in the factory. Those sweatshops would not have ¶ existed had China not embraced the worldmarket. The ability of such op- ¶ portunities to change people’s lives for the better cannot be underesti -¶ mated.

Opening up trade accelerates economic growth.Fernández and Bouhey 2008 (Santiago Fernández de Córdoba is an economist at the United NationsConference on Trade and Development (UNCTAD) and a Special Professor of Economics at Universidad de Navarra,Spain. Antoine Bouhey has worked as a National Coordinator of Campaigns for Amnesty International Ecuador andan adviser to Oxfam France. “Trade and the MDGs: How Trade Can Help Developing Countries Eradicate Poverty”UN Chronicle online,



http://www.un.org/wcm/content/site/chronicle/home/archive/issues2008/partnershipfordevelopment/pid/21584)

Developing countries depend on national and global economic growth to achieve the MillenniumDevelopment Goals (MDGs) by 2015. In this regard,international trade is recognized as a powerfulinstrument to stimulate economic progress and alleviate poverty. Trade contributes to eradicating

extreme hunger and poverty (MDG 1), by reducing by half the proportion of people suffering fromhunger and those living on less than one dollar a day, and to developing a global partnership fordevelopment (MDG 8), which includes addressing the least developed countries’ needs, by reducingtrade barriers, improving debt relief and increasing official development assistance from developedcountries. ¶ ¶ ¶ Poverty is the most crucial plague of our times. It is commonly agreed that in order toreduce the proportion of people living on less than $1 a day, developing countries need to substantiallyaccelerate their economic growth by carefully opening their markets. The standard rationale is thattrade liberalization improves efficiency in the allocation of scarce resources, enhances economicwelfare and contributes to long-term economic growth . However, while there might well be long-termgains from opening their markets, liberalizing economies are likely to face some short-term adjustment

costs. This is because, as economies open up, a country’s imports use existing channels, while its newexports opportunities often come from different sectors that have yet to sufficiently develop productioncapacity.¶ ¶ The international community recognizes the importance of trade for development throughinitiatives, such as Aid for Trade, Financing for Development and, most importantly, the World TradeOrganization (WTO) Doha Round of trade negotiations. It is estimated that the global annual welfaregains from trade liberalization would be in the order of $90 billion to $200 billion, of which two thirdswould accrue to developing countries.1 This could help lift 140 million people out of poverty by2015 .2 ¶ Trade and economic growth. In the last decade, trade has helped trigger strong growth indeveloping countries, whose share in the global trade has increased from 29 per cent in 1996 to 37 percent in 2006 and whose exports have consistently been growing at a faster rate than those of developedcountries. This has stimulated growth in export revenues of developing countries. At the same time,gross domestic product (GDP) per capita, one of the most relevant indicators of MDG progress, hasincreased by more than 16 per cent over the past five years in Africa, West Asia and Latin America (seetable above). This has led to significant increases in employment and investment levels. The stronggrowth in exports from developing countries has, to a large extent, been due to the steady reductionof global tariffs as barriers to trade. On average, world tariffs have declined from 11 per cent in 2000to 7 per cent in 2006 (see Figure 1). However, there is still evidence that developing countries facedisproportionately high tariffs and trade barriers on products of export interest for them (see Figure 2).For example, in 2005, developing countries’ agricultural exports faced, on average, a tariff of 8.9 percent. Developed countries still impose tariffs on imports from developing countries that are twice ashigh as those from developed countries.1¶ In Africa, Mauritius—one of the most open economies insub-Saharan Africa—exemplifies how trade can be a strong instrument for achieving the MDGs. Itstraditional exports, such as sugar and textiles, have been sustained by trade policies that have allowedthe country to adapt to international competition and develop value-added services. Mauritius’ GDPgrowth reached an impressive average of 6 per cent per year after implementing an export-orientedstrategy in 1996. Other successful initiatives have been initiated in Rwanda, where coffee exportshave fuelled economic development, and also in Kenya, where cut-flower exports have seen a growthrate of 35 per cent annually over the last 15 years, sustained by trade incentives.



Attribute lack of substantial growth in US and Mexico after NAFTA to increased US-China relations, not failure of the FTA.Blecker and Esquivel 2009 (Robert A. Blecker, Professor of economics and chair of the economicsdepartment at American University, Washington, DC. Gerardo Esquivel, Professor of economics at ElColegio de México, Mexico City.“NAFTA, Trade, and Development” October 2009

http://www.american.edu/cas/economics/pdf/upload/2009-24.pdf)

This lack of convergence did not occur because of a failure of trade to grow faster after NAFTA ¶ wentinto effect. On the contrary, Table 7.1 shows that U.S. nonpetroleum imports from Mexico ¶accelerated to an average annual growth rate of 19.5 percent in the first seven years of NAFTA ¶(1993 –2000), after growing at an already rapid clip of 13.9 percent in 1987 –1993 following¶ Mexico’sunilateral liberalization. As a result of this f aster growth, Mexico’s share of U.S. ¶ nonpetroleum importsclimbed from 6.7 percent in 1993 to 11.4 percent in 2000. The accelerated ¶ growth in 1993 –2000 shouldnot be attributed entirely to NAFTA, however, but also resulted ¶ from two other factors: the “neweconomy” boom in the United States in the late 1990s, which ¶ led to an enormous explosion of U.S.demand for imports generally; and the depreciation of the ¶ Mexican peso following the 1994 –1995 peso

crisis, which left the peso at a more competitive¶

exchange rate for the next several years.¶

However,U.S. import growth from Mexico slowed considerably after 2000. U.S.¶ nonpetroleum imports fromMexico grew only at a 4.9 percent annual rate in 2000 –2008, while ¶ U.S. imports from China continuedto soar at a torrid 16.4 percent annual pace during that ¶ period. To be sure —and this is where bothNAFTA and geography may have helped—Mexico ¶ succeeded in maintaining its U.S. market share betterthan other global regions in the 2000 –2008 ¶ period. The 11.3 percentage point increase in the Chineseshare of U.S. nonpetroleum imports ¶ during this period came mostly at the expense of othercountries, while Mexico’s share dipped ¶ only slightly. Nevertheless, it is likely that U.S. imports fromMexico would have grown much 8 ¶ faster and increased their share further after 2000 in the absenceof the rapid influx of imports ¶ from China .10¶ The disappointing growth of Mexican exports to theUnited States in 2000 –2008 occurred ¶ after China joined the World Trade Organization (WTO) and

obtained “permanent normal trade ¶ relations” (formerly known as “most favored nation”) statusfrom the United States in 2001 . ¶ However, other factors were also at work. As part of its inflation-targeting monetary policy, the ¶ Mexican government allowed the value of the peso to rise significantlyin the early 2000s.11 The ¶ end of the Multifibre Arrangement (MFA) in 2005 led other developingcountries (largely, but ¶ not exclusively, China) to increase their shares of global textile and apparelproduction, thereby ¶ destroying a large part of the vertically integrated North American textile-apparelcomplex that ¶ flourished briefly under NAFTA’s rules of origin in the late 1990s. High -tech producersalso ¶ discovered that they could find lower wages and more supportive government policies in various ¶

East Asian countries.12

NAFTA boosted demand for highly-skilled labor in Mexico, and wage inequality cannotbe attributed to trade liberalization.Blecker and Esquivel 2009 (Robert A. Blecker, Professor of economics and chair of the economicsdepartment at American University, Washington, DC. Gerardo Esquivel, Professor of economics at ElColegio de México, Mexico City.“NAFTA, Trade, and Development” October 2009http://www.american.edu/cas/economics/pdf/upload/2009-24.pdf)

http://www.american.edu/cas/economics/pdf/upload/2009-24.pdf






Figure 7.4 shows one of the most widely cited indicators of wage inequality, the skilled-unskilled ¶ wagegap, measured by the ratio of salaries of employees (non-production workers, in the U.S. ¶ terminology)to wages of production workers, from the monthly survey of non-maquiladora ¶ industries in Mexico.The sharp rise in this measure of wage inequality in the first decade of ¶ trade liberalization (1987 –1997) surprised most economists, since they had assumed that trade 12 ¶ liberalization would boost thewages of less-skilled workers in Mexico due to a supposed ¶ abundance of less-skilled labor. Oneexplanation for the rise in this ratio at that time is that the ¶ initial tariffs that were lowered in the tradeliberalization of the late 1980s were higher in the ¶ industries that were most intensive in less-skilledlabor.19 Another explanation is that skill-biased ¶ technological change during this period boosted

demand for more educated workers —although ¶ this shift may have been at least partially an effect oftrade liberalization rather than an ¶ independent cause.20 ¶ Of course, a rise in wage inequality thatbegan several years before NAFTA cannot be ¶ attributed to this trade agreement. After NAFTA wentinto effect, this measure of wage ¶ inequality stopped increasing and turned gradually downward from 1997 –2007, although as of ¶ 2007 it remained 34 percent above its 1987 level. While there areprobably several causes of this ¶ reversal, the leading explanation is an increase in the relative supply ofmore-skilled labor due to ¶ the rising levels of education of the Mexican labor force.21

NAFTA didn’t decrease Mexican wage inequality because they’ve lacked a relativeabundance of skilled workers.Blecker and Esquivel 2009 (Robert A. Blecker, Professor of economics and chair of the economicsdepartment at American University, Washington, DC. Gerardo Esquivel, Professor of economics at ElColegio de México, Mexico City.“NAFTA, Trade, and Development” October 2009http://www.american.edu/cas/economics/pdf/upload/2009-24.pdf)

In hindsight, the expectations of significant overall wage gains for Mexican workers as a ¶ result of trade

liberalization alone were surely unrealistic. The prediction that Mexican workers ¶ in general—and less-skilled workers in particular—would benefit from trade liberalization ¶ hinged on the assumption thatMexico had a relative abundance of (less-skilled) labor compared ¶ with its trading partners. Althoughthis is true in regional terms, i.e., in comparison with Canada ¶ and the United States, it is not true inglobal terms, i.e., in a world economy that includes the ¶ much more labor-abundant countries ofSouth and East Asia . Mexico is close to the world ¶ average in terms of labor abundance, in-betweenhighly labor-abundant countries like China and ¶ India on the one side, and relatively labor-scarcecountries like the United States and Canada on ¶ the other.25 Similarly, although Mexico is the low-wagecountry in North America, it is a¶ medium-wage country globally.26 Thus, Mexico does not have aglobal advantage in labor costs ¶ and should not have been expected to reap large gains in wagesfrom opening up to trade , except ¶ in those sectors where the country can parlay its geographic

proximity to the U.S. market into¶

special competitive advantages.

Increased US trade and FDI to Mexico highly possible for futureBlecker and Esquivel 2009 (Robert A. Blecker, Professor of economics and chair of the economicsdepartment at American University, Washington, DC. Gerardo Esquivel, Professor of economics at ElColegio de México, Mexico City.“NAFTA, Trade, and Development” October 2009http://www.american.edu/cas/economics/pdf/upload/2009-24.pdf)







Just before the financial crisis worsened in September 2008, the business press was ¶ noting a trendtoward the return of some manufacturing production from Asia to both the United ¶ States andMexico, as a result of the high energy prices and transportation costs that had emerged ¶ at that timecoupled with the then-lower value of the dollar and concerns over quality control in ¶ China.31 Thefinancial crisis and recession temporarily interrupted this process, as energy prices ¶ tanked,transportation costs fell, and the dollar temporarily recovered (not only against the peso, ¶ but againstmost currencies) in the fall and winter of 2008 –2009. However, as the global ¶ economy began to revivein the second half of 2009, energy and commodity prices started to 19 ¶ recover and the dollar resumedits previous downward course against the major currencies such ¶ as the euro. If the dollar and pesoboth stay low and transportation costs again rise when global ¶ demand recovers, the potential for arevival of both Mexican and U.S. manufacturing is ¶ enormous. ¶ Press reports also indicate thatexisting foreign investment in Mexico has been ¶ remarkably resilient in spite of the increasedviolence resulting from the government’s ¶ crackdown on narcotrafficking;32 success in the lattereffort could help the country attract yet ¶ more FDI inflows. Furthermore, although both the U.S. andMexican automobile industries took ¶ a big hit in the crisis, as the auto companies begin to focus onsmaller and more fuel-efficient ¶ cars for the U.S. market, there is significant potential for a recovery of

regional trade in ¶ automobiles and auto parts. One sign of this potential is the (pre-crisis)announcement by Ford ¶ Motors that it would produce a new (low-cost, fuel-efficient) Fiesta model at itsplant in Toluca, ¶ Mexico.33

Greater US-Mexico cooperation can benefit healthcare for both countries.Blecker and Esquivel 2009 (Robert A. Blecker, Professor of economics and chair of the economicsdepartment at American University, Washington, DC. Gerardo Esquivel, Professor of economics at ElColegio de México, Mexico City.“NAFTA, Trade, and Development” October 2009http://www.american.edu/cas/economics/pdf/upload/2009-24.pdf)

Third, there are special opportunities for mutual gains from U.S.-Mexican cooperation in ¶ the areas ofhealth care and elder care services. Given the aging of the U.S. population and the ¶ high and rising costsof health and elder care in the United States , it would make sense to allow ¶ U.S. Medicare benefitsand private insurance payments to flow to Mexican providers of medical ¶ care and elder services(e.g., assisted living or nursing homes), who can provide those services at ¶ significantly lower cost. Infact, some U.S. senior citizens are already taking advantage of the ¶ lower cost of retiring and seekingmedical treatments in Mexico, but their numbers could be ¶ vastly expanded if Medicare and insurancebenefits were allowed to be spent there (subject, of ¶ course, to adequate quality controls). This couldprovide enormous numbers of jobs for ¶ Mexicans not only in health and elder care directly, but alsoin various supplier industries . Given ¶ that the manufacturing sector does not seem capable of supplyingadequate numbers of jobs in ¶ Mexico, for the reasons discussed earlier, Mexico needs to focus on othersectors, such as ¶ services and construction, to solve its employment problems . Since rising health carecosts are 21 ¶ threatening both the private and public sectors of the U.S. economy, both countries couldreap ¶ enormous gains from such an arrangement.

Free trade has little too do with inequalityYves 07 Does Globalization Cause Income Inequality? Posted by Yves Smith Yves (is a graduate ofHarvard College and Harvard Business School). Tuesday, February 6, 2007





Read more at http://www.nakedcapitalism.com/

Now this argument is increasingly made by the free market absolutists. We all know that free trade is agood thing, since it makes all parties wealthie r (well, at least in the two-country, two-goods model weall learned in school, and presumably in models with more countries and more factors). But if this goodpolicy happens to have some side effects, as in it leaves some individuals worse off, that doen s’tnecessarily obviate the overall merits of more open trade.The causes of income inequality appear to be many, including the declining power of unions, lessprogressive taxes and income redistribution, and the rise of technology (both in reducing the numberof lower-skill jobs and in increasing the incomes of higher skill ones ). While globalization may play apart, given that only 1% of American jobs have been outsourced, its role appears to be secondary.

Trade decrease inequality, China proves — CarlosLozada

Globalization Reduces Inequality in China-carlos lorzada ( a graduate of Notre Dame and Princetonmanaging editor of Foreign Policy magazine)National Bureau of Economic Research.com

In Globalization and Inequality: Evidence from Within China (NBER Working Paper No. 8611), co-authors Shang-Jin Wei and Yi Wu seek to overcome these obstacles by studying the connectionsbetween openness and inequality within a single country , where data disparities as well as institutionaland cultural differences are less likely. Wei and Wu examine data for about 100 Chinese cities between1988 and 1993, focusing on the gap between urban and rural incomes as a measure of incomeinequality . (They limit the study to cities that encompass urban areas plus adjacent rural counties.) Totalincome inequality in China can be decomposed into inequality between urban and rural areas, inequalitywithin urban areas, and inequality within rural areas. A number of other studies have shown that thefirst component - the inequality between urban and rural incomes - explains 75-80 percent of the overall

inequality in China in the last two decades.It is sometimes asserted, based on China's aggregate statistics, that it is an example in which greateropenness has led to an increase in inequality . Wei and Wu suggest that this is wrong because otherfactors, such as inflation, could account for the increase in inequality. A within-country study such astheirs can hold constant these nationwide factors. Wei and Wu find that "those cities that have had agreater increase in the trade-to-GDP ratio have also tended to witness a reduction, rather than anincrease, in the urban-rural income inequality." In other words, openness to the global economy isassociated with a reduction, not a worsening, of income disparities

Trade reduces inequality – increases wealth

Eiras 2004

(Ana Isabel Eiras is Senior Policy Analyst for International Economics in the Center for InternationalTrade and Economics at The Heritage Foundation. “Why America needs to support free trade” May 24,2004. The Heritage Foundation. http://www.heritage.org/research/reports/2004/05/why-america-needs-to-support-free-trade)

The most compelling reason to support free trade is that society as a whole benefits from it. Freetrade improves people's living standards because it allows them to consume higher quality goods atless expensive prices . In the 19th century, British economist David Ricardo showed that any nation that

http://www.heritage.org/About/Staff/AnaEiras-archive.cfm

http://www.heritage.org/research/reports/2004/05/why-america-needs-to-support-free-trade







focuses on producing goods in which it has a comparative advantage will be able to get cheaper andbetter goods from other countries in return. As a result of the exchange, both trading parties gainfrom producing more efficiently and consuming higher quality goods and services at lower prices. ¶

Trade between nations is the same as trade between people. Consider what the quality of life would be ifeach person had to produce absolutely everything that he or she consumed , such as food, clothing, cars,or home repairs. Compare that picture with life as it is now as individuals dedicate themselves to workingon just one thing--for example, insurance sales--to earn a salary with which they can freely purchase food, a car,a home, clothing, and anything else they wish at higher quality and lower prices than if they had done itthemselves. ¶ It simply makes sense for each person to work at what he or she does best and to buy therest . As a nation, the U nited States exports in order to purchase imports that other nations producemore skillfully and cheaply. Therefore, the fewer barriers erected against trade with other nations,the more access people will have to the best, least expensive goods and services in the world"supermarket." ¶ Producers benefit as well. In the absence of trade barriers, producers face greatercompetition from foreign producers, and this increased competition gives them an incentive toimprove the quality of their production while keeping prices low in order to compete. At the same time,free trade allows domestic producers to shop around the world for the least expensive inputs they canuse for their production, which in turn allows them to keep their cost of production down without sacrificing

quality. ¶ In the end, the results benefit both producers--who remain competitive and profitable--and consumers--who pay less for a good or a service than they would if trade barriers existed.



Trade Good/Bad – General



Trade Good



Trade Good – General

Free trade is good – it’s a prerequisite to solving global problemsEiras 2004


Free trade is again under attack, despite having been, for over a century, the basis of America's wealth .Some groups in the United States blame free trade for the loss of manufacturing jobs, while others blame it forexposing some U.S. producers to foreign competition. ¶ Free trade , however , is good for America, and for avery simple reason: It allows American workers to specialize in goods and services that they producemore efficiently than the rest of the world and then to exchange them for goods and services thatother countries produce at higher quality and lower cost. Specialization and free trade allow the U.S.to become more competitive and innovative. Innovation constantly provides new technologies thatallow Americans to produce more, cure more diseases, pollute less, improve education, and choosefrom a greater range of investment opportunities. The resulting economic growth generates better-paying jobs, higher standards of living, and a greater appreciation of the benefits of living in apeaceful society. New technologies bring about change, which, as U.S. economic history shows,benefits society as a whole . In the process, however, some sectors suffer until they can adapt to the newchanges and begin to benefit from them. Today, Americans are experiencing some of that "suffering" becausenew technologies are challenging old methods of production.









Trade Good – War

Trade openness massively reduces the risk of conflictPyun & Lee 2009 (Ju Hyun Pyun- Researcher at Ministry of Finance and Economy in Korea, and Korea Institute for InternationalEconomic Policy, Jong-Wha Lee- Jong-Wha Lee is the Head of the Asian Development Bank’s Office of Regional Economic Integration,Globalisation promotes peace, 21 March 2009, http://www.voxeu.org/article/globalisation-promotes-peace)

More importantly, our study finds that global trade openness also significantly promotes peace. Anincrease in global trade openness would reduce the probability of military conflict as it leads to anincrease in bilateral trade interdependence. However, when the level of bilateral tradeinterdependence is held constant, the effect of increased multilateral trade openness on the probabilityof bilateral conflict is not clear. Countries more open to global trade may have a higher probability ofdyadic conflict if multilateral trade openness reduces bilateral dependence on any given country, thuslowering the opportunity-cost of military conflict. In a recent paper, Martin, Mayer, and Thoenig (2008)find that an increase in multilateral trade raises the chance of conflict between states (see their Voxcolumn). In contrast to their findings, however, our study finds that multilateral trade openness in factlowers the probability of dyadic conflict with the bilateral trade partner, and by a larger magnitudethan bilateral trade does alone. An increase in global trade openness by 10% from the world meanvalue decreases the probability of the dyad's military conflict by about 2.6% from its predicted mean. ¶

The results may derive from the fact that an open global trading system will prevent a state frominitiating a war against any trading partner because other trading partners in global markets prefer to dobusiness with a "peaceful" player. Hence, global trade openness of the dyad can reduce the incentiveto provoke a bilateral conflict. We also think that open states can be more peaceful because theybecome more susceptible to political freedom and democracy. They apply international law betterand employ good governance. Trade openness can also lead to an "expansion of bureaucraticstructure," which concerns itself with economic interests in addition to security interests — and isthus less likely to support military action. ¶ Therefore, globalisation promotes peace through twochannels: one from the increased advantage peace holds for bilateral trade interdependence and theother from a country’s integration into the global market, regardless of the size of trade with eachtrading partner. "Globalisation" has been one of the most salient features of the world economy overthe past century. Emerging markets and developing countries continue to integrate into the globaltrading system. World trade has increased rapidly, particularly since World War II — from 18% ofworld GDP in 1950 to 52% in 2007. At the same time, the number of countries involved in world tradehas also increased significantly. However, despite the increase in the number of country pairs betweenwhich conflict is possible, the probability of dyadic military conflicts has decreased.¶ Our findings suggestthat trade integration not only results in economic gain but can bring about significant political gain aswell — such as a significant “peace dividend” between trading partners. It also explains why regional orglobal economic integration is often initiated to satisfy political and security motives. For example, theraison d’etre behind the formation of the EU following World War II was the desire for peace —

particularly between France and Germany. ¶ In response to the current financial crisis and economicrecession, some countries have resorted to trade-restricting measures to try to protect nationalbusinesses and jobs. The world should remember that protectionism in the interwar period provokeda wave of retaliatory actions that not only plunged the world deeper into the Great Depression butalso put international relations at greater risk.

http://www.voxeu.org/index.php?q=node/354

http://www.voxeu.org/index.php?q=node/354



Trade is key to international peace —China-Taiwan Relation ProvesBenson & Niou 2007 (Brett V. Benson-Assistant Professor of Political Science and Asian Studies at Vanderbilt University, Emerson M.S. Niou-Professor of Political Science at Duke University, Journal of East Asian Studies 7 (2007), 35 –59, 2007,https://my.vanderbilt.edu/brettbenson/files/2012/04/jeas.pdf)

What can we learn about China and Taiwan from their economic relationship? At a glance, the boomingeconomic relationship between China and Taiwan appears to exhibit expected trends for trade partnersthat are in close geographical proximity to one another, have complementary comparative advantages,and share a common language and sociocultural roots. However, it is common knowledge that Chinaand Taiwan are also political adversaries because of the decades-long dispute over the question ofwhich government legitimately represents all of China and, in recent years, the official status of Taiwan’ssovereignty. How, then, should we expect increasing economic integration to affect the politicalrelationships and prospects for peace and stability between interdependent dyads like China andTaiwan?¶ Although some disagree, the prevailing view is that economic interdependence promotesinterstate peace.3 Early on, the pacific effect of interdependence was justified by two different butrelated arguments. The first contends that peace follows economic integration through theestablishment of social links.4 Trade increases communication, a convergence of economic interests,

and the establishment of cultural ties that promote relationships of trust and respect between tradingpartners that will prevent them from resorting to forceful means to resolve disputes. ¶ The second lineof argument, which has become the central theoretical rationalization for the liberal proposition thattrade promotes peace, is that interdependence results from trade partners’ mutual emphasis onmaximization of gains from trade, which will be lost if conflict interrupts the trade relationship. Fromthis standpoint, conflict is viewed as a kind of tariff on trade prices, driving import prices up and exportprices down.5 As the level of trade increases, the cost of conflict also goes up because of theopportunity costs due to lost gains from trade that follow from the onset of conflict. Optimizing tradepartners, therefore, will be less willing to initiate a conflict or increase existing levels of conflict,because as trade increases, the marginal cost of conflict also increases, resulting in a decrease in themarginal benefit of more hostility. Less-interdependent countries will derive greater utility from conflictbecause their opportunity costs are lower due to lower import and export levels. However, as countriestrade more and become more interdependent, there is more at stake in terms of welfare gains lostwhen conflict increases the cost of trade and ultimately threatens the cessation of trade altogether.

Economic interdependence decreases the likelihood of warCopeland 1996 (Dale C. Copeland-Assistant Professor in the Department of Government and Foreign Affairs at the University of Virginia,Economic Interdependence and War: A Theory of Trade Expectations, International Security, Volume 20, Number 4, Spring 1996, pp. 5-41,https://www.mtholyoke.edu/acad/intrel/copeland.htm)

The prolonged debate between realists and liberals on the causes of war has been largely a debateabout the relative salience of different causal variables. ¶ Realists stress such factors as relative power,while liberals focus on the absence or presence of collective security regimes and the pervasiveness ofdemocratic communities.’ Economic interdependence is the only factor that plays an important causalrole in the thinking of both camps, and their perspectives are diametrically opposed. ¶ Liberals argue thateconomic interdependence lowers the likelihood of war by increasing the value of trading over thealternative of aggression: interdependent states would rather trade than invade. As long as high levelsof interdependence can be maintained, liberals assert, we have reason for optimism. Realists dismissthe liberal argument, arguing that high interdependence increases rather than decreases theprobability of war. In anarchy, states must constantly worry about their security. Accordingly,interdependence-meaning mutual dependence and thus vulnerability-gives states an incentive to



initiate war, if only to ensure continued access to necessary materials and goods.¶ The unsatisfactorynature of both liberal and realist theories is shown by their difficulties in explaining the run-ups to thetwo World Wars. The period up to World War I exposes a glaring anomaly for liberal theory: theEuropean powers had reached unprecedented levels of trade, yet that did not prevent them from goingto war. Realists certainly have the correlation right-the war was preceded by high interdependence-buttrade levels had been high for the previous thirty years; hence, even if interdependence was a necessarycondition for the war, it was not sufficient. ¶ At first glance, the period from 1920 to 1940 seems tosupport liberalism over realism. In the 1920s, interdependence was high, and the world was essentiallypeaceful; in the 1930s, as entrenched protectionism caused interdependence to fall, internationaltension rose to the point of world war. Yet the two most aggressive states in the system during the1930s, Germany and Japan, were also the most highly dependent despite their efforts towardsautarchy, relying on other states, including other great powers, for critical raw materials. Realism thusseems correct in arguing that high dependence may lead to conflict, as states use war to ensure accessto vital goods. Realism’s problem with the interwar era , however, is that Germany and Japan had beeneven more dependent in the 1920s, yet they sought war only in the late 1930s when theirdependence, although still significant, had fallen.

Globalization key to solve warHolmes 2011 (James Holmes is professor of strategy at the Naval War College and senior fellow at the University of Georgia School ofPublic and International Affairs, Globalization=No War?, August 6, 2011, http://thediplomat.com/flashpoints-blog/2011/08/06/globalization-no-war/)

Tanned, rested, and ready, Norman Angell lives again—and he now wears US Navy khaki.He’s doubleddown on his thesis that economic interdependence ought to end war, insisting that globalization hasended war between leading powers like China and the United States. Writing in the US Naval InstituteProceedings, Lt. Cmdr. Matthew Harper maintains that those of us who take China’s naval rise seriouslygaze ‘through a spyglass, distortedly,’ omitting a ‘glaring detail’ about this momentous de velopment—namely ‘the global economy.’ ¶ In particular, he writes, calling attention to Chinese weaponry like the DF-21D/CSS-5 anti-ship ballistic missile is ‘both overblown and unproductive for the United States and itsmilitary.’ Harper alleges that I and my co-author Toshi Yoshihara are among those pushing a skewedunderstanding of Chinese military power: ¶ ‘In Red Star over the Pacific…Naval War College professorsToshi Yoshihara and James Holmes examine the rise of the Chinese military. However, they also appearto dismiss the wider ramifications of a Sino-American conflict. In describing the Chinese advantages offiring anti-ship missiles deep from inland China, the authors write, “the United States would risk alimited naval conflict escalating into a full-blown war against China, its leading trading partner.” Whilethey note that China is America’s largest trading partner , they still imply a limited naval conflict overTaiwan is possible.’¶ We imply nothing. We say explicitly, in Red Star over the Pacif ic and many otherforums, that such a conflict is possible. US-China economic ties elevate the costs of armed conflict forboth belligerents, but can’t rule it out entirely. Other interests supersede economics at times.Conducting strikes on the Chinese mainland could carry vast economic and political consequences for

the United States. Knowing this —and knowing that Washington knows it —Beijing can hope to deterthe United States from coming to the island’s defence. Should a conflict come to pass, Chinese le adershope Washington will stand aside for the sake of national self-interest.

http://www.usni.org/magazines/proceedings/2011-07/chinese-missiles-and-walmart-factor

http://www.usni.org/magazines/proceedings/2011-07/chinese-missiles-and-walmart-factor



Trade Good – Economy

Trade causes economic growthEiras 2004


This change is especially visible in the manufacturing sector, just as it was in the agricultural sector 100 yearsago. But in the same way that it adapted then to a new, more industry-based society, America will adapt againto a new, more knowledge-based society. The Bush Administration should support free trade by all means at its disposal. Keeping America free of protectionism and special favors helps to generateopportunities and fosters economic growth . Economic growth is of particular importance todaybecause eliminating the large federal budget deficit requires either growth to generate tax revenuesor something even harder to come by--the political will to cut spending . To promote economic growth,the Administration should advance more free trade agreements and lead negotiations at the WorldTrade Organization to eliminate agricultural subsidies, antidumping measures, and other protectionistpolicies that benefit a very small group of Americans at the expense of most other citizens. In addition,instead of threatening to impose barriers against inexpensive imports, the Administration should lower the taxand regulatory burden on U.S. companies so that they can be more competitive. Moving toward greater, notless, economic freedom benefits all Americans .

Free Trade spurs innovation, jobs and bolsters US econ.Markheim 7 (Daniella, is Jay Van Andel Senior Trade Policy Analyst in the Center for InternationalTrade and Economics at The Heritage Foundation. “Why Free Trade Works for America” April 16, 2007.)http://www.heritage.org/research/reports/2007/04/why-free-trade-works-for-america)

The gains from freer Trade are substantial . Today, the $12 trillion U.S. economy is bolstered by freeTrade, a pillar of America's vitality . In 2005, U.S.exports to the rest of the world totaled $1.2 trillionand supported one in five U.S. manufacturing jobs. jobs directly linked to the export of goods pay 13percent to 18 percent more than other U.S. jobs .[1] Moreover, agricultural exports hit a record high in2005 and now account for 926,000 jobs.[2]¶ In Colorado, international Trade supports one of every 20private-sector jobs and more than 16 percent of manufacturing jobs. International Trade supports anestimated 6.1 percent of Ohio's total private-sector employment and more than 20 percent of allmanufacturing jobs. In South Carolina, Trade supports one of every 10 private-sector jobs and more than23 percent of manufacturing jobs.[3] State by state across America, international Trade promotesopportunity. ¶ The service sector accounts for roughly 79 percent of the U.S. economy and 30 percent ofthe value of American exports.[4] Service industries account for eight out of every 10 jobs in the U.S.and provide more jobs than the rest of the economy combined. Over the past 20 years, serviceindustries have contributed about 40 million new jobs across America.[5] ¶ As today's global economyoffers unparalleled opportunities for the U.S., continuing to expand Trade by lowering barriers togoods and services is in America's economic interest. Freer Trade policies have created a level ofcompetition in today's open market that engenders innovation and leads to better products, higher-paying jobs, new markets, and increased savings and investment . Small business, a critical componentof the U.S. economy, creates two out of every three new jobs and accounts for about one-quarter ofAmerica's exports.[6]


http://www.heritage.org/research/reports/2007/04/why-free-trade-works-for-america

http://www.heritage.org/research/reports/2007/04/why-free-trade-works-for-america




Trade Good – Environment

Free trade is key to maintain a good environmentKerr – 12 ( Thomas Kerr is director, Climate Change and Green Growth Initiatives at the World

Economic Forum. “Could free trade be good for the environment”. October 3, 2012“http://forumblog.org/2012/10/could -free-trade-be-good-for-theenvironment/”)

The past few weeks have produced good news and bad news for global “clean technology” markets, economic growth, andsustainable development. On the negative side, a looming trade war threatens to undermine industry progress towards lowercosts and expansion in the use of solar technologies. Last week, China threatened retaliation after the US and EU launched“anti -dumping” cases against Chinese solar energy products Without wishing to comment either way on the merits of thesecases, the World Economic Forum’s Climate Change and Gree n Growth Initiatives group urges all sides to avoid escalating thesituation. Negotiation is always better than lit igation The good news is that leaders at the Asia-Pacific EconomicCooperation (APEC) meeting in Vladivostok, Russia, agreed to cap tariffs affecting trade for green goods andservices at 5% When fully implemented, tariffs will be reduced from as much as 35% to the maximum5%. They also produced a specific list of goods and services covered by the measure – a crucial step toward definitivelylowering tariff rates. These tariff reductions should have a significant positive impact in terms ofincreasing trade in green goods and services – and protecting the environment – in the Asia-Pacificregion, which currently accounts for more than 50% of world trade . However, while the APEC decision iswelcome, the rising tide of green import tariffs, local content requirements, and other non-tariff barriers, demonstrates thatmore action is needed: a truly global initiative to lower the barriers to green free trade. The information andcommunications technology (ICT) industry faced similar challenges in the 1990s and successfully developed a ground-breakingInformation Technology Agreement that led to the elimination of tariffs. The result was substantial growth in the ICT sector,with total trade rising from US$ 1.2 trillion to US$ 4 trillion between 1996 and 2008, an annual growth rate of 10%. This is apromising model to follow. There should not be a “North vs South” agenda. Leading “clean -tech” companies come from largeemerging economies as well as industrialized countries. We all lose, and the environment loses, when we face trade barriersthat prevent free movement of sustainable technologies. Working with the Green Growth Action Alliance, the WorldEconomic Forum’s Climate Change and Green Growth Initiatives group is encouraging leadingcompanies in the sector to work with governments and civil society organizations in developing a

green free-trade strategy that delivers economic growth and preserves environmental prosperity .Companies that have signed up to this approach so far include, Wal-Mart Stores, Inc., Applied Materials, Bank of AmericaMerrill Lynch, Barclays, Canadian Solar, General Electric, Yingli Solar, Novozymes, SEMI PV Group, Solar Energy IndustriesAssociation, Suntech, Suzlon Group, Trina Solar, Vestas Wind Systems and Welspun Energy. We are also urging national leadersto engage with multilateral trade organizations and liberalize trade in clean technologies. The threat to the environment affectsus all, so we should all work together to find a solution

http://www.apec.org/Meeting-Papers/Leaders-Declarations/2012/2012_aelm.aspx




http://www.weforum.org/issues/green-growth








Trade Good – Democracy

Turn: removing sanctions increase democracy: China and Mexico proveNCPA 1-14-2003 (“Should We Trade with Cuba?” National Center for Policy Analysis, Amy Maness, No. 427, January 14, 2003<http://www.ncpa.org/pub/ba427>).

The U.S. embargo on Cuba was instituted in 1961 to overthrow Fidel Castro and neutralize the threat his regime posed by blocking all trade,except in food and medicine. The embargo was aggressively tightened in the 1990s with the enactment of the Cuban Democracy (Torricelli) Actof 1992 and the Cuban Liberty and Democratic Solidarity (Libertad or Helms-Burton) Act of 1996. All trade with Cuba was blocked, includingfood and medicine . However, American attitudes toward U.S. policies on Cuba are changing, and supportfor repealing the embargo is growing. ¶ Passionate embargo proponents argue that trading with Cuba would strengthen FidelCastro, whose authoritarian regime has suppressed all opposition and violated the human rights of political dissidents. They say that tradeshould occur only after Cuba makes significant efforts toward economic and political reform. Embargo opponents argue that sanctions actuallybolster support for Castro, providing an excuse for the poor economic performance of socialism. They note that the Cuban people sufferbecause trade sanctions deny them access to basic necessities like food and medicine. ¶ Both arguments miss the point that U.S.policies toward Cuba are outdated and ineffective. The threat Cuba once posed to U.S. nationalsecurity ended with the collapse of the Soviet Union in 1991. Without Soviet support, Cuba wasunable to maintain its military power. And as other countries trade with and invest in Cuba, the U.S.embargo is increasingly ineffective. ¶ Furthermore, while the embargo has not produced the desiredregime change in Cuba, integration into the international economy has helped other developingcountries - including socialist countries. Economic growth enhanced by trade has reduced poverty andcreated a middle class that supports further liberalization. Trade partners are well positioned to influence governmentpolicies on human rights and to encourage democratization. ¶ Trading with the "Enemy."¶ The United States has trade agreements withgovernments similar to that of Cuba - including China, Vietnam and North Korea.¶ After 20 years of economic reform, China has become one ofthe United States' fastest-growing trade partners, among whom it already ranks fourth. U.S. trade with China for the year 2002 was $91.15billion; in the month of August alone, it was $14.51 billion. As the Center for Trade Policy points out:¶ In 1978 international trade was 10percent of China's gross domestic product (GDP), but by the late 1990s trade comprised 36 percent of its GDP.¶ Due to China's reforms, 100million people no longer live below the poverty line, and both rural and city dwellers have better access to health care and education. ¶ Tradewith China has flourished due in part to the U.S. decision to separate trade promotion from humanrights issues. Trade has encouraged China to develop a legal system with enforceable contracts andproperty rights. Thus trade is anchoring the process of democratization. ¶ Trading with Latin America. ¶ Like China, Mexico has benefited greatly from embracing trade as a means for economicdevelopment. Mexico began economic reform by targeting trade and investment liberalization tostimulate the economy in the 1980s and 1990s. According to Angel Villalobos, a high-ranking Mexican trade official:¶ Since the NorthAmerican Free Trade Agreement (NAFTA) was enacted in 1994, foreign direct investment (FDI) in Mexico has grown to over $115 billion.¶ Employment in FDI firms has grown more than twice as fast as the economy as a whole, and these firms offer salaries that are 48 percenthigher than average. ¶ Between 1993 and 1999, Mexico rose from twenty-sixth to eighth among the world's exporting countries and becamethe United States' second-largest trading partner. ¶ The link between trade liberalization and increased democratization was evinced in Mexico'scase by the election of President Vicente Fox in 2000, which ended seven decades of s ingle party rule. Economic growth from NAFTA increasedMexico's commitment to trade liberalization. Mexico recently entered into free trade agreements with the European Union, Israel, Nicaragua,El Salvador, Guatemala, Honduras and several Asian countries.¶ Hurting U.S. Farmers.¶ Cuba's population of 12 million is in need of everything,and other countries are offering it. ¶ A recent Texas A&M study commissioned by the Cuba Policy Foundation shows that U.S. farmers lose $1.24billion each year due to the embargo. [See the Figure.] ¶ Lifting the sanctions would generate an additional $1.6 billion in U.S. GDP, $2.8 billionin sales and 31,262 jobs.¶ In the 10 months since Congress enacted the Trade Sanctions and Export Reform Act of 2000 - allowing cash sales ofagricultural commodities - Cuba has purchased almost $200 million in U.S. food and agricultural products from 34 states.¶ Falling International

Support.¶ The United States has pursued trade to promote democracy in countries throughout the Pacific and the Americas. The inconsistentU.S. stance on Cuba does not have international support. An overwhelming majority in the United Nations has voted for 10 years to condemnthe U.S. embargo. Of 173 countries, only Israel and the Marshall Islands have sided with the United States. Similarly, the Organization ofAmerican States has voted 32 to 1 to repeal trade sanctions against Cuba. ¶ Many of these nations have pursued increased trade with the islandnation. Cuba imports approximately $1 billion annually from many U.S. allies, rendering the U.S. embargo increasingly ineffective.¶ GrowingInternational Support for Trade .¶ Our 42-year experiment with Cuba has shown that trade sanctions do notwork. Not only has the embargo failed to remove Fidel Castro from power, it has done little to fosterdemocratization. ¶ Unsurprisingly, domestic support for the policy is dwindling. Last summer the House voted 262-167 to repeal thetravel ban on Cuba, and the Senate considered similar legislation. Also, according to a recent poll by the Cuba Policy Foundation, Americanssupport lifting the sanctions by 52 percent to 32 percent. A large majority of Americans want the United States to start a formal dialogue with



Cuba now.¶ In May 2002, President Bush announced his Initiative for a New Cuba, which would take a quid pro quo approach to opening uptrade. Should Cuba hold free and open elections, the president would take significant steps toward repealing trade sanctions. Helms-Burtondoes not allow the president to change U.S. policies toward Cuba. However, Helms-Burton comes under sunset review next year, and the 108thCongress should allow it to expire. This would free the president to negotiate the repeal of the trade embargo and to implement other changesby executive order.



Trade Bad



Trade Bad – Environment

Free Trade tanks the environmentKirkpatrick et al. – 8 ( Colin Kirkpatrick works for International Business Development in the UK and

Serban Scrieciu is a Reader in Economics for Sustainability at Natural Resources Institute, University ofGreenwich. “Is trade liberalisation bad for the environment? A review of the economicevidence”http://www.tandfonline.com/doi/full/10.1080/09640560802116988#.UdHD9yvwJZW )

The issue of whether increased levels of trade and investment will lead to increased pressures on theenvironment has fuelled much of the ongoing trade-environment debate. According to the classicaltheory of trade, trade liberalisation will lead to structural changes in a country's economy, allowingspecialisation in those goods or services where the country has a comparative advantage, for example,in low labour costs, natural resource abundance or high availability of skills and socio-economicinfrastructure. The theory of comparative advantage is a static analysis that is concerned with theefficiency gains that result from the reallocation of resources in response to the change in relative priceincentives resulting from a reduction in protective trade barriers. Standard trade theory also allows forthe potential dynamic gains from trade liberalisation, wher e the lowering of trade barriers ‘opens’ thedomestic economy to imported technology and know-how. Broadly similar effects are predicted tofollow the reduction of constraints on foreign investment, with an increased flow of foreign directinvestment to the liberalising economies. Trade liberalisation may theoretically affect the environmentthrough a variety of channels. First, the overall increase in the level of economic activity is likely to beaccompanied by an increase in the use of natural resources and higher levels of pollution (scaleeffect). However, although freer trade and increased production levels might be accompanied (ceterisparibus) by adverse environmental effects, a number of other factors make it difficult to isolate ‘pure’scale effects and identify a strong pattern in the commonly-assumed detrimental relationship betweenincreased economic activity and environmental performance. Environmentally beneficial income effects

might arise when augmented financial capacity supplies more resources for environmental protection(supply-side effects) and fosters greater demand for environmental quality (demand-side effects) (Estyand Ivanova 2003).2 Nevertheless, although it may be difficult to isolate the ‘pure’ scale effect, it isincreasingly acknowledged that anthropogenic activities (in terms of scale and methods of production,as well as consumption effects) are having a net negative impact on the environment, particularly withreference to climate change and global warming (IPCC 2007, Stern 2007). To summarise, the effect oftrade and investment liberalisation on the environment is theoretically ambiguous. This is hardlysurprising, given the complex interdependencies that exist between trade, investment, regulation andenvironmental quality. The different assumptions and possibilities in the theoretical literature suggestthat the impact of trade liberalisation on environmental quality may not necessarily follow a single orunique pattern, and may depend on country specifics, the nature of the environmental problem under

investigation, as well as policy and institutional measures accompanying the trade reform process

Trade results in more greenhouse gas emissionsHorween 13 ( Matt Horween was a U.S. foreign service officer for the U.S. Agency for InternationalDevelopment “Free trade Explodes Emerging Markets’ Massive Pollution”http://realmoney.thestreet.com/articles/03/05/2013/free-trade-explodes-emerging-markets-massive-pollution )

http://www.tandfonline.com/doi/full/10.1080/09640560802116988#.UdHD9yvwJZW

http://realmoney.thestreet.com/articles/03/05/2013/free-trade-explodes-emerging-markets-massive-pollution




http://www.tandfonline.com/doi/full/10.1080/09640560802116988#.UdHD9yvwJZW



This week President Obama castigated his own country for not doing enough to control greenhousegasses while at the same time not saying one word about the real polluters of this world. I am talkingabout the entire emerging markets world led by China who is exempt from doing anything about carbonemissions or any other kind of pollution. Environmentalists have the same head in the sand attitude andnever protest what the emerging market is doing to foul their own air and water and to increase theirgreenhouse gas emissions. Instead environmentalists endlessly badmouth the industrialized world,which has done a huge amount of pollution control while losing millions of jobs to the emerging marketssince NAFTA and the Kyoto Protocol came into existence and the emerging markets joined the Worldtrade Organization. Does free trade coupled with the Kyoto Protocol actually make global warmingworse overall ? I think they do. I think that ignoring the massive polluters in the emerging marketscreated a situation where no matter how hard the industrialized countries try to limit their emissionsthe overall world situation gets worse and more people in the industrialized countries will stayunemployed. This is why Canada withdrew from the Kyoto Protocol in December 2011 . The Canadiangovernment said at the time that they were not going to lose any more jobs because of the ridiculousgoals in the Kyoto Protocols and they were not going to pay any fines to the emerging markets for notmeeting their goals. I suggest that the EU, U.S. and Canada put a carbon tax on all products

manufactured in the emerging markets unless they reduce their greenhouse gas emissions and reducetheir other forms of pollution. Now the emerging market countries like China are demanding that wepay to clean up their pollution because they are poor. The emerging market countries are not justgigantic greenhouse gas emitters but they also are destroying rain forests and polluting rivers and ofcourse their air. The industrialized world is heavily in debt now and cannot afford to pay for cleaning upthe pollution that the emerging market countries have created over years since they joined the WTO.Auto production and light vehicles in China will exceed that of Europe this year. Jobs and pollution havegone to the emerging markets under the Kyoto Protocol and free trade that exempts the emergingmarket countries from having to do anything about global warming or other forms of pollution. Theefforts to reduce global warming gasses in the industrialized world under the Kyoto Protocol coupledwith free trade has made the overall situation worse in the world because of the massive increase in

greenhouse gasses in the emerging market countries and also their much higher birth rates . The morewe increase the cost of energy in the industrialized world the more overall pollution will rise in the worldbecause people in the emerging markets who use very little carbon are now using much more carbonbased fuels at work and for their own personal use. Our leaders and all green groups seem blind towhat's happened and what is happening every day now. In fact the greens protest all the time againstthe Keystone pipeline and against Canada for its development of shale oil and tar sands oil while theyNEVER protest in front of the Chinese embassy or the Mexican embassy about the massive pollution inthose two countries and the degradation of life itself from massive regular pollution plus global warminggas pollution. The emerging market countries have become our creditors and have run up gigantic tradesurpluses with the U.S. due to many factors including unlimited capacity to pollute, very weak laborlaws, child labor, close to slave labor in the North Korean special manufacturing zones that South Koreancompanies utilize, manipulated currencies, special rules for them under the WTO rules that allow themto control investments in their countries and percentage ownership by outsiders and to block ourproducts while we cannot easily block their products. Even with unemployment at record high levels inthe southern states of the EU that rely heavily on tourism, the EU wants to implement a carbon tax onairlines which is really a carbon tax on tourism. All the emerging market countries are against thiscarbon tax on airlines and the U.S. is against it as well. The amazing thing is that none of the southerncountries in the EU has protested against this silly tax on tourism. The EU of course could care less, as itis a bureaucracy second to now in the world and answers only to itself until very recently when theBritish forced a slight cut in its budget.



Trade causes warming – movement of goodsVaughan & Nordstrom 09’ Scott Vaughan & Hakan Nordstrom/ Scott Vaughan is the commissioner of the Environment and

Sustainable Development of the Government of Canada/Hakan Nordstrom is the Chief Economist andSenior Adviser of the National Board of Trade, the central administrative body in Sweden dealing withforeign trade and trade policy./Trade and the Environment/ World Trade Organization (WTO)/2/27/09/http://dspace.cigilibrary.org/jspui/bitstream/123456789/21048/1/Trade%20and%20the%20Environment.pdf?1

Global warming is caused by the increasing emissions ¶ of carbon dioxide from sources that burn fossilfuel, including energy-intensive processing industries, fossil-fuelled power plants, automobiles, and soon. Since the early 1800s, when people began burning large amounts of ¶ coal and oil, the amount ofcarbon dioxide in the earth’s ¶ atmosphere has increased by nearly 30 per cent, and average globaltemperature appears to have risen between ¶ 0.3° and 0.6° on the Celsius scale . Carbon dioxide gas¶ traps solarheat in the atmosphere in the same way as ¶ glass traps solar heat in a greenhouse. For this reason, carbon dioxide is sometimes called a

“greenhouse gas.” Besides carbon dioxide, human emissions of methane and ¶ nitrous oxide contribute to the process of global warming.Turning now to the trade dimension of the issue, trade ¶ itself is arguably a contributing factor toglobal warming ¶ through the carbon dioxide emitted when goods are ¶ shipped between differentparts of the world. Of course, ¶ the problem is generic to all kinds of transportation using ¶ fossil fuel,whether domestic or international . The firstbest policy follows: a tax on fossil fuel to curtail excessively long shipments of goods

with a low value relative to ¶ weight or volume. While trade barriers could possibly be¶ used as a second-best measure to reduce transport

emissions, such measures would be only partially effective ¶ since they would not address emissions fromdomestic ¶ shipping. The effective policy would be one that does not ¶ discriminate betweeninternational trade and trade within national boundaries.



Trade Bad – War

Trade leads to war – increases vulnerability to disruptionsKinne 12

Brandon J Kinne, 2012,assistant professor of political science at The University of Texas at Dallas, PhD in political sciencefrom Yale University, “Multilateral Trade and Militarized Conflict: Centrality, Openness, and Asymmetry in the Global TradeNetwork” ¶

http://journals.cambridge.org/download.php?file=%2FJOP%2FJOP74_01%2FS002238161100137Xa.pdf &code=26756df0ac55f890a239898b8d35813a

This dyadic logic is directly extensible to multilateral trade. Increased integration corresponds toincreased trade partners, strengthened trade ties, and shorter commercial distances to nonpartners. Each of these aspects of trade increases a state’s sensitivity to market dynamics and its vulnerabilityto disruptions in the global trade network. As Dorussen and Ward observe, dyadic conict ‘‘generatesexternal effects on the system of states, ’’ including reductions in trade ¶ (2008: 195). An extensive arrayof trade partners (breadth) creates potential disruption points in a¶ state’s trade relations, and strongertrade ties (depth) increase the costs of those disruptions . Commercialproximity to nonpartners (closeness) also incr eases costs for conict . Referencing Angell (1933), Gartzke asserts that‘‘interdependence ensures that damage inicted on one economy travels through the global system,aficting even aggressors ’’ (2007, 170). Similarly, Maoz argues that states avoid con ict even againstenemies they do not trade with, as the ¶ ‘‘uncertainty and instability associated with conict may causetheir trading partners to look for other markets ’’ (2009, 225). These indirect costs may disrupt globalvalue-added chains or intrarm trade by, for example, affecting availability and costs of intermediategoods and other productive inputs . When states use force, even toward nonpartners , they riskdisrupting the complex economic linkages that feed their domestic industries and drive demand fortheir own products (cf. Brooks 1999). Thus, by ex ante increasing opportunity costs,multilateral tradeunilaterally inhibits uses of force.

If countries close to conflict had strong bilateral trade ties, the probability of a MID(militarized interstate dispute) would decrease.Philippe Martin et al ; 2006 (Phillipe Martin is a Professor of economics Sciences Po, Chairman of thedepartment of economics, Member of the Conseil d'Analyse Economique of the Prime Minister; ThierryMayer is a Professor of Economics at Sciences-Po, Scientific advisor in CEPII, Research Fellow at CEPR(International Trade Programme) ; Mathias Thoenig is Professor of Economics at the University ofGeneva and associate researcher at Paris School of Economics and research affiliate at CEPR in theinternational trade and macro programmes; “Make Trade Not War?”http://www.ecore.be/Papers/1177063947.pdf)

This seemingly pessimistic message illustrates the importance of the pattern of trade openness ¶

(bilateral vs multilateral): this pattern, which exhibits wide variations across country pairs, directly ¶

inuences the probability of conicts. Let us consider the following illustrative example. France and¶Germany have in 2000 an average bilateral trade openness of 3.4% of GDP and an averagemultilateral¶ trade openness (excluding bilateral trade) of 22%. India and Pakistan , which experienced36 conicts¶ since 1950 , exhibit a different pattern: respectively 0.1% and 14%. We can use oureconometric model ¶ to address the following thought experiment: What would be the probability ofconict between¶ India and Pakistan if those countries mimicked the Franco -German trade pattern?












Using in-sample¶ predictions for 1995, our estimates show that the India-Pakistan probability ofconict drops from¶ 57% to 49%, mostly due to the increase in bilateral trade openness. The result iseven more striking¶ if the trade structure was to mimic the Canada-US pattern as the estimatedprobability of war would¶ then drop to 39%. Interestingly, India and Pakistan are in the process ofnegotiating a large cut in ¶ their tariffs within the South Asia Free Trade Area Agreement (SAFTA).

Trade leads to war —WWI provesAlexander 2005 (Bevin Alexander-military historian and author, How America Got It Right, 2005,http://bevinalexander.com/books/how-america-got-it-right.htm)

Until [World War I] occurred, the imperial powers of Europe—notably Britain, France, and Russia—controlled much of the world’s underdeveloped territory and most of the world’s seaborne trade.Britain was incomparably the leader. It had outperformed all other countries industrially until the lastfew years of the nineteenth century. Moreover, by means of the Royal Navy, it had seized a quarter ofthe earth’s surface, which made Britain the paramount force in world commerce, commanding tradewith the new dominions of Canada, Australia, New Zealand, and South Africa, with its crown jewel,India, and with most of Latin America.¶ Since its unification in 1871, however, Germany had become a

major contender, seeking a large colonial empire of its own and expanding its trade, especially at theexpense of Britain. Right-wing political leaders began to claim for Germany status as a world power—Weltmacht. Around the turn of the century Germany passed Britain in industrial development andoverall economic power. At the same time it began a fatal program of building a modern fleet tochallenge the Royal Navy, which set in motion a fierce naval arms race. By 1909 Britain had won thecontest. Its navy was double the size of Germany’s, and the disparity was growing, not shrinking.Nevertheless, the damage had been done. Fearful of Germany’s economic growth, Britain signed aseries of agreements with France in 1904 that grew into a secret military alliance, and signed a similaragreement with Russia in 1907. Meanwhile Germany had allied itself with Austria-Hungary. Thus twopowerful coalitions arose in Europe, each ready to challenge the other. ¶ In 1907 Arthur Balfour, Britishprime minister from 1902 to 1905, told an American diplomat, “We are probably fools not to find areason for declaring war on Germany before she builds too many ships and takes away our trade.”



Trade Bad – Economy

Free Trade Leads to Economic CollapseHeffner 2012 (THOMAS HEFFNER-writer for EconomyInCrisis Inc., Free Trade – Destined to Lead to America’s Collapse, APRIL 30, 2012,http://economyincrisis.org/content/free-trade-destined-lead-americas-collapse)

Too many Americans are blissfully or blatantly unaware of the true nature of America’s economiccondition. Yes, Americans can see the U.S. is hurting, but few know the root causes of our pain.¶

Americans are saddled with debt, both personal and national. However, many Americans do not feel thepain and economic destruction this debt is causing to its full extent. Our lifestyle is being temporarilysupported by debt and imports. When the money from our creditor nations stops, so will the imports – we will become a bankrupt nation. ¶ We have sold 16,613 of our best companies in just 30 years. ¶ Thismeans our wealth, our technology and our jobs have been moving to other nations, replacing high-paying jobs with jobs in the service sector. With the absence of these companies, we no longer have themeans to provide for ourselves — we have sold off our self-sufficiency.¶ We are borrowing more andmore money from the same foreign countries that we are getting our imports from.¶ Not only are we

losing $600 billion every year due to our trade deficit, we are $14 trillion in debt! This is the highestrecorded debt in U.S. history. Taxing the trillions of dollars in imports we receive every year would go along way toward bringing jobs and financial stability back to America.¶ We are encouraging outsourcingat almost every level, not just manufacturing – we are outsourcing our phone support, customer service,R&D, and more.¶ How can we support ourselves as a nation, if we cannot provide for ourselves? Ourgovernment needs to implement policies that support and encourage homegrown industries.Companies that outsource American jobs should pay higher taxes; those that keep jobs at home shouldget tax breaks and other incentives. ¶ With agreements like the North American Free Trade Agreementand our treaty with the World Trade Organization, our domestic companies do not stand a chance. ¶ If wecannot be in control of our own laws and future, we will never break free from our present troubles.They will continue to spiral down until there is nothing left and the United States becomes a hollow shell

of its former glory.¶ Without reform to our tax structure we can’t compete with the foreign value -addedtax (VAT) we must get our own and lower the income tax if we do not or cannot offset it domestically.Our tax disadvantages are too great to compete internationally. Our tax system no longer works for us

– it works against us. This must change.¶ We need to wake up and let our leaders in Washingtonknow that these issues are important to us – our economy and our national security.



Latin America Specific



LA Trade Good – General

Increasing trade is essential for maintaining the US economyNoriega and Cárdenas 12 (Roger F., former assistant secretary of state for Western Hemisphere

affairs and José, former assistant administrator for Latin America at the U.S. Agency for InternationalDevelopment, “An action plan for US policy in the Americas,” American Enterprise Institute, 12/5/12,http://www.aei.org/outlook/foreign-and-defense-policy/regional/latin-america/an-action-plan-for-us-policy-in-the-americas/)Expanding regional economic cooperation is crucial to US economic growth . An aggressive tradepromotion and investment strategy in today’s hypercompetitive, globalized economy is not a policy option; it is an imperative. Clearly, prosperity at home depends on success abroad . The economicopportunities in the Western Hemisphere are enormous, and US policy-makers and the private sectormust recognize them as critical to US economic growth.In 2011, US exports reached a record $2.1 trillion in total value, despite the fact that only 1 percent ofUS businesses export their products to foreign markets. The United States must expand on theseopportunities. Exports benefit the US economy by offering companies opportunities to tap newmarkets, expand their production, and earn more consumer dollars . Today, 95 percent of the world’sconsumers live outside the United States, and the International Monetary Fund predicts that, through2015, some 80 percent of economic growth will take place beyond US shores.It is indisputable that an aggressive US trade policy—meaning selling US goods and services in as manymarkets as possible —is essential for the US economy to hone its competitive edge in the 21st century.In this sense, America’s future is inextricably linked to the future of its neighbors in its ownhemisphere . A prosperous hemisphere means a more prosperous United States.



US/Mexico Trade High

Trade with Mexico good nowSchoichet and Rodriguez 2012

Catherine E. Schoichet and Cindy Y. Rodriguez, Writers for CNN in international affairs, Key Issues onObama’s Mexico Trip: Trade, immigration and drug war, May 1, 2013,http://www.cnn.com/2013/05/01/world/americas/mexico-obama-visitThe United States is Mexico's largest trading partner, and Mexico is America's third-largest tradepartner, after China and Canada. Imports and exports between the two countries totaled nearly $500billion last year . Officials on both sides of the border have said they want economic relation s to be afocal point during Obama's visit. Obama's trip comes as Peña Nieto's government has said it's on theverge of pursuing reforms in the country's state-run oil company -- a politically divisive issue in Mexicoand something U.S. and global investors are watching closely.

U.S and Mexico trade strong now – both depend on each otherFischler 2013Jacob Fischler, Reporter for The Monitor, Mexican Trade-and tourist- are a boon for the U.S businesses,May 28, 2013, http://www.themonitor.com/news/local/article_3bf218a2-c734-11e2-b19a-001a4bcf6878.htmlAs the Congress debates immigration reform legislation, millions of tourists and billions of dollarscontinue to cross the U.S.-Mexico border in both directions . A study released earlier this month byNDN, a center-left think-tank based in Washington, D.C., shows trade and tourism between the twocountries is at an all-time high. Trade between the two nations in 2012 was estimated at $535 billion.That number is up from $300 billion in 2009, a number that’ s projected to double by this year, saidSimon Rosenberg, the president of NDN. Texas leads all states with almost $200 billion in imports andexports with Mexico. Trade with Mexico sustains almost 6 million U.S. jobs , the NDN study said. In theRio Grande Valley, tourists provide the biggest Mexican boost to the economy. “We really rely heavily on the Mexican market ,” said Nancy Millar, the director of the McAllenChamber of Commerce’s Convention and Visitors Bureau. The economic downturn in 2008 — whichcoincided with a spike in cartel violence — hurt Mexican tourism to the Valley, Millar said. Prior to thosephenomena, 35 percent of income to McAllen’s tourism industry came from Mexico, she said, and itremains a vital part of McAllen’s economy. “T here’s no doubt we have a much stronger economy thanwe would without them — 35 percent stronger ,” she said.

http://www.cnn.com/2013/05/01/world/americas/mexico-obama-visit

http://www.census.gov/foreign-trade/balance/c2010.html



http://www.state.gov/r/pa/prs/ps/2010/05/142020.htm

http://edition.cnn.com/2013/03/27/world/americas/mexico-obama


http://www.themonitor.com/news/local/article_3bf218a2-c734-11e2-b19a-001a4bcf6878.html






http://www.state.gov/r/pa/prs/ps/2010/05/142020.htm



http://www.cnn.com/2013/05/01/world/americas/mexico-obama-visit



US/Mexico Trade Good

Trade with Mexico leads to loss of U.S. jobs

Amadeo 2012Kimberely Amadeo, Writer for About.com over the U.S. economy, Disadvantages of NAFTA, U.S. JobsWere Lost, May 3, 2012, http://useconomy.about.com/od/tradepolicy/p/NAFTA_Problems.htmSince labor is cheaper in Mexico, many manufacturing industries moved part of their production fromhigh-cost U.S. states. Between 1994 and 2010, the U.S. trade deficits with Mexico totaled $97.2billion, displacing 682,900 U.S. jobs. (However, 116,400 occurred after 2007, and could have been aresult of the financial crisis.) Nearly80% of the losses were in manufacturing. California, New York,Michigan and Texas were hit the hardest because they had high concentrations of the industries thatmoved plants to Mexico. These industries included motor vehicles, textiles, computers, and electricalappliances.

http://useconomy.about.com/od/tradepolicy/p/NAFTA_Problems.htm

http://useconomy.about.com/od/economicindicators/p/Durable_Goods.htm

http://useconomy.about.com/od/tradepolicy/p/Trade_Deficit.htm

http://useconomy.about.com/od/tradepolicy/p/Trade_Deficit.htm

http://useconomy.about.com/od/economicindicators/p/Durable_Goods.htm

http://useconomy.about.com/od/tradepolicy/p/NAFTA_Problems.htm



US/Venezuela Trade Good

Trade is key to relations and Venezuelan stabilityO’Neil 3/6 (Shannon, Senior Fellow of Latin America Studies at the Council on Foreign Relations,

“Viewpoint: New era for US -Venezuela relations?,” BBC News, 3/6/13,http://www.bbc.co.uk/news/world-us-canada-21680885)

The US remains the largest recipient of Venezuelan oil - some 40% percent of Venezuelan oil exports(and oil makes up over 90% of the country's total exports).¶ In turn, the US has continued to sendmachinery and cars, and even increased exports of natural gas and petroleum products to the SouthAmerican nation.¶ The hard currency and goods are vital to the functioning of Venezuela's economy,government and society , and may become even more so through the anticipated tough economictimes ahead .¶ Despite the increased government management of the economy through price controlsand the nationalisation of hundreds of private companies over the last decade, many well- and lesser-known US companies still work in Venezuela , providing not just goods but ongoing links with theUnited States. In addition to these commercial links, the more than 200,000 Venezuelans living in the USand the hundreds of thousands more that have ties through family, friends and colleagues, could alsobring the two countries together. Finally, as subsequent Venezuelan governments look to adjust theireconomic policies in the coming months and years , the experience of their neighbours provideincentives to forge a more amicable bilateral relationship.

http://www.bbc.co.uk/news/world-us-canada-21680885

http://www.bbc.co.uk/news/world-us-canada-21680885



US/Cuba Trade Good

Lifting embargo boosts U.S. economy

Reuters 9-20-2012 (“Cuba says ending U.S. embargo would help both countries” September 20, 2012, Reuters U.S. edition, JeffFranks <http://www.reuters.com/article/2012/09/20/us-cuba-usa-embargo-idUSBRE88J15G20120920>).

(Reuters) - Both the United States and Cuba would benefit if Washington would lift its longstanding tradeembargo against the island, but U.S. President Barack Obama has toughened the sanctions sincetaking office in 2009 , a top Cuban official said on Thursday.¶ The embargo, fully in place since 1962, has done$108 billion in damage to the Cuba economy, but also has violated the constitutional rights ofAmericans and made a market of 11 million people off limits to U.S. companies , Foreign Minister Bruno

Rodriguez told reporters. ¶ "The blockade is, without doubt, the principal cause of the economic problems ofour country and the essential obstacle for (our) development ," he said, using Cuba's term for the embargo. ¶ "Theblockade provokes suffering, shortages, difficulties that reach each Cuban family, each Cuban child," Rodriguez said.¶ He spoke at a press conference that Cuba stages each year ahead of what has become an annual vote in the United Nations on

a resolution condemning the embargo. The vote is expected to take place next month. ¶ Last year, 186 countries voted for the resolution, whileonly the United States and Israel supported the embargo, Rodriguez said. ¶ Lifting the embargo would improve the image ofthe United States around the world, he said, adding that it would also end what he called a "massive,flagrant and systematic violation of human rights." ¶ That violation includes restrictions on U.S. travel to the island thatrequire most Americans to get U.S. government permission to visit and a ban on most U.S. companies doing business in Cuba, he said.¶ "Theprohibition of travel for Americans is an atrocity from the constitutional point of view," Rodriguez said.¶ Cuba has its own limits on travel thatmake it difficult for most of its citizens to leave the country for any destination. ¶ Rodriguez said the elimination of the embargo would provide amuch-needed tonic for the sluggish U.S. economy.¶ "In a moment of economic crisis, lifting the blockade would contribute to the United Statesa totally new market of 11 million people. It would generate employment and end the situation in which American companies cannot competein Cuba," he said.¶ Obama, who said early in his presidency that he wanted to recast long-hostile U.S.-Cuba relations, has been adisappointment to the Cuban government, which expected him to do more to dismantle the embargo. ¶ He has lifted some restrictions on traveland all on the sending of remittances to the island, but Rodriguez said he has broadened the embargo and its enforcement in other areas. ¶ Fines against U.S. and foreign companies and individuals who have violated the embargo have climbed from $89 million in 2011 to $622 millionso far this year, he said. ¶ U.S.-Cuba relations thawed briefly under Obama, but progress came to a halt when Cuba arrested U.S. contractor AlanGross in Havana in December 2009.¶ Gross was subsequently sentenced to 15 years in prison for setting up Internet networks in Cuba under acontroversial U.S. program that Cuba views as subversive.¶ Rodriguez dodged questions about how U.S. policy toward Cuba might change ifObama is re-elected in November or if Republican candidate Mitt Romney wins the presidency, but said whoever is in office will have a chanceto make history. ¶ "Any American president would have the opportunity to make a historic change," he said. "He would go into history as theman who rectified a policy that has failed."

Free Trade popular with Cubans- increases quality of life with no backlashNew York Times 2012 (“Easing of Restraints in Cuba Renews Debate on U.S. Embargo” Damien Cave, New York Times, November19, 2012 <http://www.nytimes.com/2012/11/20/world/americas/changes-in-cuba-create-support-for-easing-embargo.html?pagewanted=all&_r=0>).

HAVANA— “If I could just get a lift,” said Francisco López, imagining the addition of a hydraulic elevator as he stood by a rusted Russian se danin his mechanic’s workshop here. All he needed was an investment from his brother in Miami or from a Cuban friend there who a lready sneaks

in brake pads and other parts for him. ¶ Multimedia¶ ¶ Slide Show¶ Changes in Cuba Create Support for Easing Embargo¶ Related¶ Cuba’sProspects for an Oil-Fueled Economic Jolt Falter With Departure of Rig (November 10, 2012)¶ Times Topic: Cuba¶ Connect With Us on Twitter¶Follow @nytimesworld for international breaking news and headlines. ¶ Twitter List: Reporters and Editors¶ Enlarge This Image¶ ¶ The New YorkTimes¶ Cuba’s Capitol building in Havana. Any Obama administration effort to relax the trade embargo could face diplomatic, Congressional andother political obstacles. More Photos » ¶ Readers’ Comments ¶ Readers shared their thoughts on this article. ¶ Read All Comments (109) »¶ Theproblem: Washington’s 50 -year-old trade embargo, which prohibits even the most basic business dealings across the 90 miles separating Cubafrom the United States. Indeed, every time Mr. López’s friend in Florida accepts payment for a car part destined for Cuba, he puts himself at riskof a fine of up to $65,000.¶ With Cuba cautiously introducing free-market changes that have legalizedhundreds of thousands of small private businesses over the past two years, new economic bondsbetween Cuba and the United States have formed, creating new challenges, new possibilities — and a



more complicated debate over the embargo .¶ The longstanding logic has been that broad sanctions are necessary to

suffocate the totalitarian government of Fidel and Raúl Castro. Now, especially for many Cubans who had previouslystayed on the sidelines in the battle over Cuba policy, a new argument against the embargo is gainingcurrency — that the tentative move toward capitalism by the Cuban government could be sped upwith more assistance from Americans.¶ Even as defenders of the embargo warn against providing theCuban government with “economic lifelines,” some Cubans and exiles are advocating a freshapproach . The Obama administration already showed an openness to engagement with Cuba in 2009 by removing restrictions on travel andremittances for Cuban Americans. But with Fidel Castro, 86, retired and President Raúl Castro, 81, leading a bureaucracy that is divided on thepace and scope of change, many have begun urging President Obama to go further and update American policy by putting a priority onassistance for Cubans seeking more economic independence from the government. ¶ “Maintaining this embargo, maintainingthis hostility, all it does is strengthen and embolden the hard- liners,” said Carlos Saladrigas, a Cuban exile and co-chairman of the Cuba Study Group in Washington, which advocates engagement with Cuba. “What we should be doing is helping thereformers.” ¶ Any easing would be a gamble. Free enterprise may not necessarily lead to the embargo’s goal of free elections, especiallybecause Cuba has said it wants to replicate the paths of Vietnam and China, where the loosening of economic restrictions has not led topolitical change. Indeed, Cuban officials have become adept at using previous American efforts to soften the embargo to their advantage,taking a cut of dollars converted into pesos and marking up the prices at state-owned stores. ¶ And Cuba has a long history of tossing ice onwarming relations. The latest example is the jailing of Alan Gross, a State Department contractor who has spent nearly three years behind barsfor distributing satellite telephone equipment to Jewish groups in Havana. ¶ In Washington, Mr. Gross is seen as the main impediment to aneasing of the embargo, but there are also limits to what the president could do without Congressional action. The 1992 Cuban Democracy Actconditioned the waiving of sanctions on the introduction of democratic changes inside Cuba. The 1996 Helms-Burton Act also requires that the

embargo remain until Cuba has a transitional or democratically elected government. Obama administration officials say they have not given up,and could move if the president decides to act on his own. Officials say that under the Treasury Department’s licensing and r egulation-writingauthority, there is room for significant modification. Following the legal logic of Mr. Obama’s changes in 2009, further expansions in travel arepossible along with new allowances for investment or imports and exports, especially if narrowly applied to Cuban businesses. ¶ Even theseadjustments — which could also include travel for all Americans and looser rules for ships engaged in trade with Cuba, according to a legalanalysis commissioned by the Cuba Study Group— would probably mean a fierce political fight. The handful of Cuban-Americans in Congressfor whom the embargo is sacred oppose looser rules. ¶ When asked about Cuban entrepreneurs who are seeking more American support,Representative Ileana Ros-Lehtinen, the Florida Republican who is chairwoman of the House Foreign Relations Committee, proposed an eventighter embargo. ¶ “The sanctions on the regime must remain in place and, in fact, should be strengthened, and not be altered,” she wrote in ane-mail. “Responsible nations must not buy into the facade the dictatorship is trying to create by announcing ‘reforms’ while, in reality, it’stightening its grip on its people.” ¶ Many Cubans agree that their government cares more about control than economic growth. Business ownerscomplain that inspectors pounce when they see signs of success and demand receipts to prove that supplies were not stolen from thegovernment, a common practice here. One restaurant owner in Havana said he received a large fine for failing toproduce a receipt for plastic wrap.¶ Cuban officials say the shortages fueling the black market arecaused by the embargo . But mostly they prefer to discuss the policy in familiar terms. They take reporter after reporter to hospitals offrail infants, where American medical exports are allowed under a humanitarian exception. Few companies bother, however, largely because ofa rule, unique to Cuba, requiring that the American companies do on-site monitoring to make sure products are not used for weapons. ¶ “TheTreasury Department is asking me, in a children’s hospital, if I u se, for example, catheters for military uses — chemical, nuclear or biological,”said Dr. Eugenio Selman, director of the William Soler Pediatric Cardiology Center.¶ As for the embargo’s restriction on investment, Cubanofficials have expressed feelings that are more mixed. At a meeting in New York in September with a group called Cuban Americans forEngagement, Cuba’s foreign minister, Bruno Rodríguez Parrilla, said business investment was not a priority. ¶ “Today the economic developmentof Cuba does not demand investments of $100,000, $200,000, $300,000,” he said, according to the group’s account of the meeting. Rather, he

called for hundreds of millions of dollars to expand a local port.¶ Owners of Cuba’s small businesses, mostly one -personoperations at this point, say they know that the government would most likely find ways to profitfrom wider economic relations with the United States. The response to the informal imports that come from Miami in the

suitcases of relatives, for instance, has been higher customs duties. ¶ Still, in a country where Cubans “resolve” their wayaround government restrictions every day (private deals with customs agents are common), manyCubans anticipate real benefits should the United States change course. Mr. López, a meticulous mechanic who

wears plastic gloves to avoid dirtying his fingers, said legalizing imports and investment would create a flood of the supplies that businessesneeded, overwhelming the government’s controls while lowering prices and creating more work ap art from the state. ¶ Other Cubans, includingpolitical dissidents, say softening the embargo would increase the pressure for more rapid change by undermining one of the g overnment’smain excuses for failing to provide freedom, economic opportunity or just basic supplies. ¶ “Last month, someone asked me to redo theirkitchen, but I told them I couldn’t do it because I didn’t have the materials,” said Pedro José, 49, a licensed carpenter in Havana who did notwant his last name published to avoid government pressure. ¶ “Look around — Cuba is destroyed,” he added, waving a hand toward a colonialbuilding blushing with circles of faded pink paint from the 1950s. “There is a lot of work to be done.”



US/LA Trade Declining

Despite growth, US influence as an importer declining in Latin America due to ChinacompetitionMartinez and Iyer ’13 (Rutilio, Assoc. Professor of Business Statistics and International Business,and Vish, Professor of Marketing, at the University of Northern Colorado, “U.S. Trade In Goods WithLatin America¶ (2001-2010): Trends And Perspectives,” International Business & Economics ResearchJournal, May 2013, http://www.cluteonline.com/journals/index.php/IBER/article/view/7825/7887)

U.S. imports of goods from Latin America grew between 2001 and 2010 at a yearly average rate of 6.7%-¶ from $192.4 billion in 2001 to $350.6 billion in 2010. All 19 nations of Latin America participated inthis high and ¶ unprecedented growth which meant that by 2010, every single Latin American countrywas exporting more to the ¶ U.S. than in 2001 (U.S. Census Bureau, 2011).¶ Yet, between 2001 and2010, the U.S. ceased to be the largest buyer or importer of goods from an ¶ increasing number ofLatin nations. In 2001, the U.S. was not the main buyer or importer for Argentina, Cuba, ¶ Paraguayand Uruguay. By 2010, this group was joined by Bolivia, Brazil, Chile and Panama ; that is, between

2001 ¶ and 2010, the number of Latin countries for which the U.S. was not the main importer of theirgoods went from four ¶ to eight (ECLAC 2010).¶ Along with the increase in the number of Latinnations for which the U.S. was not the number one importer ¶ came the reduction in the percentageor share of Latin American exports that went to the U.S . This percentage ¶ progressively declinedbetween 2001 and 2010 - from 56% to 39.5% (ECLAC, 2010). Thus, despite the 6.7% annual¶ growth rateof U.S. imports from Latin America during the period 2001-2010, the relative importance of the U.S. as¶

importer of Latin American goods underwent a steady and marked decline. ¶ The main cause of thisdecline was the fast increase of Latin American exports to China. These exports ¶ grew 32.5% per yearduring this period - from $5.4 billion dollars in 2001 to at least $68.7billion in 2010. Due to¶ this highgrowth, China went from being (in 2001) an importer of very marginal importance for the LatinAmerican ¶ nations to being (in 2010) the number one importer for Brazil, Chile, Cuba and Peru, and thenumber two importer ¶ for Argentina, Costa Rica and Venezuela. Also as a result of the high growth oftheir exports to China, Argentina, ¶ Brazil, Chile and Peru were - of all the 19 Latin American nations - thefirst ones to recover from the recession that ¶ afflicted many countries between 2007 and 2009 (Kay andCanaveri-Bacarreza, 2011; and Central Intelligence¶ Agency [CIA], 2011)China's imports from Latin America grew so much during the period 2001-2010 because China'seconomy ¶ grew at an annual rate of 10.2% during these years (Kay and Canaveri-Bacarreza, 2011). Thus,if the direct ¶ correlation between the growth of China's economy and its imports from Latin Americancontinues, the projected ¶ five to seven percent yearly growth of China's GDP for the 2012-2016period should result in a significant reduction ¶ of the rate of growth of Latin American exports toChina. Very likely, this reduction may not, however, be enough ¶ to allow the U.S. to reverse - or atleast to stop - the decline of its relative importance as importer of Latin American ¶ goods. Twoobstacles preclude such a reversal. ¶ The first of these obstacles is the slow - current and projected -

growth of the U.S. economy. In 2011, the ¶ U.S. economy grew less than two percent and for theperiod 2012-2017, the U.S. economy is projected to expand at ¶ no more than 2.5 percent per year (U.S. Government Printing Office, 2011). Therefore, the U.S. economy is growing¶ and is expected togrow at rates that are no more than one-half of the projected rates of China's growth in economy. ¶ Suchdifferential practically guarantees that the rate of growth of imports from Latin America is bound tobe ¶ significantly smaller for the U.S. than for China for the next four years. The second of theseobstacles is the limited capacity of Latin America to produce high-income goods. This¶ limitation isindicated by the dominance of Mexico in the exports of these products to the U.S. Between 2001 and ¶



2010, Latin American exports to China were almost exclusively primary goods; whilemanufacturedgoods were, on ¶ average, 60% of the Latin American exports to the U.S. Of this 60%, however, atleast 90% consisted of cars, ¶ complex chemical inputs, high-tech electronics, components of high-tech machinery, and other high-income goods ¶ made or assembled in Mexico (Kay and Canaveri-Bacrreza, 2011, and Banco de Mexico, 2011).

Despite growth, US influence as an importer declining in Latin America due to ChinacompetitionMa rtinez and Iyer ’13 (Rutilio, Assoc. Professor of Business Statistics and International Business,and Vish, Professor of Marketing, at the University of Northern Colorado, “U.S. Trade In Goods WithLatin America¶ (2001-2010): Trends And Perspectives,” International Business & Economics ResearchJournal, May 2013, http://www.cluteonline.com/journals/index.php/IBER/article/view/7825/7887)

U.S. imports of goods from Latin America grew between 2001 and 2010 at a yearly average rate of 6.7%-¶ from $192.4 billion in 2001 to $350.6 billion in 2010. All 19 nations of Latin America participated inthis high and ¶ unprecedented growth which meant that by 2010, every single Latin American countrywas exporting more to the ¶ U.S. than in 2001 (U.S. Census Bureau, 2011).¶ Yet, between 2001 and2010, the U.S. ceased to be the largest buyer or importer of goods from an ¶ increasing number ofLatin nations. In 2001, the U.S. was not the main buyer or importer for Argentina, Cuba, ¶ Paraguayand Uruguay. By 2010, this group was joined by Bolivia, Brazil, Chile and Panama ; that is, between2001 ¶ and 2010, the number of Latin countries for which the U.S. was not the main importer of theirgoods went from four ¶ to eight (ECLAC 2010).¶ Along with the increase in the number of Latinnations for which the U.S. was not the number one importer ¶ came the reduction in the percentageor share of Latin American exports that went to the U.S . This percentage ¶ progressively declinedbetween 2001 and 2010 - from 56% to 39.5% (ECLAC, 2010). Thus, despite the 6.7% annual¶ growth rateof U.S. imports from Latin America during the period 2001-2010, the relative importance of the U.S. as¶

importer of Latin American goods underwent a steady and marked decline. ¶ The main cause of this

decline was the fast increase of Latin American exports to China. These exports ¶ grew 32.5% per yearduring this period - from $5.4 billion dollars in 2001 to at least $68.7billion in 2010. Due to¶ this highgrowth, China went from being (in 2001) an importer of very marginal importance for the LatinAmerican ¶ nations to being (in 2010) the number one importer for Brazil, Chile, Cuba and Peru, and thenumber two importer ¶ for Argentina, Costa Rica and Venezuela. Also as a result of the high growth oftheir exports to China, Argentina, ¶ Brazil, Chile and Peru were - of all the 19 Latin American nations - thefirst ones to recover from the recession that ¶ afflicted many countries between 2007 and 2009 (Kay andCanaveri-Bacarreza, 2011; and Central Intelligence¶ Agency [CIA], 2011)China's imports from Latin America grew so much during the period 2001-2010 because China'seconomy ¶ grew at an annual rate of 10.2% during these years (Kay and Canaveri-Bacarreza, 2011). Thus,if the direct ¶ correlation between the growth of China's economy and its imports from Latin American

continues, the projected ¶ five to seven percent yearly growth of China's GDP for the 2012-2016period should result in a significant reduction ¶ of the rate of growth of Latin American exports toChina. Very likely, this reduction may not, however, be enough ¶ to allow the U.S. to reverse - or atleast to stop - the decline of its relative importance as importer of Latin American ¶ goods. Twoobstacles preclude such a reversal. ¶ The first of these obstacles is the slow - current and projected -growth of the U.S. economy. In 2011, the ¶ U.S. economy grew less than two percent and for theperiod 2012-2017, the U.S. economy is projected to expand at ¶ no more than 2.5 percent per year (U.S. Government Printing Office, 2011). Therefore, the U.S. economy is growing¶ and is expected to



grow at rates that are no more than one-half of the projected rates of China's growth in economy. ¶ Suchdifferential practically guarantees that the rate of growth of imports from Latin America is bound tobe ¶ significantly smaller for the U.S. than for China for the next four years. The second of theseobstacles is the limited capacity of Latin America to produce high-income goods. This¶ limitation isindicated by the dominance of Mexico in the exports of these products to the U.S. Between 2001 and ¶

2010, Latin American exports to China were almost exclusively primary goods; whilemanufacturedgoods were, on ¶ average, 60% of the Latin American exports to the U.S. Of this 60%, however, atleast 90% consisted of cars, ¶ complex chemical inputs, high-tech electronics, components of high-tech machinery, and other high-income goods ¶ made or assembled in Mexico (Kay and Canaveri-Bacrreza, 2011, and Banco de Mexico, 2011).



LA Trade Bad – Econ

Free trade in Latin America is not successful and drags down their economies globally.Vos et al. 2013 (Rob Vos is Director of the Development Policy and Analysis Division at the

Department of Economic and Social Affairs of the United Nations. Jomo K. S. is Assistant SecretaryGeneral for Economic Development based in the Department of Economic and Social Affairs (DESA) ofthe United Nations Secretariat. Jose Antonio Ocampo is Under-Secretary General for the Department ofEconomic and Social Affairs (DESA) in the United Nations Secretariat. “Who Gains from Free Trade:Export-Led Growth, Inequality and Poverty in Latin America” Publisher: Routledge, 2013)

1.3 Overview of the main findings. Chapter 2 analyses growth trends and the vulnerability to externalshocks of the¶ countries in Latin America and the Caribbean over almost a quarter of a century ¶ since1980. It is shown that as a consequence of the process of economic opening to world markets, growthhits become export-led in virtually all countries of¶ the region . However, unlike the experience withexport-led growth in East Asia.¶ Latin America's new growth strategy seems to come with a numberof less¶ virtuous characteristics. First, while more reliant on exports, economic growth¶ did notsignificantly increase after trade opening. Instead, growth slowed down¶ and economic performancewas worse in the second half of the 1990s than in the¶ first and most countries slipped to negativeper capita income growth at the turn ¶ of the century. Second, vulnerability to fluctuations in globalcommodity markets¶ (i.e. terms-of-trade shocks and volatility in global demand) remains high and isa¶ first indication of insufficient diversification of trade. This vulnerability to trade¶ shocks cannot byitself explain the dismal growth performance, as in fact for most ¶ countries terms of trade and worlddemand for their exports improved during ¶ the 1990s. ¶ Third, for most countries of the region exportgrowth has been below that of ¶ world trade, implying lower export penetration in global markets as aresult of¶ losses in competitiveness . At the same time, import dependence has risen more¶ stronglythan the capacity to export. As a result, capital flows have become more¶ important to sustain a growthpath built on this paradoxical combination of ¶ increasing reliance on exports and a structural rise in the

trade deficit. Capital¶ flows in turn have both initiated (to the extent exogenous) and reinforced this ¶

pattern by pushing up real exchange rates, cheapening imports and squeezing ¶ profits for exporters inthe short run. As capital flows themselves have been ¶ volatile, to a large part for reasons exogenous tothe economic conditions of the ¶ countries of the region, macroeconomic adjustment has become moredifficult to¶ steer, resulting in short-lived booms as access to foreign borrowing eases and¶ demanddeflation as it contracts with important implications for employment and¶ wages . Trade reformstherefore must be studied in conjunction with such macro- ¶ economic constraints.

Documents

Trade Core - Berkeley 2013