Trade Ties that Bind: An Economic Community for the Americas

When leaders from across the Western Hemisphere departed President Biden’s Summit of the Americas in Los Angeles, they left largely empty-handed. Despite fanfare and bold proclamations of an “Americas Partnership for Economic Prosperity,” the Summit amounted to pleasant words with few tangible results. Although Latin American leaders received respectful engagement from the Biden Administration, they did not secure the trade deals, market access, or investments which they requested.

If the Biden Administration is serious about addressing the myriad crises in Latin America—from climate change, to migration, to China’s growing influence—it must be willing to devote the resources necessary to make transformative change. The creation of an E.U.-style free trade area and integrated market for the Western Hemisphere, an Economic Community of the Americas (E.C.A), could be the solution.

Latin America faces an ever-growing list of challenges. The COVID-19 pandemic hit the region hard. Latin America experienced over 27% of global COVID-19 deaths despite being home to only 8.2% of the world’s population and faced a 7.0% economic contraction in 2020. The region’s migration crisis has reached record levels, with 1.7 million Central American migrants arriving at the U.S. border in 2021 and an estimated 6 million Venezuelan refugees leaving their country. The vulnerability of the Caribbean to climate change and the erosion of democracy in Brazil, El Salvador, Venezuela, and elsewhere also foreshadow further long-term migration and instability.

Amidst these crises, China continues to expand its influence in Latin America and the Caribbean. Chinese trade in the region rose from $18 billion in 2002 to $449 billion in 2021. China loaned over $137 billion to Latin American governments between 2005 and 2020, raising the risk of debt traps. Furthermore, China continues to pressure Latin American governments to withdraw diplomatic recognition of Taiwan as an independent country.

Latin America and the Caribbean are a core U.S. national security interest—U.S. trade with the Western Hemisphere totaled $1.9 trillion in 2019 alone. Addressing problems that directly impact the U.S. like migration, transnational crime, and drug trafficking requires a hemispheric approach. Since the passage of the Monroe Doctrine, the Western Hemisphere has served as a bastion of global democracy and a bulwark of U.S. defense.

Turmoil, instability, and crises in Latin America and the Caribbean will eventually reach the United States’ shores. Rather than building walls or scolding governments, the U.S. must offer a positive partnership with the region. This approach will require sustained resources over decades, but the promise of transformative hemispheric change offers enormous benefits.

Luckily, there is already a model for such a transformative regional project: the European Union (EU).

The EU, launched as the European Coal and Steel Community (ECSC) in 1951, was forged in a moment of similar continental crisis. Facing economic and political devastation after WWII, Western Europe began integrating natural resource markets. Over the next 70 years, the ECSC gradually expanded in depth and membership to become today’s EU. With 27 member states, the EU’s internal single market, common regulatory systems, free travel, visa-free work, and monetary zone, have fostered sustained economic growth and stability in Europe. Critically, the prospect of EU membership and its economic benefits has transformed Eastern and Southern Europe. The EU’s accession criteria—from rule of law, human rights, and democracy requirements to regulatory alignment and administrative capacity minimums—have hastened democratic reforms and the resulting prosperity across the continent. Similarly, countries across the Western Hemisphere would be motivated by the promise of trade deals, market access, and investments to improve domestic political and economic conditions to gain membership.

Certainly, an EU-style pact for the Americas would not be as tightly integrated as the EU and would forgo the EU’s political dimensions such as the European Parliament and a common foreign policy, which are unlikely to be politically feasible in the U.S. Rather, this pact could focus on lighter economic integration and be marketed domestically as a commercial initiative to strengthen U.S. economic well-being.

Eric Farnsworth, Vice President of the Council of the Americas, proposed a similar concept. Farnsworth argued that the U.S. should offer Latin America and the Caribbean membership to the U.S-Mexico-Canada Agreement (USMCA), a North American free trade bloc. Countries meeting economic, political, labor, and environmental standards could join immediately, gaining a “first mover” advantage. This incentive, Farnsworth argued, would create a “race to the top” across the region as internal business constituencies pressure governments for the domestic reforms necessary for membership.

This project would require a sustained U.S. commitment, and mistaken arguments that trade deals unequivocally hurt American workers would reemerge. However, despite similar German criticisms that wealthy EU members are merely subsidizing poorer members, Germany actually economically benefits from the EU more than any other country, and America stands to be in the same position under an E.C.A. Securing political support in the U.S. for this vision will undoubtedly be challenging, yet a broad coalition of business leaders, national security officials, human rights advocates, and immigrant communities could be assembled to champion this policy. U.S. officials could take another lesson out of the EU playbook and operate with banality—starting the integration process through mundane regulatory, commercial, and travel mechanisms while avoiding boisterous pronouncements and more politically-difficult issues.

An Economic Community of the Americas offers a positive vision for the Western Hemisphere that benefits the U.S. by fostering economic growth, mitigating regional crises, and bolstering democracy. By helping U.S. businesses outcompete Chinese investors in the region, enabling supply-chain nearshoring, reinforcing human rights and the rule-of-law, and forging stronger hemispheric economic and political ties, the U.S. could steer dozens of countries away from the authoritarian lure of China. Amidst grave global and regional challenges, it is time for the Western Hemisphere to stand together.

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