One country is increasingly being forgotten in the world of global trade. And it’s a country you would least expect. Worldwide, regions are integrating more and more with free-trade agreements. Following the European Union model, nations in Asia are working toward economic cohesion. Meanwhile, the EU is set to form the largest free-trade area in the world with Latin America. As these territories coalesce, the nation that is being consistently left out is the United States.
That’s not to say that the United States is not heavily involved in international trade. It is. It trades with nearly 200 countries around the world. However, most U.S. trade is conducted with five countries: Canada, Mexico, China, Japan and Germany. Four of these five countries are currently involved in creating massive free-trade agreements that will leave the U.S. out.
Interestingly, it is the European Union that keeps stepping in where the U.S. used to hold a strong position in international trade. If this trend continues, the American position of economic dominance is destined to end.
Asia
First, the Association of Southeast Asian Nations (asean) is rapidly forming a more cohesive union. The 10 asean countries represent over 500 million consumers, a huge export market. However, trade opportunities have been limited in the past by immense tariffs between Asian nations. All that is changing now with the decade-old afta (asean Free Trade Agreement) terms finally beginning to take effect in the last two years. Tariffs, formerly as high as 70 percent for some items like cars, have been slashed to 5 percent or less throughout the region (Business Week, June 3, 2002). The result is that companies with a factory in just one Asian nation can distribute goods throughout all of Southeast Asia with minimal tariffs, a boon to the Asian economy. By 2012, tariffs in 11 different industry sectors will be eliminated completely, pending ratification of the plan at an asean summit in November (Agence France Presse, September 5). The Straits Times (Singapore) called East Asia the “world’s most dynamic growth region” (June 14).
Heads are turning in China and Japan because of asean’s quickly growing influence and economic strength. Remember, China and Japan are two of America’s largest trading partners. In November 2001, China unexpectedly announced that it wanted to form a free-trade agreement with asean. Japan quickly followed suit in early 2002. In 2005, South Korea is scheduled to enter into talks with the trading bloc as well. These are not minor trade deals: China, Japan and South Korea combined account for one fifth of the world’s trade.
It’s clear that Asian nations want tighter and tighter trade integration within the region. Talks so far have already produced a noticeable impact on world trade. According to the Wall Street Journal, “Japan’s exports to China have been rising faster than those to America for the first time since perhaps the 19th century” (June 8). To facilitate even easier trade among their countries, economic leaders in the region have begun to explore the idea of a common currency, like the euro, for Asia.
Enter the EU
Not wanting to miss out on this 500-million-plus consumer market, the European Union has been investing more and more in asean. In July 2003, the EU formed a trans-regional trade initiative, dubbed “treati,” with Asia. As EU Trade Commissioner Pascal Lamy said, the EU has a “clear and unconditional commitment to the asean region” (European Report, September 8). Recent events indicate that asean policy-makers have more respect for the requests of the EU than those of the U.S. One example: In 1997, asean pushed ahead with plans to accept Burma into the trading block, contrary to U.S. wishes; however, when EU-asean trade talks stalled this past year because of human rights issues in Burma, EU pressure won out, and top officials from Burma have been excluded from the next round of talks in October.
The World’s Largest Trading Bloc
October was a big month for the EU. “The European Union and Mercosur, South America’s four-nation trading bloc, set October as the target date to conclude negotiations for the creation of the world’s largest free-trade zone” (Agence France Presse, May 28). On September 29, the EU presented its final proposal to Mercosur. Whether it will be accepted without changes remains to be seen. Even if trade talks are not concluded as originally hoped this year, Lamy stated that talks would continue to progress until an accord is reached. The EU also supports regional integration with Central America, Chile, and other communities in South America. The EU is currently Latin America’s “second-most important trading partner” (European Commission press release, April 7). Between 1990 and 2002, trade between the EU and Latin America doubled. The EU has become Latin America’s most important source of foreign direct investment (ibid.). The EU expects the trend to be reinforced in coming years.
Latin America has more in common with Europe than with any other part of the globe: With Spain, it shares a language (trade talks in 2002 were held in Madrid), and with most of Europe, it shares a religion, Catholicism. As the Chilean foreign minister said, “We definitely share more values with Europe …. There is a strong European influence all over Latin America …” (Santiago Times, May 18). The same cannot be said about the United States. To the contrary, anti-American sentiment is abundant in Latin America. Venezuelan President Hugo Chavez has announced that the “time of cowardly governments on this continent subordinate to the dictates of Washington is coming to an end” (Guardian, London, January 12).
In stark contrast to Europe’s successes, U.S.-led trade agreements with Latin America have not gone well lately. nafta has utterly failed to usher in any Latin countries except Mexico. The Free Trade Area of the Americas (ftaa) initiative, led by the U.S., has stalled, pushing Latin America even closer to the European Union. In what is probably the most disturbing news for America, even Mexico is tiring of its large northern brother and turning to the EU: Already, Mexico has a free-trade agreement with the EU. Further, it has submitted an official proposal to join Mercosur. If that happens, Mexico will enter into a more intimate relationship with Latin America and Europe, at the expense of its relations with the U.S.
Where Does This Leave America?
America is finding its biggest partners increasingly allied in trade blocs with other nations. Japan and China, which have been big U.S. trading associates, are turning toward asean, which in turn is looking to strengthen its internal ties. Meanwhile, in Latin America, Mexico—also a big U.S. partner—is looking to align itself with Mercosur. The EU has its eyes on both Latin America and asean and has made significant progress with both regions. The China/Japan/asean trade bloc and the EU-Latin America bloc, when formed, will be the two largest on the planet. In all of this, the U.S. is being left out by some of its most strategic trading partners.
Canada remains the most important trade partner for the U.S. Interestingly, both countries are Israelite nations, destined to tangle soon with the revived Holy Roman Empire: the European Union (write for our free book The United States and Britain in Prophecy for more information). Current trends point to trade blocs around the world continuing to coalesce—apart from the United States. Watch for anti-U.S. sentiment to continue to rise, and trade blocs around the world to continue to alienate America.