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The United States Needs a Bold Vision for Trade in the Americas

Earlier this month, leaders from the Western Hemisphere gathered in Washington, DC, to outline a new framework for economic cooperation in the region. The framework in question, the Americas Partnership for Economic Prosperity (APEP), aims to address a range of economic, environmental, and social challenges. While the inaugural meeting announced five new initiatives, concrete proposals on trade were notably absent. Though APEP presents promising opportunities to enhance U.S. partnerships in the Americas, the Joe Biden administration should pursue a comprehensive approach to deepen trade links that exceeds APEP’s inaugural efforts.

A New Approach to the Americas

The APEP framework is organized into different topical buckets that address a wide array of foreign economic policy challenges shared by the United States and eleven other countries—Barbados, Canada, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Mexico, Panama, Peru, and Uruguay. Discussions are organized under three separate tracks, each of which addresses several cross-cutting issues. However, the three tracks—foreign affairs, trade, and finance—will develop their own initiatives and activities to strengthen regional competitiveness and integration, foster shared prosperity and good governance, build sustainable infrastructure, protect the climate and environment, and promote healthy communities within the hemisphere.

At their inaugural meeting, APEP leaders announced five initiatives to advance those priorities, focusing on investment, business development, grants, workforce development, and climate financing. The first is an investment platform to support “sustainable infrastructure and critical economic sectors in the Americas,” leveraging the Inter-American Development Bank (IDB) and the U.S. International Development Finance Corporation to fund those investments. Second is a program to support budding entrepreneurs, with initial funding from the U.S. Agency for International Development (USAID), Canada, and Uruguay. Third are grants to “expand infrastructure and social services for migrants and their host communities” to support better living conditions for migrants.

The fourth initiative aims to “develop a robust regional workforce” in digital technologies, such as semiconductors. This will involve convening symposiums to identify workforce development needs and to build educational programs with support from academia, industry, and governments. The United States already invests in Panama and Costa Rica to develop their domestic semiconductor industries as part of a Central America chip hub. APEP could further support those efforts, as well as investments in artificial intelligence and 5G. The fifth initiative aims to facilitate the green transition through climate financing. With support from the IDB, investments will be made “in innovative and scalable nature-based solutions,” such as through green bonds and debt-for-climate swaps.   

When it was originally announced in June 2022, APEP largely seemed to resemble the Biden administration’s signature trade initiative, the Indo-Pacific Economic Partnership (IPEF). That agreement is also organized around a set of issue areas, or “pillars,” including, trade, supply chains, clean economy, and fair economy. Notably, IPEF does not include discussions on market access, and the trade pillar is currently in limbo. The United States already has free-trade agreements with eight of the eleven APEP members. In contrast, the United States has trade agreements with just three of the thirteen IPEF countries. This means that the foundations of the United States’ economic relationships are more robust in the Americas than across the Indo-Pacific.

Though the initial areas of focus could support the United States’ existing trade relationships and help build new ones through targeted investments—particularly to support entrepreneurs and regional supply chains—more could be done to enhance economic cooperation between the signatories.

Biden’s Opportunity in the Americas

The Biden administration is right to increase U.S. engagement in the Americas, and APEP has the potential to realize important shared priorities in the region. The framework, as currently organized, combines a set of interrelated, though at times distinct, priorities. So far, there is little detail on the focus of the trade track. Though a trade agreement does not seem like a possibility for now given the Biden administration’s lack of interest in traditional trade deals, the dialogue under the trade track could serve as a launching pad for one in the future, improving trade facilitation and strengthening regional supply chains along the way.

For instance, APEP could tackle persistent regulatory barriers to trade, such as production requirements for goods and certification schemes to ensure that products are safe. Canada, Mexico, and the United States have made some progress in regulatory cooperation, and even embedded a process for discussing regulatory barriers as part of the United States-Mexico-Canada Agreement (USMCA). Replicating this through APEP would support trade facilitation and improve transparency in each country’s regulatory processes. Similar to past North American efforts, APEP could advance regulatory cooperation in some sectors, such as semiconductors and medical devices.

In addition, APEP could serve as a platform to strengthen regional supply chains and contribute to the administration’s friendshoring strategy. China’s presence in the Western Hemisphere has been growing, but as CFR’s Shannon O’Neil points out, while China has trade agreements in the Western Hemisphere, it has less influence there than in Asia. Therefore, APEP could deliver a more ambitious agenda than IPEF because the United States “maintains an advantage in terms of more comprehensive ground rules, a longer history of investment, and more balanced and higher value-added trade.”

To do so, investments in regional workforce development should be further supported by lowering barriers to trade across those sectors and generating opportunities for continental entrepreneurship and education. For example, in 2022, Arizona State University, the government of Mexico, and several Mexican higher education institutions launched an initiative to develop programs to support the microelectronics industry. Recently, the group launched a course to provide Mexican engineers with English-language training to support their work in the semiconductor industry. Mexico is a natural trade partner to strengthen this particular supply chain, but those efforts could be expanded throughout the Americas to fill the technical-talent deficit in the region.

Finally, discussions on the trade track should serve as the basis for more comprehensive trade negotiations in the future. U.S. Congress has strong bipartisan support for expanding trade relations in the Western Hemisphere. In January 2023, Sen. Bill Cassidy (R-LA) and Rep. Maria Elvira Salazar (R-FL) released a discussion draft of the Americas Act, proposing draft legislation “to create an ever-expanding and permanent trade partnership of Western Hemisphere countries promoting prosperity and stability.” Notably, the authors call for the creation of a pathway for countries in the region to join the USMCA, in addition to efforts to nearshore critical supply chains. This legislative effort should be seriously considered as a way to link discussions under the APEP trade track to cement economic deepening in the region. It would also provide a way to ensure that the commitments agreed to under the trade track will be durable. However, pursuing trade obligations through a framework agreement that is not submitted for congressional approval, such as APEP or IPEF, is a risky endeavor, since the next president could easily withdraw from them. 

Seizing the Opportunity

Governments in the Americas have been deeply skeptical about APEP, and unsure about the Biden administration’s preferred outcomes. The first APEP meeting outlines some of those priorities, but the trade agenda remains unclear. While APEP shows plenty of promise, its potential will be determined by how countries in the hemisphere build on the opportunities it creates. Undoubtedly, U.S. engagement in the region will need to be sustained beyond a few pilot investment programs. The best way to do that is through a comprehensive trade pact that brings APEP countries together to enhance regional competitiveness and create economic opportunities for decades to come.

Source: Renewing America