University of Arkansas, Fayetteville


This paper will examine the likely impacts of the proposed Free Trade Agreement of the Americas (FTAA) that was initiated by President Bush in 1994 and is anticipated to include 34 countries in the Western Hemisphere excluding Cuba and to come into force during 2005. The paper will focus on the likely trade effects for Brazil, the largest potential member of the FTAA. In the first part, I will review the current trade relations between countries in the Western Hemisphere and the US, including the various bilateral and multilateral agreements such as NAFTA, MERCOSUR, CBI, The Andean Trade Preference Act, etc. Next, the paper will present the special complexities introduced by rules of origin which are inherent in any free trade area. The methodology used to estimate the trade impacts is presented in section 3. Briefly, the elimination of US tariffs on imports from Brazil will stimulate US imports to the benefit of US consumers and at the expense of US producers and imports from other countries. Standard comparative static analysis will be used for the base estimates. These estimates will be qualified for special situations, namely the US quotas on sugar imports, the extremely high US tariffs on orange juice imports, and the forthcoming change in the world trading environment for textiles and apparel. The expected results will be that the FTAA will provide significant benefits for Brazil, and by implication, for the other Latin American countries which will also benefit from the FTAA.