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Latin America in the New World Order: A Regional Bloc of the Americas? Author(s): Andrew

Latin America in the New World Order: A Regional Bloc of the Americas? Author(s): Andrew Hurrell

Source: International Affairs (Royal Institute of International Affairs 1944-), Vol. 68, No.

1 (Jan., 1992), pp. 121-139 Published by: Wiley on behalf of the Royal Institute of International Affairs Stable URL: http://www.jstor.org/stable/2620464 Accessed: 15-10-2017 10:47 UTC

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Latin America in the New

World Order: a regional bloc of

the Americas?

ANDREW HURRELL

This article examines the prospects for the emergence of a Americas, encompassing Latin and Central America, the United States and Canada, following President Bush's announcement of his 'Enterprise Initiative for the

Americas' in the summer of iggo. It looks at the incentivesfor and the limits to

interest in this type of regionalism in Latin America and in the United States.

The emergence of regional blocs is seen by many as a central feature of the

developing 'New World Order'.' The argument goes that the end of the Cold

War and the disintegration of the Soviet Union have reduced the incentives for

superpower intervention, while the lifting of the pattern of global Cold War alliances that used to cut across regions has allowed more autonomous 'regional spaces' to emerge, freed from the distorting impact of the East-West

confrontation. The decline of American hegemony and reduced American capacity and willingness to play a global role have made space for regional

power systems to develop, in Europe around the European Community and in

Asia aroundJapan. Economic trends-the success of the European Community,

continuing difficulties in the GATT Uruguay Round, and structural changes in

the world economy-are pushing in the same direction, pressing both states and

firms towards expanded collaboration within regions.

The apparent trend to regionalism has aroused mixed reactions. Some have

welcomed it as a force for strengthening stability and world order at both the

regional and the global level. They argue that the benefits are of two kinds:

regional frameworks are the most effective ones in which to achieve order and stability within particular regions,2 and they are likely to facilitate order at the global level as well.3

1 For a recent argument in favour of regionalism, see Walt Rostow, 'The coming age of regionalism',

Encounter, June I990, pp. 3-7.

a Because of a sense of common interest, because economic integration tends to inhibit conflict and

increase incentives for managing it, and because cohesive regional units would reduce the scope for intervention by outside powers. For a detailed analysis of these arguments see Joseph Nye, Peace in parts: integration and conflict in regional organisations (Boston: Little, Brown, 197I).

Because an international system composed of regional units would lay down clear ground-rules about

the acceptable limits of political rivalry and economic competition, and because international agreements can be more easily negotiated and policed-whether on security issues, the environment

International Affairs 68: I (I992), I2I-I39 I2I

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Andrew Hurrell

Far more common, however, is the view that regionalism is a potentially

disruptive force. The fear is that a breakdown in the multilateral trading order

will lead to the emergence of three trading blocs dominated by Japan, the

United States and the EC. Freed from the constraints of the GATT system,

these might become more exclusive and more discriminatory, promoting trade within them and discriminating against outsiders. This would mean increased economic friction and the adoption of beggar-my-neighbour policies between

blocs. This in turn could increasingly spill over into political tensions- especially given the United States' declining willingness and ability to organize collective management of the international system, and the ending of European and Japanese security dependence on the United States.

Regionalism and Latin America

In the context of Latin America, 'regionalism ' has historically meant two very different things-intra-regional cooperation between the countries of Latin and Central America themselves, and inter-American or hemispheric cooperation involving the United States. Both date back to the nineteenth century. In the I980s there was a significant resurgence in the first of these types of regionalism.

The first wave was essentially political in nature. The regional attempts to secure peace in Central America through the Contadora Group and the

Contadora Support Group were examples of this,4 as were moves towards

increased political consultation and coordination in such forums as the Group

of Eight and its successor, the Rio Group,5 and the improvement in the political

relationship between Brazil and Argentina from I980 and particularly from

I985.

More recently, the focus has been on proposals for economic cooperation and

integration. Examples have been the attempts to extend and revitalize the

Central American Common Market,6 moves to relaunch the Andean Pact,7 and

the conclusion of a series of economic agreements between Brazil and

Argentina since I985, leading inJuly I990 to the formal commitment to create

a common market between the two countries. In April I99I this was extended

to include Paraguay and Uruguay with the creation of Mercosur.8 The I990-9I

or the world economy-between a limited number of blocs than between 170 separate states. There is a long tradition in Western thinking on international relations seeing regionalism and particularly

regional spheres of influence as providing a framework for global order. See Paul Keal, Utnspoken rules

and superpower dominance (London: Macmillan, I983), esp. ch. 8.

4 The Contadora Group was formed in I983 by Mexico, Venezuela, Colombia and Panama to promote

a negotiated settlement of the conflicts in Central America. Argentina, Brazil, Peru and Uruguay subsequently formed the so-called 'Contadora Support Group'. The Group of Eight subsequently called the Rio Group, was established in Dec. I986 as a forum for

political consultation between Argentina, Brazil, Colombia, Mexico, Panama, Peru, Uruguay and

Venezuela. Chile, Ecuador, Bolivia and Paraguay became members in Oct. I990.

6 The Central American Common Market was founded in I960.

The Andean Pact was formed in I969. In May I99I the presidents of the five member countries,

Bolivia, Colombia, Ecuador, Peru and Venezuela, agreed to form a free trade area by 1995.

Mercosur is the name given to the process of economic integration formalized by the Treaty of

Asuncion, signed on 26 Mar. I99I between Argentina, Brazil, Paraguay and Uruguay, which called

for the creation of a common market by 1995.

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Latin America in the New World Order

period has witnessed an outpouring of regionalist rhetoric (for example at the Rio Group summit in October I990), and discussions on regional cooperation

involving, in one form or another, almost all the countries of the region. The other kind of regionalism in Latin American experience is that between the Americas, covering the entire Western hemisphere. An elaborate formal institutional structure was developed in the Organisation of American States and its related bodies, founded in I948.9 Like intra-regional cooperation, inter- American regionalism has acquired new momentum in the past few years, particularly in the economic sphere. The decision to make a North American Free Trade Area an objective of US trade policy goes back to the US Trade

Agreements Act of I979. A notable step was the successful negotiation of the

US-Canada Free Trade Agreement, which came into effect in January I989. This, together with Canada's decision to join the OAS from I990, marked a definite regionalist turn in Canadian foreign policy, which had previously been based on building up extra-regional relations and active multilateralism as a

means of balancing the power of the United States.

Another crucial development was the turnaround in Mexican policy towards

inter-American regionalism. For most of the I980s Mexico had resisted the

Reagan administration's offers to negotiate a free trade agreement. In I985, the United States and Mexico signed an agreement on countervailing duties and subsidies; in November I987 they signed a Framework Agreement providing

mechanisms for resolving trade disputes and for liberalizing bilateral trade; and

inJune I990, President Salinas formally requested negotiations on a free trade

agreement. In the same month, on 27 June I990, President Bush gave his

'Enterprise Initiative for the Americas' speech. This proposed the extension of the North American Free Trade Area further south, and pointed to the long-

term objective of a hemispheric free trade area, one which would include both

bilateral negotiations and agreements with the various intra-Latin American trade groupings. The Enterprise Initiative spoke of the importance of debt

'reduction and rescheduling, but placed greatest emphasis on encouraging foreign investment, both through continuing economic reforms within the countries of Latin America and by creating a multilateral investment fund. Bush aired many of these ideas subsequently during his Latin American visit in late

I990.

To provide a benchmark against which to measure the progress and significance of regionalism, we need a working definition. I will use 'regionalism' in this article to mean a set of policies by one or more states

designed to promote the emergence of a cohesive regional unit, which

dominates the pattern of relations between the states of that region and the rest

of the world, and which forms the organizing basis for policy within the region

across a range of issues. This definition emphasizes the importance of policy in

the emergence of regionalism rather than 'natural' factors such as geography,

language or culture. It sees the two routes by which regional blocs may become

9 The OAS includes all the Latin and Central American and Caribbean states except for Cuba, the

United States, and (since Jan. I990) Canada.

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Andrew Hurrell

established as uncoerced regionalism on the one hand and (historically far more

common) hegemonic regionalism on the other. It emphasizes that economic

factors alone are insufficient to explain either the emergence of regional blocs or their nature. The definition is intended to provide some perspective on the current discussion of regionalism in the Americas, and to draw attention to the

wide gulf between the increased regionalization of trading patterns on the one

hand and the emergence of politically significant regional blocs on the other.

Why the Latin American interest?

Fear of marginalization

The renewed Latin American interest in regionalist arrangements involving the

United States-the 'return to the region -reflects in the first instance the

relative absence of alternatives. This state of affairs is by no means new, but it

has been accentuated by recent developments. It was clear by the early I98os that the Third World movement would not serve as an effective platform for the promotion of Latin American interests. Progress in expanding ties with Western Europe was also limited in the I980s, though Latin America had set great hopes here too. Except in Central America, where European political involvement did increase significantly and has become institutionalized, European professions of political support for Latin America were undercut by stagnant economic relations and a European willingness to follow the US lead

on the management of the debt crisis. Japanese involvement in the region grew in the I980s, but it too fell well short of Latin American expectations.

For many in Latin America it appears that this pattern has been reinforced by

the dramatic events of I989-9I. Though publicly applauded, the collapse of communism in Eastern and Central Europe has led to an acute fear of

marginalization. Latin Americans see themselves as competing with the newly

democratic states of Eastern and Central Europe for a limited pool of aid, loans,

foreign investment and technology. They fear that the developing world will

lose out in this competition, and that within the developing world Latin America will find itself at the bottom of the list of priorities, unable to match

either the geopolitical importance of the Middle East or the humanitarian pull of Africa and South Asia. There is fear too that events in Eastern and Central

Europe, coinciding with the European Community's completion of the internal

market and with deepening monetary and political integration, will lead to

a period of sustained introspection in Europe. At worst, this might mean an increase in trade barriers; it certainly will lead to a general European lack of

interest in the problems of Latin America. There is particular concern that

Germany, preoccupied and burdened by the demands of unification, will no

longer be able to play its central role at the heart of the EC-Latin America

economic relationship.

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Latin America in the New World Order

The renewed centrality of the United States

The I980s witnessed the renewed centrality of the United States to the Latin American countries. The United States' position as the region's major trading partner was firmly re-established. Between I980 and I987, the US share of Latin American exports rose from 32.2 % to 38.2 %. For Brazil it increased from I7.4 % to 29.2 %, for Chile from I2.I % to 2I.5 %, and for Mexico from

63.2 % to 69.6 %. Critical decisions on the management of foreign debt lay in the United States: if not with the administration itself, then with US-based

multilateral agencies or US-chaired committees of private banks. Indeed, the

mutual recognition of regional 'spheres of influence'-the United States in Latin America, Japan in Asia, West Germany in Eastern Europe was one of the most notable features of the I980s debt crisis. In the Reagan administration, Latin America was also facing an administra-

tion that placed a good deal of emphasis on recovering its power and authority

in Latin America after what it saw as the weakness and vacillation of the Carter

years. Much of this 'reassertion of hegemony' remained on the level of rhetoric,

and practical implementation was mostly confined to Central America, but its impact was not entirely absent further south and was most notable in the increasingly forceful trend in US trade policy and, negatively, in the United

States' unwillingness to make concessions on debt management.

In contrast to other parts of the developing world, the end of the Cold War has certainly not opened up an autonomous 'regional space' in Latin America.

US hegemony is perceived as having become further entrenched with the

events of I989-9I. The invasion of Panama in December I989 pointed to the

ease with which Cold War rationales for intervention could be replaced by

historically deeper-rooted ones-the need to maintain 'order', to promote

democracy, to safeguard US property and economic interests. If the central

structural feature of the New World Order is its unipolar distribution of

political and military power, then the area in which the problems that follow

from this are most apparent is undoubtedly Latin America.

Economic introspection at an end

Latin America can no longer take refuge from a hostile world by concentrating

on the kind of inward-oriented development policies and schemes for self-

reliance and autonomy that characterized so much earlier Third World

thinking. One of the most striking changes of the period since I985 has been the move away from development strategies based on ISI, high tariffs and a

large role for the state. More and more governments have embraced economic

liberalism-placing greater reliance on market mechanisms, seeking to

restructure and reduce the role of the state, and laying greater emphasis on integration into world markets. In part this shift is due to the discrediting and failure of previous development

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Andrew Hurrell

policies and increased recognition of the need for effective stabilization. The cases of Mexico and Argentina show unexpectedly, to many that the implementation of neo-liberal economic policies can be electorally popular. In part the shift results from external factors. The impact of the debt crisis constrained overall growth, intensified governments' fiscal crises, and placed a high premium on successful export promotion. There was direct external pressure from multilateral agencies and governments to make economic assistance conditional upon moves towards economic liberalization. There is also the critical impact of structural changes in the global economy the increased pace of globalization of markets and production, and the dramatically accelerating rate of technological change. This has led to a powerful perception in Latin America that dynamic economies are internationalized economies, that growth depends on successful participation in the world economy, and that the accelerating rate of technological change undermines projects aimed at autonomous, nationally based technological development. The failure of Brazil's attempt to create a nationally based computer industry provides a graphic illustration of these new constraints, and of the undermining of old notions of autonomous development.

Structural changes in the global economy have also reinforced the fear that

economic interdependence is rapidly growing on a North-North axis, and that Latin America and other parts of the developing world are becoming

increasingly marginalized. The trend towards marginalization can be seen in the

steady decline of Latin America's share of world exports, down from IO.9 % in I950 to 5.43 % in I985; in Latin America's share of total direct foreign investment, down from I5.3 % in I975 to 9.I % in I985; and in the fall of its

share of both European and Japanese trade and investment. The shift towards

greater integration into the world market is, for Latin America, the most important aspect of the New World Order. While its causes are complex, its impact has been to make the region more outward-looking and more dependent on the international economy at precisely the time when the overall pattern of international relations is in a state of great flux and uncertainty.

These changes also impact critically on US-Latin American relations. They

explain why Latin America is so interested in opening up its economies to the

United States. At the same time, the gradual implementation of these policies

has removed many of the sources of friction between the United States and

Latin America. Much of the bitterness in US-Brazilian relations in the I99Os

focused on economic friction, and in particular on US attempts to alter

Brazilian policies over trade and investment issues and over intellectual property rights (notably in the pharmaceutical and informatics sectors).

President Collor's programme of tariff reform, the virtual abandonment of the

protectionist informatics regime and the decision to place intellectual property

rights legislation before the Brazilian Congress has thus substantially altered the

character of relations with the United States. For Mexico, the perceived costs

of failing to modernize the Mexican economy have gradually come to outweigh long-standing fears that freer trade with the United States would

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Latin America in the New World Order

impose unacceptable adjustment costs, especially in manufacturing, and would undermine the traditional quest to preserve national autonomy.

The end of multilateral trade?

The perception that Latin America might be excluded from an increasingly

protectionist Europe, and that the multilateral trade negotiations were on the point of breaking down, has increased the attractions of bilateral free trade agreements with the United States. Free trade agreements offer the prospect of

maintaining and guaranteeing access to the region's most important market,

and of escaping the growth of US protectionist measures. Given the scale of the

US market and the US contribution to the Latin American trade surplus, this

is important. Between I985 and I987 the United States accounted for 54 % of

Mexico's total trade surplus and 40 % of Brazil's. It becomes even more important because so much of the success of recent export expansion in Latin America has been in manufactured goods, to which the United States has been far more open than either the EC or Japan. The US share of total Latin

American manufactured exports increased from 2I.8 % in I980 to 49.5 % in

I987. Between I985 and I987 Mexican manufactured exports to the United

States doubled, and they now account for around half of total Mexican exports,

replacing oil as the key export sector. By I985 manufactured goods made up

72% of Brazilian exports to the United States (as against 29% in I972, and

compared with 33 % for the EC and 27 % for Japan). These increases in

manufactured exports raise obvious questions about long-term market access, especially as it is precisely these products that have been most susceptible to US

protectionism. Further, consolidated market access makes countries rrm ore

attractive to inward foreign investment, especially when, as in the Mexican case, they are so close geographically.

Regionalist momentum

Once the process of regionalism began, it took on a dynamic quality, feeding

the image of ever-expanding regionalisms and creating powerful incentives for

other states to join in. Thus Mexico's move towards accepting a free trade

agreement with the United States has forced the other countries of the region

to reconsider their position: in the first place so as not to risk exclusion and the

diversion of trade and investment towards Mexico, and second, because

Mexico's 'defection' undercuts the political and economic viability of a purely

Latin American form of regionalism. While Mexico has been anxious to stress

the continued importance of its relations with South America (for instance in its September I99I free trade agreement with Chile), there must be some

question over the genuineness of this concern, and there can be little doubt that

Mexico's 'defection' alters the balance of power between North and South

America.

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It is thus hardly surprising that recent meetings of the Rio Group have been dominated by the problem of how subregionalism in Latin America can best be

integrated with proposals for 'macro-regionalism' between Latin, Central and North America. There are significant divergences between Latin American

countries on this question. Some countries, such as Chile, see the priority issue

as the negotiation of free trade agreements with the United States.10 Others,

such as Brazil, Venezuela and Argentina, favour encouraging subregional

integration so as to coordinate the Latin American response to the Bush

initiative, strengthen the Latin American bargaining position, and provide a fallback option in case talks with the United States prove fruitless. In addition,

the progress of Mercosur has surprised many observers. Despite continued

problems, it represents by far the most solid example of subregional

cooperation.

US policy thinking

Though still far from dominant, a number of factors have come together to increase the priority being placed in Washington on relations with Latin America. The year I990-9I saw an increased regionalist momentum in the United States, though this has not yet reached the stage of a clear regionalist

turn in foreign policy.

Images of exclusive regionalism

In the first place, there is a fear of what is perceived as the growing trend towards exclusive regionalism in other parts of the world. The image of Europe

I992 and the growing perception of Japan as an increasingly hostile and antagonistic competitor have done most to refocus US attention on Latin

America. It is worth stressing that it is images and perceptions, far more than hard evidence or arguments, that have shaped US thinking on regionalism.

Indeed there is a real danger of the rhetoric of regionalism becoming a self-

fulfilling prophecy.

Disenchantment with GATT

These fears have been reinforced by increasing disenchantment with the GATT framework with its institutional weaknesses, with the problems it has faced in dealing with the complexities of post-Tokyo Round issues, and with the

difficulty of securing key US objectives in the Uruguay Round, especially over

trade in services and agriculture and over intellectual property rights. Fears that

the GATT system and the relatively liberal trading order that is embodied is

10 Chile has recently declined to take part in the Brazilian-Argentinian integration process, which was

extended in March I990 to include Uruguay and Paraguay. On Mexico's ambivalent relations with

Latin America, see Jos6 Miguel Insulza, 'Mexico and Latin America: prospects for a new relationship',

in Riordan Roett, ed., Mexico's externtal relationts int the 1990S (Boulder, CO: Lynne Rienner, I99I).

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Latin America in the New World Order

under threat have been illustrated recently in the problems of the Uruguay Round, the deadlock over agricultural trade between the US and the EC, and

the continued tensions in US-Japanese trade relations.

But the shift in US trade policy can be traced to the early I98os: to the decision to push ahead with further multilateral trade negotiations but at the same time to strengthen and safeguard US policy by broadening the range of

options. One strand of this twin-track approach involved increased de-

termination to use US power to force unilateral concessions from countries

whose trade policies were deemed contrary to US interests, most visibly in the form of investigations and retaliatory measures under section 30I of the I974

Trade Act and its Super 30I successor. The other strand involved the conclusion of bilateral trade agreements, with Israel in I985 and with Canada in I988.

These were intended to exert pressure on the EC and Japan: there was an

implicit message that if the Uruguay Round broke down, such measures would

become the central thrust of US trade policy, rather than merely an adjunct to

it."1 Structured free trade agreements offer the United States both economi

benefits (market access, the ability to ensure compliance with a favourable investment regime and adequate patent protection) and a political framework for the effective management of other issues (drugs, migration, the en-

vironment). 12

Even if the GATT system holds together, the prospects for increased

economic relations with other regions are not bright. The difficulties of political

and economic reform in Eastern Europe are becoming clearer by the day; the Soviet Union is in a vortex of economic chaos; economic relations with China are restricted by political frictions. In a world in which free trade can no longer be taken for granted, it is argued, the United States needs Latin America as a market. It is after all a market in which the United States has an obviously strong historical position, and it has enormous potential (a population of around 430 million, compared with I I0 million in Eastern Europe). Economic liberalization has already made significant progress, and business and investor

confidence is slowly returning witness the return of some flight capital,

renewed flows of foreign capital, the revival of some bank lending, and

impressive growth rates in several countries (the new confidence being most apparent in Mexico, Chile and Venezuela, most absent in Brazil).

Perceived interdependencies

Third, there is the need for the United States to develop a more assertive

regionalist policy because of the perceived interdependencies that have developed on such issues as drugs, the environment, and (especially)

11 See Jeffrey J. Schott, 'More free trade areas?', Policy Analyses in International Econom

I989.

12 Paul Krugman has argued that regional free trade areas allow neighbours to negotiate at a level of

detail and mutual intrusiveness that is increasingly difficult at a global level: see Paul Krugman, 'The move to free trade zones', paper presented to symposium on 'Policy implications of trade and currency zones', Jackson Hole, 22-4 Aug. I99I, p. 35.

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immigration. The argument is that the I98os focus on military threats and military responses has been rendered obsolete with the end of the Cold War. Old-style security threats have gone, and security needs to be redefined around precisely these kinds of problems problems that can only be effectively

managed by active cooperation with the states of the region and by developing

new structures and sources of influence.13

Not only does the management of these issues involve active cooperation; it

forces the United States to make far greater efforts towards ensuring the overall

stability and prosperity of the region. For example, formal international

agreements on measures to curtail the drug trade or to address environmental

issues are of little use if governments are unable to implement them within their

own societies:

If, however, Mexico or some Caribbean states became too weak to deal with internal

poverty or domestic problems, transborder flows of migrants, drugs or contraband

might create a new foreign policy agenda for the United States. Similarly, developing

countries that cannot prevent the destruction of their forests will affect the global

climate, yet the very weakness of those states will diminish the power to influence them.

Ironically, the current neglect of weak Third World nations may reduce America's

future power to influence them on the new transnational issues.14

Ideological motives

The proponents of US regionalism argue that the United States has both a political interest and a moral duty to uphold the values of political democracy and economic liberalism that are now in the ascendant in Latin America, but

in many cases still very fragile. They argue that the widespread acceptance of

these values, together with the increase in US power in relation to Latin

America, has created a historic opportunity to shape and sustain a new order in the Americas, reflecting American values and American interests.

The regionalist option is strengthened by the fact that these arguments are to be found in differing combinations among both liberals and conservatives. An increased regional emphasis to US policy can be accommodated by both the

'declining hegemony' thesis and the view of the United States as the world

hegemon of the post-Cold War world. For the declinists, Latin America

becomes the refuge from an increasingly hostile world. For the hegemony resurgent school, Latin America is a test of the United States' ability to give

concrete embodiment to its still diffuse vision of a New World Order, to act

decisively in support of its values, to assert its authority over recalcitrant or

delinquent states.

However, we should not exaggerate the importance of regionalism,

particularly within the still very globally minded Bush administration. Bush's

13 For an examination of the 'new security agenda' see Andrew Maguire and Janet Welsh Brown, eds.,

Bordering on trouble: resources and politics in Latin America (Washington, DC: Adler & Adler for World

Resources Institute, I986).

14 Joseph Nye, Bound to lead: the changing nature of American power (New York: Basic Books, I990), p.

I98.

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Latin America in the New World Order

Enterprise Initiative speech was at least in part a rhetorical gesture to reassure Latin and Central America that it had not been completely forgotten in the face of the momentous developments in Europe and the Soviet Union. Equally, the North American Free Trade Area is still seen by many in Washington as a bargaining tool, a hedging policy within the broader context of the GATT negotiations. But the pressures and justifications for an increased regionalist emphasis are already in place. If no agreement is reached in the Uruguay Round, if relations with Japan deteriorate, if US political opinion continues to move in an introspective direction: they will grow.

The limits to regionalism

In other words, there has been a significant degree of coincidence in the kinds

of factors that have led Latin America and the United States to think again

about increased regional cooperation; and significant steps have already been taken to translate these overlapping interests into reality. On the one hand, a

number of framework agreements under the Enterprise Initiative have already

been signed. On the other hand, it is increasingly likely that agreement will be

reached between the United States and Mexico over the North American Free

Trade Area.15

There are still many problems, of course. The Free Trade Area is opposed by

a coalition of US environmentalists, church groups, unions, textile and clothing

manufacturers and agricultural pressure groups, who fear that a free trade

agreement will mean the loss of jobs and lowered environmental and health

and safety standards. The range of problematic sectors is large-oil, agriculture,

banking, automobiles, and the environment and there is the perennial

problem of the migration issue. But in the end the Mexican agreement is likely

to go through. US interests are far more directly engaged in Mexico than elsewhere in the region, the transformation of Mexican economic thinking is

greater than elsewhere in the region, and the degree of existing economic

interdependence is already high. Around 70 % of Mexican exports go to the

United States. Tariffs have already fallen significantly (the average Mexican

tariffis now IO%, compared to 30% in I985). There is already a high degree

of integration of cross-border production arrangements. And migration has led to a high degree of human interdependence, which has in turn had an impact

on identity and social and economic values.

But it is also clear that there are important factors that work against the

emergence of any cohesive, broadly based regionalism in the Americas. More

important for the rest of the world, there is little to suggest that such regionalist

15 After a meeting between Bush and Salinas at Camp David on I4 Dec. I99I, it was announced that

the NAFTA treaty is to be delayed at least until after the I992 US election. This is partly due to the political climate in the US, where pressing NAFTA too hard would be politically risky given protectionist sentiment, and partly due to the current emphasis on trying to salvage a successful conclusion to the GATT Uruguay Round. Despite this delay, it is likely that NAFTA will be

concluded in I993.

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Andrew Hurrell

initiatives as do emerge in the Americas will be of a closed or exclusive

character.

Economic limitations

In the first place, it is important to highlight the economic limits to the growth

of regionalism. The geographical focus of US attention is likely to remain

firmly fixed on Mexico and the Caribbean. Mexico has increasingly come to dominate US economic relations with Latin America. Between I980 and I988, Mexico's share of total US exports to Latin America increased from 39.4 % to

46.7 %, and of imports from 32.3 % to 43.6 %. Social, political, economic and

environmental interdependence is far higher between the United States and

Mexico than with the rest of the region.

Further south, economic regionalism is likely to remain patchy, slow, and ad

hoc. There is no guarantee that the United States will seek to negotiate further

free trade areas. The United States may continue to be reluctant to conclude additional free trade areas for example with Chile so as not to provoke

further regionalist initiatives in other parts of the world. Washington may also believe that it can achieve its political and economic objectives without making regionalism or the construction of new economic arrangements a high

priority. Hegemony strengthened by the detachment of Mexico from

South America may well be seen as making institutionalized regionalism

unnecessary.

It is also clear that economic regionalism is not going to include large-scale flows of US economic aid to Latin America, nor significant debt reduction. The United States has neither the economic resources nor the political motivation for mounting any economic programmes in the region on the model of the Kennedy era Alliance for Progress. In fact the limitations of Washington's capabilities in this area are well illustrated by the difficulties of securing

significant amounts of aid to the two recent showcases of US policy, Panama

and Nicaragua. More importantly, US economic interests do not point towards the creation of a close, exclusivist regional bloc. Though significant, Latin America is not a major economic partner, and the relations that matter will continue to be those

with the major industrialized countries. Indeed Latin America's share of US

trade has declined. In I989 Latin America's share of US exports was I3.46%

(as against I7.5 % in I980), and the region supplied I2.2% of United States (as

against I5.5 % in I979). In the same year Latin America represented only io.6 % of total US foreign investment and I3.5 % of its foreign investment in

manufacturing (though 72 % of US manufacturing investment in the

developing world is in Latin America). In addition, the build-up of bank reserves and the debt-rescheduling process has drastically reduced the threat to US banks posed by a Latin American default.

US trading patterns are strongly multilateral. In I989, 26 % of total US trade

was with Canada and/or Mexico, 35 % with Asia, and 20% with the EC. By

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Latin America in the New World Order

I989 the North American region the United States, Canada and Mexico was

nearly as tightly integrated with Asia (29 %) as internally (35 %).16 The

evidence of a long-term trend towards increased intra-regional trade in the

Americas, and, as Fred Bergsten has pointed out, 'geographical propinquity is

no longer central to trading patterns '.17 A move towards regional blocs would

risk cutting the United States off from the most dynamic world markets and

would favour less efficient Latin American producers in a number of sectors

over their more efficient Asian counterparts, thereby eroding the long-term

competitiveness of US industry. Moreover, it is difficult to see how an American regional bloc would significantly increase US bargaining power in

international trade negotiations.

Finally, the rhetoric of regionalism has to be set against countervailing trends

in the world economy. The structures of global economic interdependence that

have developed since the Second World War have been built around the consolidation of global markets and global production, in a dense and complex network that could only be altered at very high cost. In particular, regional blocs would cut across the emergence of the complex cross-regional production arrangements that have developed within and between companies, and also across the rapidly expanding volume of foreign trade based on transnational

production."

US economic interests, then, do not point unequivocally towards

regionalism. But, of course, the current perception of US interests, which sees regionalism as an adjunct to a still fundamentally globalist trade policy, could be altered by a number of factors by increased domestic political pressures as

the country moves towards the I992 election, by the rhetoric of regionalism

acquiring a logic of its own, by deteriorating relations withJapan, above all by

a disintegration of the GATT system, which has embodied certain common

understandings, however incomplete and ambiguous, on how regionalist trading schemes should be integrated into a multilateral framework.

No longer a closed continent

Second, regionalism is unlikely to dominate the pattern of relations between the

Latin and Central American states and the rest of the world. We are not seeing

the 'closing of the hemisphere' as occurred early after the Second World War,

when outside powers came to view the region as an adjunct to their relations

with Washington. Indeed a further loosening of US-European and US-

Japanese relations may well end completely the deference that Western Europe

and Japan have historically shown to US interests in Latin America, and to

Washington's sensitivities over the activities of non-hemispheric states.

16 See Helen Milner, 'A three bloc trading system', paper presented to International Political Science

Association conference, Buenos Aires, 20-25 July I99I, p. II.

17 C. Fred Bergsten, 'Policy implications of trade and currency zones', paper presented to Jackson Hole

symposium, 23 Aug, I99I, p. 8.

18 For an examination of these trends see DeAnne Julius, Global companies and public policy: the growing challenge offoreign direct investment (London: Pinter/RIIA, I990).

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Andrew Hurrell

It is certainly true that Europe's preoccupation with the problems of Eastern Europe, with the completion of the single market and with the need to rethink Europe's broader international position have led to a period of introspection.

Further, there is still a chance that the completion of the internal market may

lead to some increased protectionism, as a means of shifting the burden of

adjustment from EC firms and labour onto the outside world. The completion of the internal market may well also involve further non-tariff barriers, resulting from the New Community-wide norms and standards. There is also the genuine problem of a diversion of resources away from the developing world and towards Eastern and Central Europe. But these trends should not be exaggerated. There is no clear evidence that I992 is likely to lead to significantly higher levels of protectionism. Diversion of resources to the East will affect public funds mostly in the form of bilateral and multilateral aid aid which, for most of Latin America, is minimal (the exception is Central America). The evidence on private investment and private lending is less clear-cut, and suggests a marked reluctance to move capital to the East, where uncertainties over the success of economic and political reform are, if anything, even greater than in Latin America. As to Japan, its declining interest in Latin America during the I980s was due

primarily to the deep economic crisis facing the region. As the overall economic

climate improves, the pressures on both theJapanese state andJapanese business to increase their economic stake in the region will increase. Indeed the same recipe for success that is needed to underpin an increase in US-Latin American economic relations economic stabilization, structural reform and economic liberalization will also help improve relations with Japan.

Political issues

Third, regionalism cannot be seen solely in economic terms. The recent moves

towards increased economic regionalism have to be placed in the context of the

broader agenda between the Americas. It is an unfortunate byproduct of the

success of the European Community that regionalism elsewhere tends to be

discussed overwhelmingly in economic terms. But in the Americas, non-

economic issues are likely to work against the emergence of a tightly knit

regional bloc, and certainly against the liberal functionalist illusion of an

automatic spillover from increased economic interaction to the emergence of

political common interests. Hemispheric regionalism is unlikely to form the

organizing basis for policy between the Americas across a range of important

issues democratization, the environment, security.

Democracy: The promotion of democracy has reappeared as an important

theme of the debate on inter-American regionalism. It might be argued that

democratization could be the issue to re-engage US interests in Latin America and to serve as a source of common values to underpin the growth of economic

ties. There is, after all, an extensive inter-American institutional framework

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Latin America in the New World Order

around which regional support for democratization might be built. Not-

withstanding its undoubted weaknesses, some see the basis here for an effective

framework for international support for democracy."9 That the OAS was able

to coordinate a regional response to the September I99I coup in Haiti and,

more importantly, that the United States was prepared to set its own policy within a multilateral framework could be argued as solid evidence of a

growing convergence of attitudes to democratization.

But there are number of factors that cloud this happy and harmonious picture. It is clear to many in Latin America that US willingness to back democratization with solid economic assistance is still heavily influenced by strategic and geopolitical concerns, as illustrated by the US decision to offer substantial debt relief to Poland and Egypt, but its determination to 'ring fence' these offers to prevent them being taken as a precedent. There is also a danger that democratization can all too easily become an excuse for an interventionist foreign policy, a cloak for darker and less admirable purposes. The historical record illustrates all too fully that the region has not been well served by its geographical proximity to the United States, a country whose political traditions have made it particularly susceptible to democratic crusading,

whether of the liberal Wilsonian or the conservative Reaganite variety. Thus

while democratic values are indeed widely shared throughout the Americas, the

dangers of the abuse of hegemonic power have led, and will continue to lead,

Latin American states to try to limit the scope for 'democratic interventionism',

and to place continued emphasis on the principle of non-intervention. Nor is the record of US attempts at supporting democracy encouraging.

Outside intervention can all too easily distort domestic political outcomes and

undermine fragile democracies by encouraging the polarization of domestic

politics. As one scholar has recently written:

Recurrent efforts by the government of the United States to promote democracy in

Latin America have rarely been successful, and then only in a narrow range of

circumstances

From the turn of the century until the I980s, the overall impact

policy on Latin America's ability to achieve democratic politics was usually negligible,

often counterproductive, and only occasionally positive.20

Putting a high priority on democracy all too often cuts across other US interests

and objectives. This was of course a central feature of the Cold War period,

when fear of radicalization consistently forced the United States into the arms of decidedly undemocratic military regimes. But it could pose problems again

if, for example, political liberalization in Mexico does not keep up with the speed or success of economic reform. Another important example is Colombia,

where in the context of managing the drugs issue the important process of

domestic political pacification by negotiation and social reincorporation cuts across US preferences for police action and extradition.

1 See, for example, Tom Farer, 'The United States as guarantor of democracy' in the Caribbean ba

is there a legal way forward?, Human Rights Quarterly, No. Io (I988).

20 Abraham F. Lowenthal, 'The United States and Latin American democracy: learning from history',

in Abraham Lowenthal, ed., Exporting democracy: the United States and Latin America (Baltimore, MD:

Johns Hopkins University Press, I99I), p. 26I.

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Andrew Hurrell

Finally, it is not obvious that democratic or ideological common interests

point Latin America towards the United States. If democracy is to become a

central element of international alignments, then political and ideological

common interests are in many fundamental ways far stronger with Europe than

with the United States. This is certainly true of political parties and ideologies,

illustrated by the fact that 95 % of the members of the Party Internationals

consist of parties from Europe and Latin America.

The pursuit of democratization could develop as the ideological cement for a strengthened inter-American regionalism, but moves in that direction are beset with difficulties, and it is equally possible that democratization will

emerge as a source of friction and frustration if US rhetoric is not backed up

by concrete economic benefits, if the dangers of democratic interventionism reappear, and if the pursuit of democracy comes into conflict with other core

US interests.

Environmental issues: A second important issue is the environment. This has emerged as a central issue on the inter-American agenda. Environmental

problems are important to Latin America for three reasons. First, they are

highly visible in the Latin American context in that if problems of deforestation, soil erosion and the deterioration of the urban environment are not tackled, direct damage is likely to be suffered. Second, there are significant international costs attached to not taking the environment seriously, as Brazil has discovered in the late I980s with the international campaign against Amazonian deforestation. Third, the global environment is the one area where North- South interdependence is based on solid reality rather than empty rhetoric. In this sense it provides Latin America with potentially significant opportunities.

In most respects, North-South interdependence has declined since the heady

days of the I970s: the North trades less with the South, less Northern investment takes place in the South, the North has less need of most Southern minerals and commodities, and Northern banks have gradually reduced their

potentially crippling exposure to developing country debt.2" But the effec

management of the global environment is one area where the developing countries' cooperation and active participation is likely to prove essential-both

for negotiating international agreements and, more importantly, in ensuring

that those agreements are effectively implemented.

Now there are clearly some environmental issues that can best be dealt with

at a regional or inter-American level. There have been a wide range of regional

environmental initiatives, such as the UN Environmental Programme's regional seas programme or the EC environmental regime, and many more are currently under discussion.22 Crossborder pollution between Mexico and the

United States is the most obvious example within Latin America, and

21 On this see John Ravenhill, 'The North-South balance of power', International Affairs 66:

1990, pp. 73 1-48.

22 See Peter H. Sand, 'International cooperation: the environmental exp

Matthews, ed., Preserving the global environment: the challenge of shared l

'99').

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Latin America in the New World Order

environmental questions have emerged as a major subject of detailed negotiations within the moves to a Free Trade Agreement.

But it is far from clear that inter-American regionalism is the most logical or politically effective forum for securing Latin American objectives in en- vironmental negotiations. Latin America's key strategic alliance on this issue is with the developing world. The potential bargaining power of the developing world is considerable, and Latin America has a fundamental interest in making use of this, both to ensure a fair distribution of the costs and benefits of global environmental management, and as a lever to force the North to address the broader question of North-South inequality. Although the United States

moved some way towards accepting the principle of environmentally related

resource transfers at the Houston Group of Seven economic summit in July I990, it has been the least willing of the industrialized countries to take action in this direction. Europe has been consistently more open to considering mechanisms to provide additional resources. And it is Japan, often pilloried as 'eco-outlaw' over its record on whaling, driftnet fishing and imports of tropical timber, that has promised the largest amounts of foreign aid for environmental projects. So not only does the logic of environmental nego- tiations point Latin America towards the developing world; it also suggests that Latin America is more likely to win concessions from Europe and Japan, and more likely to face the United States as an opponent rather than as an ally.

Security issues: A third critical set of issues concerns security. The consolidation of a regional security order was, after all, an important part of the hegemonic regionalism of the period after the Second World War. What are the chances of security re-emerging as a focus for hemispheric regionalism? There are some signs of convergence. The United States has placed considerable emphasis on nuclear proliferation and on controlling conventional arms sales as elements of its proclaimed New World Order. In Latin America, the proliferation issue has been transformed by two related factors: first by the rapprochement that has taken place between Brazil and Argentina and the role that nuclear confidence-building measures and low-level cooperation played in this, and second by the Collor government's shift in Brazil's nuclear policy, highlighted by Collor's United Nations speech in September I990, and

illustrated by the public abandonment of Brazil's so-called 'parallel' nuclear

research programme. There has also been progress in resolving disputes between the United States and Brazil and Argentina over arms sales to the

Middle East and the transfer of missile technology. Moreover, Latin America

offered solid, if not wholly unequivocal, support to US and UN policy during the Gulf War. But it would be wrong to paint too rosy a picture. The transfer of sensitive technology remains a problematic issue-witness continued differences between

the United States and Brazil over the transfer of supercomputer technology. A

good deal of the public shift in attitudes on these issues has been as much to

please the United States and in the expectation of future benefits as it has been

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Andrew Hurrell

based on a fundamental shift in thinking within the political and military establishments of these countries. Latin American Countries are distinctly unhappy about the growth of US ideas of linking economic assistance to

controls on military spending and arms sales. And underneath the public support, the view that in the Gulf War the United States was manipulating the

United Nations for its own purposes and was backing only a selective enforcement of international law found an echo in many quarters in Latin

America.

What of the broader security agenda? Mutual cooperation against threats from outside the Americas has been rendered almost wholly obsolete with the decline in Soviet power. There certainly is much potential for interstate friction

within the region, but particularly compared with other parts of the developing

world, the overall pattern of the I98os was positive, with the resolution of a

number of long-standing tensions, most notably between Brazil and Argentina and between Argentina and Chile. This would seem to suggest that such

tensions as continue or re-emerge may be best dealt with in the first instance by

increasing the kind of bilateral confidence-building measures that have been

developed by Brazil and Argentina, and perhaps later by some form of subregional security arrangement. It is hard to see a military or political rationale for US involvement in this kind of arrangement. Here as elsewhere in the developing world, the most relevant and pressing security issues are internal ones-instability resulting from social tensions, political polarization, drugs-related violence, environmental degradation. Security problems and flare-ups of old territorial disputes are likely to stem from the underlying fragility of domestic social, political and economic structures. The very nature of these issues, and the asymmetry of power

between the United States and Latin America, work against the re-emergence of an effective inter-American security system. Latin America remains extremely sensitive to anything that might facilitate

or legitimize US intervention. Indeed one of the most noticeable trends has

been declining Latin American willingness to provide multilateral cover for US

military interventions, best illustrated by the contrast between the handling of the crises in the Dominican Republic in I965 and in Nicaragua in I979. At the

same time, US and Latin American views on how to respond to these kinds of

threats have diverged, with the United States tending to favour counter-

insurgency and militarization, and Latin America looking more to social and

economic reconstruction. This cleavage lay at the heart of differences over the nature of the crisis in Central America in the I98os, and it is also visible in the

differences between the United States on the one hand and Peru and Colombia

on the other over the question of drugs.

To conclude. The current obsession with regionalism in Latin America-and,

arguably, elsewhere-is misplaced. It certainly focuses attention on genuine

perceptions and on some concrete developments. Inter-American regionalism

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Latin America in the New World Order

is of growing importance to Latin America, and to a lesser extent to the United

States, and is likely to remain so. There is much to be gained by regional

cooperation, and there are some issues-migration, transborder pollution,

drugs-that can only be effectively addressed on a region-wide basis. But the

notion that a cohesive and exclusive regional bloc is likely to emerge in the

Americas follows from a one-sided analysis of inter-American relations. It is

contradicted by the complexities and continued ambiguities of US-Latin

American relations; by the range of Latin America interests; by the new

pluralism in the international system-even if the full impact of that pluralism

has yet to work itself out, particularly in an increased world role for Europe and

Japan; by the consolidation of global markets for production, finance and

technology; and by the growth of global issues which cannot be contained within a purely regional framework.

I6 December 199I

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