Some people look south of the Yucatan and see poverty and underdevelopment. Robert Petterson sees roads and bridges to be built and land to be cleared for modern housing and industry--all with the yellow earthmovers and other heavy equipment made by Caterpillar, based in Peoria, Ill. A quarter of the firm's $21.2 billion annual revenues comes from exports, but not enough of it from Latin America, thanks in part to tariffs that can reach 30%. Create a giant free-trade zone in the hemisphere, says Petterson, a Caterpillar vice president, and "we calculate that industrywide, over 10 years, the market for construction equipment would be 60,000 machines higher"--or a cool $4.5 billion.
Gains like that, multiplied across scores of industries, will be much on the minds of President Bush and the other 33 heads of government from Latin America and Canada when they gather later this month in Quebec City for the third Summit of the Americas. Topping the agenda: how to move forward with the Free Trade Area of the Americas, an ambitious effort launched in 1994 to create a single market, free of trade barriers, from the southern tip of Chile to the Arctic Circle, with a population of 800 million and a total annual income of $11 trillion.
Consumers would benefit from lower prices, and each country's strongest industries would gain new markets. But the trade pact would also be highly disruptive, creating new winners and losers.
Most Republicans support the free-trade area, and President Bush wants Congress to give him the "fast-track" negotiating authority that is essential to forging a deal. But the AFL-CIO, fearing the shift of U.S. jobs to Latin America, has called for rejection of the trade agreement in its current form. And Congress now includes more Democrats than when it failed to grant fast-track authority to President Clinton.
Many South American unions are against the free-trade area. And Brazil, the biggest economy in Latin America, worries about its inefficient, state-protected industries. Brazil wants to assert itself as the Latin economic and political leader through Mercosur, its customs union with Argentina, Chile and other neighbors, and it will be the region's toughest negotiator.
Helping push for the free-trade area are America's high-tech firms. "Five hundred million people live south of Texas, but only 100 million of them have phones in their homes, and only 17 million have personal computers," says Michael Maibach, a vice president at chipmaker Intel. One reason: tariffs on computer and telecom equipment range as high as 30% in some Latin American countries. Telephone regulations also keep Internet fees high. Phone companies like BellSouth and WorldCom are eager to expand in the Latin American market. Bell Canada International works in Mexico and four South American countries but chafes at "buy local" rules and tariffs. "We'd love to be able to buy the right communications network equipment from wherever it is best," says spokesman Peter Burn.