Economic and Political Issues for Governments and Firms
New Horizons in International Business series
Edited by Sidney Weintraub, Alan M. Rugman and Gavin Boyd
Chapter 3: Structural partnering potential of the US economy
Walid Hejazi There are many economic, political and social issues that need to be addressed before any Free Trade Area of the Americas (FTAA) agreement can be implemented.1 Further, although few would disagree with the view that there will be net economic benefits from such an agreement, the length of time before these benefits are achieved can be substantial. Often, there are significant economic adjustment costs involved which have important political and social implications. Through time, however, as local economies expand production in industries for which they have a comparative advantage and contract in others, the benefits will begin to emerge. This adjustment period must be well understood so that arrangements can be made to allow for flexibility in light of such significant adjustment costs. The objective of this chapter is to look beyond these issues and focus on the impact such an agreement will have on US integration with Latin America (LA). Improving access to the enormous US market will provide a tremendous economic opportunity for the Latin American economies. In addition to market access, these economies will be better able to access US technology, capital, and foreign direct investment (FDI). The United States too will benefit as it gets improved access to the economies of Latin America. At the same time, it is very important to consider the impact an FTAA would have on East Asia (EA), another developing region that has significant economic links with the United States. For many of these economies, the United States is...
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