Americas Act, Not Americas Partnership for Prosperity, Centered in Hearing

Senate Finance International Trade Subcommittee Chairman Tom Carper, D-Del., said he would like to hold a future hearing on the Americas Act, a proposal from Sen. Bill Cassidy, R-La., to liberalize trade with Central American, Caribbean and South American countries (see 2301110045 and 2301130042), and to pay for grants and subsidized loans for countries reshoring or nearshoring out of China with changes to de minimis law. Sen. Michael Bennet, D-Colo., is a co-sponsor of the bill.

The subcommittee hosted a hearing on "Economic Cooperation for a Stronger and More Resilient Western Hemisphere" May 16, and witness Eric Farnsworth, vice president of Council of the Americas, endorsed the bill. He said in his opening remarks: "It’s strategic, timely, and creative, a thoughtful framework for sustained regional engagement designed to recapture the regional narrative from those who may increasingly question Washington’s reliability."

One of the Americas Act proposals is to add new countries to USMCA. Farnsworth said, "We should consider the expansion of the trade agreement with Canada and Mexico -- USMCA -- into the hemisphere, including additional countries as they show the interest and capacity to meet the standards and obligations the agreement requires." He said that Costa Rica would be an appropriate addition, but that he doesn't endorse including all the Dominican Republic-Central America Free Trade Agreement members, noting Nicaragua's authoritarian turn.

However, the U.S. Chamber of Commerce's senior vice president for the Americas, Neil Herrington, was critical of the idea. He said the CAFTA-DR and the free trade agreements with Chile, Peru, Colombia and Panama already eliminated duties on about 99% of tariff lines.

"The USMCA has rules of origin for products such as autos and textiles and apparel that were tailored for the integrated North American industrial base. Those rules are inappropriate for U.S. trade with Central or South America," he said. And, he noted, since USMCA has no accession chapter, this could only be achieved with the assent of Mexico and Canada. "Given that Canada and Mexico already have their own FTAs with most of the countries in question, it is unclear what interests Ottawa and Mexico City would have in the undertaking," he said in his opening remarks.

Herrington and witness Margaret Myers, director of the Wilson Center's Asia and Latin America Program, did call for tariff liberalization with South American countries that are not currently FTA partners.

Herrington said the administration should begin negotiating a comprehensive FTA with Ecuador. "In the near-term, the Chamber supports the Innovation and Development in Ecuador Act (IDEA), which would make Ecuador eligible for designation as a beneficiary of the Caribbean Basin Economic Recovery Act (CBERA). According to a recent study by AmCham Ecuador-Quito, access to this preference program would cover 56% of Ecuador’s exports," he said.

The administration's Americas Partnership for Prosperity was not mentioned by any witness or senator as an important tool toward deepening economic engagement, though the Chamber endorsed its aims, if at a lower priority than opening market access for Ecuador or Uruguay.

Myers said in her opening remarks: "If the United States is serious about engaging economically with the region, and also competing effectively with China in this hemisphere and elsewhere, then a robust trade agenda must be a priority. The Ecuador-China trade agreement, struck just days ago, is evidence not just of China’s growing trade agenda in the region, but of U.S. paralysis in this respect. Ecuador sought a trade deal with the United States, too, but left Washington empty-handed."

Sen. John Cornyn, R-Texas, asked Myers how the U.S. can increase its economic presence in South America if it's unwilling to add free trade agreements with new countries.

"We are paralyzed," Myers said, "Trade is critical. If we’re talking China, China’s rise and the extent to which China is engaged, really across the region, we are losing the battle in the context of South America."

She said if the administration is not willing to liberalize trade with South American countries that it doesn't have FTAs with, it could expand existing FTAs with new chapters.

"Whether there is appetite for that remains to be seen," she said.

Herrington, in his opening remarks, noted that renewing the Generalized System of Preferences benefits program would at least restore the level of access South American countries used to have.

Carper asked witnesses about the problem of corruption in Central America as a barrier to more utilization of CAFTA-DR, and two witnesses said that is a core challenge.

Herrington said for businesses, "Lack of rule of law undermines certainty." He said that deploying digital tools for customs, permits, licensing and taxation is key.

"A bit can’t see the bribe," he said, referring to the unit of data.

Cassidy noted that his Americas Act includes an e-governance provision, and Herrington said that not only are online processes "critical for taking the temptation away from bureaucrats," they also help small businesses export.

Senate Finance Committee Chairman Ron Wyden, D-Ore., asked Myers what the Senate should add to a trade title, beyond renewing GSP and the Miscellaneous Tariff Bill, and pushing back against China's censorship.

Myers said she would argue for deepening existing FTAs, and, after an analysis of supply chains in strategic industries, facilitating trade in those goods. In an interview after the hearing, she said eliminating tariffs on additional goods "would be a real challenge," but that adding a digital chapter, and talking about labor standards, and "supporting potential supply chain development" could be politically feasible.

Sen. Todd Young, R-Ind., argued that mapping of supply chains in critical minerals should have been done before the Inflation Reduction Act passed.

He said policymakers need to assess future needs for critical minerals in the green energy transition, "then we need to divide and conquer with trusted allies and who’s going to get the lithium, who's going to get the copper," and figure out where processing capacity is or can be developed among friendly countries.

He said by passing the IRA without doing this "homework" first, "We have made our supply chains more brittle!"

Myers said she agreed that the U.S. needs a better understanding of the critical minerals mining and processing landscape, and a plan to secure its supplies.

Herrington told Young signing a taxation treaty would help with Chile, a major supplier of copper and lithium.