Image Source: Impacto Latino.
Last month, as China further deepens its ties in the Western Hemisphere and pressure mounts on Washington to renew its commitment to the region, cosponsors from both sides of the aisle introduced the “Americas Trade and Investment Act” or “Americas Act”. Sponsored by Senators Bill Cassidy (R-Louisiana) and Michael Bennet (D-Colorado) and House members Maria Elvira Salazar (R-Florida) and Adriano Espaillat (D-New York), the Americas Act seeks to create a partnership to increase trade and prosperity a well as counter China’s growing influence in the region. In this explainer we examine the Americas Act, its key provisions and impact for the region, and the prospects for its passage.
What exactly is the Americas Act, and why is it significant?
The Americas Act aims to rally countries across the Western Hemisphere, creating regional trade, investment, and people-to-people partnerships to stimulate growth and integration through viable long-term private sector development. Intended, in the first instance, for Americas Partnership for Economic Prosperity (APEP) member states (Barbados, Canada, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Mexico, Panama, Peru, and Uruguay), the bill establishes a set of guiding principles on democratic governance, trade, and rule of law. Benefits for participating countries include better access to the U.S. market, loans and grants to near-shoring industries from China, targeted programs to increase the competitiveness of strategic regional supply chains, among others.
The bill stands out for three reasons. First, it represents the most comprehensive U.S. policy attempt to deepen relations with the Western Hemisphere in more than two decades. Following the collapse of the negotiations to create the Free Trade Area of the Americas (FTAA) in 2003, successive U.S. administrations opted for negotiating less comprehensive bilateral trade deals. The Americas Act marks a return to policies inspired by deeply rooted hemispheric values of regional integration, cooperation, trade, and democracy promotion. Expectations are high. Historically, the most effective U.S. policies towards the region, such as President Franklin Delano Roosvelt’s Good Neighbor policy and President Kennedy’s Alliance for Progress, contained a strong pan-American integration component.
Second, the bill is a major effort to offset China’s increasing influence in the hemisphere. Coincidentally, just as the U.S. moved away from broader regional integration plans two decades ago, China’s economic ties with the Latin American and the Caribbean region began to grow exponentially. Today, China has surpassed the U.S. as Latin America’s largest trading partner. The Americas Act comes amid mounting concerns about Washington’s lack of strategic vision for its role within its traditional sphere of influence. From securing the critical minerals supply chains to investments on infrastructure and the introduction of telecommunications technology, the region has become a decisive battleground in the great power struggle between the United States and China.
Third, the American Act is backed by a bipartisan coalition. In the context of extreme political polarization and an election year, the introduction of a piece of legislation that includes provisions on politically sensitive issues such as expanding free trade represents a significant step forward. After four decades negotiating free trade agreements, the election of president Donald Trump in 2016 marked a turning point for trade liberalization for the United States. Ever since, despite renegotiating NAFTA (today USMCA) in 2020, Democrats and Republicans alike backed away from major trade negotiations including the Trans-Pacific Partnership and EU-U.S. trade talks. The Americas Act could signify a step towards returning to trade liberalization as a tool to increase geopolitical influence.
What are the specific provisions within the Americas Act and their potential impact?
The bill contains a series of provisions on three key issues, including investment promotion, free trade expansion, and people-to-people cooperation. Benefits are available to U.S. citizens and businesses, as well as countries throughout the hemisphere. Membership to the partnership requires a commitment to a set of standards on democratic principles, rule of law, and trade. Ineligible countries include the member states of the Bolivarian Alliance for the Peoples of the Americas, as well as countries that do not comply with the Inter-American Democratic Charter. By seeking to close trade loopholes – including banning China and Russia to be eligible for de minimis privilege – the bill aims to be fully funded, raising an estimate of over $15 billion a year in new revenue.
Among the most significant provisions, the bill aims to create a series of mechanisms to harmonize regional trade agreements as well as expand free trade. This would create economies of scale and reduce the cost of investment and manufacturing in the region. Today the U.S. maintains bilateral trade deals with Chile, Colombia, Panama, and Peru, as well as regional trade agreements, including the CAFTA-DR (Costa Rica, El Salvador,Guatemala, Honduras, Nicaragua, and the Dominican Republic), and the USMCA (Canada and Mexico).
The mechanisms for trade harmonization include the potential establishment of a docking mechanism to the USMCA—considered the gold standard of trade agreements—opening a path for partnership countries to become USMCA members. The bill identifies Uruguay and Costa Rica as ideal candidates to pilot an accession process, due to their income levels and relatively small populations and economies. The bill seeks to unilaterally provide Ecuador and Uruguay market access for certain goods under the Caribbean Basin Trade Partnership Act (CBTPA).
Aimed at countering Chinese control over global manufacturing industries, investment provisions include financing for re-shoring and near-shoring industry from China. It establishes up to $70 billion in loans and grants to companies in the U.S. and partnership countries to re-shore and re-near industry and an additional tax-credit system of $10 billion for associated expenses. The bill prioritizes increasing the competitiveness of the regional textile and apparel industry as well as bolstering the region’s energy sector. To this end, it establishes a $105 million per year textile and apparel manufacturing program and a program to advance regional energy independence and channel renewable energy investments. The bill increases the Development Finance Coorporation’s (DFC) total borrowing authority from $60 billion to $90 billion, eliminating restrictions on high income countries in the region.
Additionally, the Americas Act strengthens people-to-people cooperation efforts, including enhancing funding for USAID projects as well as the establishment of The American University of the Americas. Among other provisions it also aims at expanding the State Department’s visa waiver program to Uruguay and Costa Rica.
What are the prospects for the Americas Act’s passage?
The Americas Act contains provisions that can appeal to a broader group of lawmakers with different interests. The bill not only builds on existing initiatives such as APEP or the USMCA, but also it represents a major opportunity for the U.S. to increase its political and economic ties with the region as well as countering China’s economic influence in the Western Hemisphere. Expanding trade remains one of the U.S. most effective tools for increasing U.S. geopolitical influence. In a recent annual U.S. Congress House hearing General Laura Richardson of United States Southern Command (SOUTHCOM) stated that increasing American investments remains imperative to counter China, adding that “Economic Security is National Security, and many of the challenges in the Americas are directly tied to a lack of economic investment and opportunity.”
However, despite securing bipartisan support as well as interest from private sector leaders, the White House, and countries across the region, it is unlikely that the Americas Act will get passed in the current Congress. In an high-stakes election year and with little appetite to discuss comprehensive pieces of legislation, Washington remains extremely polarized. The 118th Congress will likely become the least productive congressional session in modern times: with 34 bills passed in the first year, it has become the congressional session with the lowest number of bills passed since the Great Depression.
Some provisions of the Americas Act have a good chance of being passed by a future Congress, though support from the executive branch remains uncertain. For these provisions to become law, their visibility must be increased, emphasizing the benefits for the U.S. economy and the U.S. position vis-à-vis China in the region. Stronger consensus and support from members of Congress and the next administration will be crucial for its enactment in the short term. Additionally, garnering support for the bill in capitals throughout the region could help to secure greater backing from the executive branch.
