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CONSEQUENCES OF HOMELAND SECURITY FOR U.S.-LATIN AMERICA ECONOMIC RELATIONS: A PRELIMINARY ASSESSMENT Terry L. McCoy and Brandon Knox University of Florida. 6 th Annual International Business Research Forum: Global Security Concerns and International Competitiveness

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CONSEQUENCES OF HOMELAND SECURITY FOR U.S.-LATIN AMERICA ECONOMIC RELATIONS: A PRELIMINARY ASSESSMENTTerry L. McCoy and Brandon KnoxUniversity of Florida

6th Annual International Business Research Forum:

Global Security Concerns and International Competitiveness

Fox School of Business, Temple University

April 2, 2005


Overview l.jpg
Overview ECONOMIC RELATIONS:

Central Question: Have measures adopted by the U.S. following 9/11 to enhance homeland security affected trade, finance and migration flows in a way to undermine the competitiveness of U.S. firms?

Outline

  • Background: U.S.-Latin American Relations Pre and Post 9/11

  • Homeland Security Regulations

  • Regional Impact

    • Mexico

    • Caribbean

  • Conclusions and Suggestions for Future Research


Background u s latin american relations before 9 11 l.jpg
Background: ECONOMIC RELATIONS: U.S.-Latin American Relations Before 9/11

Growth of “market democracies” in Latin America

  • Democratic transition and economic liberalization

    Intensification of economic integration in the Americas

  • NAFTA, MERCOSU, etc.

  • FTAA process promised regional economy of 800 million people and $14 trillion GDP

    Re-engagement of US with the region

  • Trade and democracy agenda

    Results

  • Ascendancy of economics in hemisphere relations

  • Growth of trade and investment

  • Growth of cross border, intra-firm integration

  • Promise of an American Union


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FTAA Countries ECONOMIC RELATIONS:


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Post 9/11 Relations ECONOMIC RELATIONS:

Reorientation of US Foreign and Defense Policies

  • Re-ascendancy of security agenda and realist paradigm

  • Focus on Middle East

  • Homeland Security

    Consequences

  • US lost focus on Latin America and economic relations

  • Disagreement over Iraq but Latin America support for WOT

  • US-Latin America relations cooled and lost momentum

  • FTAA negotiations stalled

  • Homeland Security regulations affecting Latin America


New us security regime department of homeland security l.jpg
New US Security Regime: ECONOMIC RELATIONS: Department of Homeland Security

  • Comprises 180,000 employees across 22 federal agencies

  • Consists of four Directorates:

    • Border and Transportation Security

    • Emergency Preparedness and Response

    • Science and Technology

    • Information Analysis


New us security regime homeland security regulations l.jpg
New US Security Regime: ECONOMIC RELATIONS: Homeland Security Regulations

“Pushing the borders outward”

  • Container Security Initiative

  • Advanced Cargo Information

  • Customs-Trade Partnership Against Terrorism (C-TPAT)

  • Bioterrorism Act

    Private sector and trading partners share the burden


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Container Security Initiative ECONOMIC RELATIONS:

  • Initiated in early 2002

  • Geared towards protecting maritime cargo

  • Applies risk assessment techniques to identify high-risk cargo and to interdict it before it reaches U.S. ports

    • “Layers of maritime security”

  • U.S. Customs officials based at foreign ports as part of program


Advance cargo information l.jpg
Advance Cargo Information ECONOMIC RELATIONS:

  • Requires expedited cargo manifest information for goods inbound for U.S.

  • Amount of lead time differs depending on mode of transport

  • Stricter requirements may lead to greater systems harmonization across federal agencies


Customs trade partnership against terrorism c tpat l.jpg
Customs-Trade Partnership Against Terrorism (C-TPAT) ECONOMIC RELATIONS:

  • Public-private partnership geared at expediting goods from low-risk firms

  • Companies agree to meet safety standards in areas such as:

    • Loading and unloading

    • Cargo container seals

    • Physical security of buildings

    • Manifest procedures

  • More than 5,000 companies participating worldwide


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Bioterrorism Act ECONOMIC RELATIONS:

  • Oversight shared by the FDA and Customs

    • FDA provides technical expertise

    • Customs responsible for screening foodstuffs

  • FDA must receive prior notice of imported food shipments and must confirm them electronically (timeframe varies by shipping method)

  • Requires all domestic and foreign food facilities to register with the FDA to allow for more accurate tracking of food-borne contamination


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Consequences for Latin America ECONOMIC RELATIONS:

Indirect Impact of WOT

  • Deterioration in US-Latin American relations and downgrading of economic agenda

    Direct Impact of Homeland Security Measures

  • Not uniform across Latin America

  • Felt more acutely by those countries whose economies are more closely linked to the U.S.


Mexico l.jpg
Mexico ECONOMIC RELATIONS:

Trade

  • Heavily dependent on trade with the U.S.

  • 46% of exports in 2004 were from the maquila sector

  • U.S. accounted for 87% of exports in 2004

    Compliance

  • 2002 US-Mexico Border Partnership Agreement

  • FAST (Free and Secure Trade)

  • US-VISIT (Visitor and Immigration Status Indicator Technology)

  • 2005 Initiative for North America


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Mexico ECONOMIC RELATIONS:

Immigration

  • Increased border security following 9/11

  • Political pressure against immigration growing

  • Confluence of security- and anti-immigration concerns in the Mexican immigration debate

  • Bush Guest Worker Proposal


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The Caribbean ECONOMIC RELATIONS:

  • U.S.’s “Third Border”

  • Heavily dependent on trade and tourism with the United States

  • Preferential trade agreement with US (CBI)

  • Increased scrutiny of offshore financial centers

  • High level of cooperation with U.S. and trade-related security initiatives

  • Caribbean Basin Marine Security Alliance


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Conclusions: ECONOMIC RELATIONS: Findings

U.S.-Latin American Relations Have Deteriorated

  • At risk deepening of economic exchange and integration

  • FTAA talks at standstill

    Impact of U.S. security regime on LA

  • Selective, greater for Mex and Caribbean

  • Targeted on trade and immigration

  • Specific measures have had limited impact


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Conclusions: ECONOMIC RELATIONS: Future Research

Trade links to competitiveness of U.S. Firms

  • Increased transaction costs for cross-border firms (like auto industry)

  • Adjustment process

  • Costs

    Immigration links

  • Labor force issues


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