CONSEQUENCES OF HOMELAND SECURITY FOR U.S.-LATIN AMERICA ECONOMIC RELATIONS: A PRELIMINARY ASSESSMENT Terry L. McCoy an

1. 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

2. Overview 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

3. Background: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

4. FTAA Countries

6. Post 9/11 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

7. New US Security Regime: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

9. New US Security Regime: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

10. Container Security Initiative • 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

12. Advance Cargo Information • 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

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

14. Bioterrorism Act • 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

15. Consequences for Latin America 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.

16. Mexico 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

18. Mexico 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

19. The Caribbean • 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

20. Conclusions: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

21. Conclusions: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