Jaime Granados and Rafael Cornejo are working to “tame the tangle” of preferential trade agreements by analyzing the CAFTA framework and making a number of suggestions:

Few regions in the world have seen such an aggressive proliferation of Regional Trade Agreements (RTAs) as the Americas. This decentralised and uncoordinated process is beginning to cause concern as it threatens to undermine efforts to build a hemispheric trading system. One of the most urgent tasks now facing trade policymakers in the Hemisphere is to analyse how the various RTAs might be made to converge, and the purpose of this paper is to act as a catalyst for such discussions. We have therefore explored how the issues raised by the coexistence of various dissimilar RTAs among seven different countries were resolved in the recently-negotiated Dominican Republic-Central America1 United States Free Trade Agreement (hereinafter ‘DR-CAFTA’ or ‘the Agreement’). This Agreement is a microcosm of what could be a broader negotiation process in the Americas, hence the usefulness of analysing its structure and the approaches used in its development.

By ‘convergence’ we mean the efforts countries make to ensure that theultimate goals of their trade agreements are consistent and, in particular, that they lead, in the most orderly fashion possible, to the creation of a hemispheric free tradesystem governed by common rules or at least by disciplines that ensure a minimum variation in regulations. Convergence efforts aim to avoid the fragmentation of the hemispheric trading system. They seek to align countries within a smaller and simpler framework of free trade disciplines, in the understanding that this process generates better results in terms of the public and private administration of trade flows and of the production apparatus. Given the status quo in the Americas, convergence could, in theory, mean several things: (1) replacing the multitude of existing instruments with fewer instruments; (2) reducing the complexity of existing regulations; (3) eliminating obsolete agreements and instruments; (4) harmonising the rules in the new agreements or the rules of pre-existing agreements; and (5) extending the membership of a specific trade agreement…

Convergence must be pursued at the hemispheric level. A number of imperfect CUs are operating in conjunction with a multitude of more shallow agreements (notably FTAs) in the Americas at the moment, and the real problem of the spaghetti bowl lies in the proliferation of these FTAs. Although there is a need to strengthen the CUs in the subregions of the Americas (to avoid extinction due to loss of relevance amidst competing integration projects), there is an even greater need to promote the convergence of the various FTAs.

The convergence of the FTAs is not only an urgent but also a highly complex issue. The proliferation of FTAs in the Americas is at the point of touching off a fragmentation of the hemispheric trading system, the effects of which are potentially highly negative. The issue needs to be urgently addressed so that this can be avoided before the interest groups become so entrenched that the task becomes unmanageable…

In the end, DR-CAFTA is not about convergence. It is about the accommodation of diverging trade axes and interests. The architecture employed and techniques used in the Agreement, however, may facilitate a new type of simpler agreement over the long term that may help to eradicate the main problems arising from the spaghetti bowl. Thus, convergence in the Americas is simply a process towards an end product or products that remain to be seen.

Despite the current impasse, for the sake of trade convergence in the Americas and for many other reasons, preventing the FTAA from becoming just another four-letter word is still a relevant endeavour. The seeds of a third generation of trade agreements in the Americas – the convergence generation – have already been sown. These agreements, which will require at least flexible trade liberalisation, some kind of origin accumulation among all the countries, and the harmonious coexistence of different origin regimes should already figure among the future plans of trade policymakers.

“Convergence in the Americas: Some Lessons from the DR-CAFTA Process” appears in the July 2006 issue of The World Economy.