Biden's ‘ambitious’ economic plan for Latin America offers a ‘social contract,’ not trade agreements

When President Joe Biden travels to Los Angeles for the Summit of the Americas this week, he will pitch leaders from across the Western Hemisphere on what the White House is dubbing a “new and ambitious economic agenda” — but it will not include new trade agreements.

Biden will outline a proposal on Wednesday called the Americas Partnership for Economic Prosperity that aims to mobilize new investments in the region, fortify supply chains, promote decarbonization and biodiversity, facilitate inclusive trade and update the “social contract” between governments and their people, a senior administration official told reporters Monday.

“The overall objective is to build our economies from the bottom up and the middle out by building on the foundation established by our free trade agreements with the region to better address the inequality and lack of economic opportunity and equity,” the official said.

The partnership is one of several initiatives the administration will put forth over the three-day summit as it looks to salvage a gathering that has been mired in rifts over which world leaders would receive an invite and a sense that the administration is prioritizing domestic issues like immigration over meaningful economic engagement. Mexican President Andrés Manuel López Obrador said Monday he would skip the gathering after Cuba, Venezuela and Nicaragua were excluded.

It’s also a key component of the administration’s broader agenda for bolstering ties with its southern neighbors in order to address persistent challenges like immigration and climate change, while also fending off the growing economic and political influence of its main geopolitical rival, China. But the president’s proposals, which mirror its approach to economic engagement in other regions of the world, are unlikely to satisfy the desire among Latin American countries for more trade access in the U.S. — and, among those that already have free trade agreements, for more economic engagement and investment, writ large.

“I really worry America has sort of walked away from our engagement in Central and Latin America, and I think it's going to take a deliberate, concerted effort to reengage,” said Rep. Kevin Brady (R-Texas), the House Ways and Means Committee’s ranking member and a vocal supporter of free trade.

“I don't see that happening at the Americas summit, principally because the whole world knows the president's not interested in enforceable trade agreements that can help boost investment in two-way trade,” he continued.

Biden is expected to address his economic agenda for the region on Wednesday, the day the summit launches, along with health initiatives; Thursday the focus is climate change and food security; and on Friday leaders will focus on migration. Vice President Kamala Harris is also hosting a roundtable with business executives as part of her push for investment in the Northern Triangle to help stem the root causes of migration, with new investment announcements promised. And U.S. Trade Representative Katherine Tai is attending the summit on Tuesday, participating in meetings with trade ministers from Chile, Ecuador, Panama and Costa Rica.

The administration will announce $300 million in funding to address food insecurity in the region, and pledge to increase U.S. involvement in a bank that funds development projects. But Biden is not expected to lower tariffs or provide other market access incentives that foreign trading partners so fervently want as part of the agreement, keeping with a trade strategy that he has pursued in Europe and Asia amid domestic political backlash to free trade deals.

It was not immediately clear whether the proposal will require foreign trading partners to sign an agreement or pledge certain commitments related to their trade and economic practices. A request for comment from the White House was not returned.

“Our approach to economic engagement needs to be fit for purpose and be fit for the specific partners,” Tai said earlier Monday.

“Characteristic of the Biden administration's approach to trade, we’re bringing an economic engagement of which trade is a part, and we're looking to build on those relationships and to deepen and expand them,” she added.

The U.S. already has free trade agreements with more countries in the Western Hemisphere than any other part of the world. Those include major trading partners like Canada and Mexico, as well as Chile, Colombia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Peru.

Separately, the U.S. has less-comprehensive Trade and Investment Framework Agreements with Argentina, Brazil, Ecuador, Paraguay, Uruguay and a collection of Caribbean nations. Those agreements outline the terms for regular dialogues on issues such as market access, workers’ rights, environmental regulations and intellectual property protections.

“The president will use the summit to align regional leaders, the private sector and civil society behind a new and ambitious economic agenda that builds upon our existing free trade agreements in the hemisphere to really help address some of the dislocations of trade,” Juan Gonzalez, the National Security Council’s senior director for the Western Hemisphere, told reporters last week.

That includes addressing issues related to “equity and equality, supporting the global energy transition, the adoption of technology,” he added.

Free trade lawmakers on both sides of the aisle, however, are growing frustrated with Biden’s resistance to negotiating traditional trade deals, a position that administration officials have said stems from members of Congress and American voters rejecting a sprawling trans-Pacific pact under former President Barack Obama.

The Biden administration has instead sought to forge a path on trade that breaks from the convention of opening the U.S. market to foreign exports in exchange for countries reforming their business and investment regulations and bolstering their labor and environmental standards.

Last month, Biden formally kicked off negotiations for an Indo-Pacific Economic Framework that seeks to find common ground among 13 countries in Asia on issues like digital trade, taxes, corruption, clean energy and supply chains, among other topics. Skeptics question whether the arrangement will have teeth without the traditional incentives and enforcement mechanisms found in free trade agreements.

“We have started to evolve away from a traditional dispute-settlement mechanism to thinking about new ways of holding the different participants in a trade agreement accountable for creating integrity in the promises that are made and in the vision that's incorporated into the agreement,” Tai said Monday.

The Americas are a much different market than Asia, in part because of the U.S.’ existing free trade agreements there, said Kellie Meiman Hock, who previously served as USTR's director in Brazil and the Southern Cone. Many countries already have negotiated lower tariffs with the U.S. — though vocal outliers like Ecuador still want their own trade deal.

“You don't have the dynamic that you necessarily had with some of the IPEF countries kind of grumbling on the margins about where's the market access,” said Meiman Hock, who is now a managing partner at McLarty Associates. “And frankly, a lot of the countries in Latin America are grappling with their own domestic conversations about what they want their own trade policy to look like.”

But similar to the Indo-Pacific region, China has made inroads in Latin America through its own investments in infrastructure projects and other initiatives. That has raised concerns that American companies are not only losing market opportunities to Chinese rivals, but that U.S. influence among some of its closest neighbors is eroding.

Eric Farnsworth, a Clinton administration alum who leads the Washington office of the Council of the Americas and the Americas Society, says business and government leaders in Latin America regularly ask him why the U.S. isn't fighting harder to maintain favor in the region.

“China is in a global battle for hearts and minds and trying to promote the idea that their system and their model is at least equal to, if not superior to, liberal Western democracy,” Farnsworth said. “If you can get populations in emerging markets around the world to have essentially a moral equivalence between Western democracy and Chinese communist governance, that's a major strategic victory for China."