The United States is reportedly planning to enact legislation that could pave the way for additional free trade agreements with Latin American nations. This development comes as concerns mount over China’s growing economic influence in the region.

What Happened: Chris Dodd, former senator and President Joe Biden’s special adviser for the region, is hopeful about the Americas Act being passed by Congress this year, Financial Times reported on Sunday. The Act is designed to consolidate and broaden existing U.S. trade agreements with Latin American countries, and incentivize the shift of production from China to closer locations, a strategy known as “nearshoring.”

China has been steadily enhancing its trade and investment ties with Latin America in the 21st century, surpassing the U.S. as the region’s top trading partner. This has raised alarms in Washington about the potential loss of influence in a region traditionally within its sphere of control.

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The Americas Act, which was introduced in March with bipartisan backing, is seen by the Global Americans think-tank as “the most comprehensive U.S. policy attempt to deepen relations with the Western Hemisphere in more than two decades”.

The Act also mandates that participating countries adhere to standards on democracy and rule of law, in addition to trade. It lays out a potential process for countries to join the U.S.-Mexico-Canada Agreement (USMCA), with Uruguay and Costa Rica viewed as ideal initial candidates.

Why It Matters: Earlier in April, U.S. Treasury Secretary Janet Yellen expressed concern about Chinese industrial policies, including government subsidies and manufacturing overcapacity, leading to a flood of cheap clean-energy product exports globally.

Furthermore, China criticized the U.S.’s recent tightening of semiconductor export regulations, impacting exports and affecting companies like Nvidia and Advanced Micro Devices, signaling escalating tension between the two nations.

This move by the U.S. comes at a time when China’s economic influence is growing in Latin America. Chinese automakers like BYD are making waves in the global automotive scene with its competitively priced electric vehicle (EV), the Seagull. The vehicle’s success and the company’s expansion into Europe and Latin America have put pressure on global automotive leaders and politicians.

Moreover, Guatemala, a key ally of Taiwan in Central America, is considering establishing formal trade relations with China, while maintaining its ties with Taiwan.

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