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ALBA and the FTAA: the Dilemma of Integration or Annexation

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ALBA and the FTAA: the Dilemma of Integration or Annexation

Por Osvaldo Martínez

Part I - 15 August 2005

Warning: free translation by Anoosha Boralessa (September 2015); not reviewed by or any other organization or person.

Latin American integration has caused rivers of ink to flow and provoked endless torrents of rhetoric. However, a significant issue still remains unresolved.

Historically, this integration is very firmly rooted in the visions of Bolivar and Martí. Bolivar called for the political unity of the fragments that had recently broken away from the Spanish Empire. He tried to give form to this political unity by convening the Panama “Anfictiónico” Congress. He faced opposition from the recently formed US, which he identified with profound and precocious foresight, would in the future, be responsible for “plaguing America with abject poverty in the name of freedom”.

Martí had direct experience of the rise of imperialism having spent a long period in New York. With surprising astuteness, he urged the people of “Our America” to unite to resist the domination and expansion of the nascent imperialist power.

Both are leading personalities in the formation of what later would be known as Latin America. Both share a fundamental perception: the countries south of the River Bravo form part of a collectivity whose peoples can only be fulfilled if Latin America is an integrated whole, that resists Northern imperialism which sees the rest of America as the backyard to its property.

The requests of Bolivar and Martí have a solid rational basis, for the case for integration is multi-pronged.
Latin America was structured by Spanish and Portuguese colonial processes that, while not exactly similar, share greater similarities than the colonial English, French, Dutch, German and Belgium models share. Once the heroic act of independence was complete, colonial control was substituted by neo-colonial control. This neo-colonial control was exercised by European powers with growing US interference, and more recently, by British and US imperialism, with progressive preponderance on the part of the latter.

A positive legacy of this colonial past is Latin America’s unique resource: its potential for integration.
Latin America offers the possibility of direct communication between Spanish-speaking people and Portuguese-speaking people. This allows more than 500 million people to communicate with each other, some speaking in Spanish and others in the highly “Brazilian” Portuguese spoken in Brazil.

Compared with Africa (divided in language and at times isolated), Asia (that is in a similar situation) as well as Europe (where integration has reached a more advanced stage but where the European Union has to translate more than ten different languages), Latin Americans enjoy greater possibilities of communicating.

Without even claiming a romantic and false equivalence between its nations and peoples, Latin America shows some conditions for integration that, theoretically, are superior to any other region in the planet.

First, Latin America has a colonial past that formed a relatively common socio-economic structure. Second, the subsequent, textbook imperialist action forged relationships of similar dependence and exploitation. Third, Latin America presents a unique opportunity for direct communication between people speaking Spanish and Portuguese.

In addition to all these factors, which are not exactly trivial, we now add, what in these times of globalization (which strictly speaking, ought to be called neo-imperialism), is a well-established fact: in this era of large economic areas of developed countries (the European Union, the US-Canada, Japan – “NIC`s”), developing countries consider that integration is far more than [simply] achieving economies of scale or benefitting from market expansion. It is a condition for development and furthermore, for survival in times of vast economic areas and the battle for imperial hegemony.

The case for integration in “Our America”, (to enable our people to develop and to overcome the domination of an America that is not our’s), is at least as strong today as when Marti participated at the meetings of the Monetary Conference of the Republics of America in Washington. At that time, the nascent North American imperialist power claimed to establish a common monetary currency for transactions in America. Now it claims to consolidate and extend its hegemony over the region, using the FTAA and the Free Trade Treaties for this purpose.

However, there is an enormous gap between the potential for integration and its anaemic reality.

If we think of the gap between an economically and politically integrated Latin America, asserting its economic, cultural and intellectual richness, making its collective voice heard, and a Latin America still debt-ridden in the OAS, with several governments vying to win the headquarters of the FTAA and enthused at the prospect of entering into this project, we are forced to acknowledge what little progress has been made towards integration.

The short path journeyed has created many institutions and structures for declaring resolutions on representation, coordination or regional or sub-regional integration. However, the accumulation of acronyms referring to institutions, signifies neither deep nor effective integration. Rather, it nicely reflects that integration does not work and that the number of failed plans, has built up.

In political terms, Latin America lacks a genuine mechanism for Latin American and Caribbean harmonization. Neither the discredited OAS nor the Latin American Summits can play this role; nor can the sub-regional groupings or interim configurations like the Rio Group, or other groupings at the Central American or Caribbean level. The South Community of Nations and the Andean Community are good projects on paper. However, they do not represent the entire region. Their real significance will depend on political tendencies that predominate in their governments in the future.

While the existence of institutions neither determines the course of reality nor assures effective integration, it is noteworthy that Latin America has nothing similar to the Organization of African Union.

The region— as an expression of political fragmentation— has not succeeded in transcending the scenario of institutions designed to meet in Washington and to transmit the boss’s directives (OAS), to meet with the former colonial metropolis that now act as the junior partners of the United States (Latin American Summits) or to meet in sub-regional groups at times capable of taking tough positions (CARICOM, the Rio Group, the Association of Caribbean States), at times capable of producing lamentable results (Centroamerica) and at times are like the unfortunate expression of a good project that lives in agony because it lacks the support of not just a few governments (SELA).
The political fragmentation referred to, has led regional integration to be understood as preferably economic integration. This is why it is frequently presented as a description of regional integration and the tale of the ups-and-downs of economic integration schemes, that began at the beginning of the sixties under the intellectual influence of CEPAL development, and out of urgency and fears triggered by the Cuban Revolution and the boom of European integration.

These schemes of economic integration have already lived for a relatively long time. While there are individual differences between all of them, all are immature attempts to integrate developing states.

What we would call Cepaline integration has failed. By Cepaline, we refer to the era of “development from within”, import substitution and the spirit of industrialization. This would be led by an industrializing and modernizing bourgeoisie, which CEPAL considered capable of being “national”; the champion of developmental interests that would be able to defend their national markets against the obvious tendency to the hegemony of foreign capital.

What we would call neoliberal integration has also failed and its failure is even more notorious. This occurred at a time when neoliberalism became dominant and converted integration into a shell encasing a large vacuum and the integrationist rhetoric into chatter to hide growing disintegration.

The failure of Cepaline integration is the failure of the Cepaline model of development from within. In this model, integration was an intellectual, logical development. It was proposed when some began to observe that industrialization, development from within and the incorporation of the “fruits of technical progress” were suffocating within narrow, national markets. There was a clear need to enlarge the market and make it regional, to aspire to the necessary levels of production and productivity.

But the model and the type of integration ascribed to it, failed. Thousands and thousands of pages have been written on the reasons and the debate on this problem. All I am claiming to do is to set out the reasons that I believe explain the failure. At the same time, I recognize the merits of Cepaline thought during that “golden age” of this institution. Then, it was able to structure an original interpretation and proposal that would end up failing.

The first reason for failure does not lie in economies of scale, techniques and procedures for lowering tariffs, or in any other aspect of economic technique. Neither can it be attributed to a “pure” economy, if such an economy exists in any form.

The reason behind the failure of the industrializing bourgeoisie is found in this area, where the economy blends with politics, sociology, history and culture. For CEPAL, the industrializing bourgeoisie was the principal social actor that had to:
make the necessary internal structural changes (agrarian reform to break up the large estates and the action of the backward binomial large estates – smallholdings, redistribution of profits without which the internal market would end up contracting);
resolve to defend their national and regional markets by firmly resisting transnationals penetrating and controlling; and consequently,
resolve to confront the US government. Without doing so, any independent developmental policy in this region cannot be conceived.

Making a regional evaluation, while not forgetting that each nation has its own history which is never a carbon copy of the others, the industrializing bourgeoisie, much talked about by CEPAL, failed in its role as the star of redistribution. It demonstrated that it was more transnational than national and that it generally accepted North American hegemony. Its members acted like the managers of dependence and high-level employees of subsidiaries of transnationals instead of being the “national” bourgeoisie, standing up in defense of their markets, companies and projects.

CEPAL’s mistake was not that it conceived a poor model. The logic of how it would work was that it would grant the industrializing bourgeoisie all the attributes with which it idealized it. That logic was correct to reproduce in Latin America, with a time lag, the classic processes of capitalist development that took place in Europe and the United States. But the industrializing bourgeoisie was, at this time, either too weak, or was too dependent and submitted, or was too fearful of the popular revolutions following the triumph of the Cuban Revolution, (or a combination of all the factors mentioned before); and therefore was nothing other the manager of dependence rather than the leaders of an independent capitalist development.

More than the failure of the CEPAL model, Latin America’s independent capitalist development failed.

No internal, structural transformations were made. It was not surprising that then, integration was in terms of capital and not of people. We are not even talking about the integration of national capital but transnational capital, the latter being the real architects of the existing schemes.

The Agrarian Reforms were either completely abandoned (Brazil) or took the shape of soft reforms or, worse still, were substituted by subterfuges such as colonization, administration of land or “development of the market for land” of neoliberal times.

As Latin American poverty was never considered anything other than incidental to and a passive receptor of a model led by the bourgeoisie and oligarchs, integration was never a popular cause. Nor was it connected to the struggles and aspirations of the people. It was just another technocratic issue reserved for experts to manage through remote, international meetings. It was also the fodder for living room chat.

When neoliberalism burst on the scene and became dominant in the region, integration was far from achieved. Concepts such as “development from within” achieved some partial successes. A small amount of progress had been made through attempts at manufacturing complementarity through multinational programs such as metal-mechanical and automotive in the Andean Pact or attempts to regulate foreign capital through Decision 24 of this Pact. It was no random coincidence that these efforts were made when the Allende government was in power in Chile and the Velasco Alvarado government was in power in Peru. Both governments were calling for great popular protection and independence against the United States.

Part II - 22 August 2005

CARICOM’s attempts to make progress occurred under very difficult conditions given how small its economies were and the very visible traces of the relationship of dependency on the old European metropolis and the new North American metropolis.

From 1982, with the explosion of the external debt crisis and the fall en masse to neoliberalism, the scene would change. The neoliberal cycle emptied regional integration of its flimsy substance; going under the names of integration schemes that had been preserved, neo-liberalism opened the door to disintegration.

It is curious to remember what some said, when they observed that under IMF “structural adjustment”, countries within it that were falling, were immediately doing and saying the same thing, with a uniformity contrary to the “diversity” that CEPAL so often invoked as an obstacle for integration in crazy times.
This common position taken in discussion and neoliberal actions made some exclaim with naïve delight in some cases and with cynicism in many others, the following: that given that divergent positions were no longer held, now was a good time for regional integration through a developmental policy and strategy. For now, all governments were saying, doing and wanting the same thing.

CEPAL lowered its banners of “development from within” and adopted the impossible eclecticism between Prebish’s Cepaline model (created under conditions of war by economic liberal thought of the forties and fifties), and the neoliberalism of the Chicago Boys and the IMF. The result was a hybrid that propounded withdrawing from the classic legacy of CEPAL and seeking to pass as another expression of original thought. This was “open regionalism” that, under textbook implementation of neoliberal policies – massive privitizations and surrendering to transnationals, demonstrated that it was very open and hardly regional at all.

Following the Cepaline era and even more so following the neoliberal cycle, integration was understood to be essentially intra Latin-American trade. Its progress was measured through the increase in intra-regional trade. This way of understanding and measuring the progress of integration is flawed in at least three ways.

Integration cannot be reduced to pure and simple trade. This is because, without regulatory mechanisms that compensate for the trend to unequal exchange between parties of greater and lesser development, all that trade achieves is reproducing and extending the scheme of production, productivity and commercial domination of one party.

So long as trade is more respectful of the alleged purity of law from value (what the neoliberals want), it will strengthen the strong and will weaken the weak. Else put, it will function as an agent of disintegration.

Furthermore, statistics on intra-regional trade are misleading. This is because they do not state who are the principal economic agents of this trade. It is a well-established truth that currently, at least two thirds of global trade is nothing more than trade between subsidiaries of transnational companies (Oxfam, 2002). These subsidiaries “buy” and “sell” from each other to evade taxes. This is how big companies operate on a global scale; in this way, they make a kind of caricature of international trade, reducing it to nothing more than captive trade within a company, stimulated by the interest of making a profit from it. However statistically, it is recorded as sovereign state exports. How much of this intra Latin-American trade is nothing more than “trade” between subsidiaries established under the protection of privitizations and concessions?

Transnationals superimpose on the regional economic space their strategies for centralizing or de-centralizing production, marketing, and growth, with a global logic of competition between large, private consortiums. This logic differs from the logic of regional integration, the basis for their operation; it is also indifferent to the needs of integration, which for them is nothing more than a piece of information to consider, among many others, in a global strategy of profit-maximization.

Temporarily and momentarily, this globalized logic may coincide with the growth of trade in the scheme of integration.

“Eventually, because of the interests of the regionalization of transnational companies, spaces of competence are produced that allow manufacturers to export. (Fajnzylber, 1970 and Fajnzylber and Tarragó 1976). More recently, the companies involved in assembling in the automobile industry underwent a process of restructuring and modernization. This fed the expansion of manufacturing trade within the Mercosur bloc. This is a good example of how these globalized companies restructure, especially in the production process and how the actual increase in trade represents, for the most part, an increase in intra-company transactions, an increase in imports, a decrease in adding value and a decrease in jobs for the production unit.”.

Finally, quantitatively, the results are poor.
Following the initial growth in the sixties, intra-regional trade was maintained for more than twenty years hovering around 13% of total regional trade (Tavares-Gomes, 1998). In 1997, it reached 21.1%, but in 2003 it cut back to 16%.

For more than forty years, efforts have been made to integrate. However, they had not been able to increase intra-regional trade —understood to be the key benchmark of integration— by more than 16% of total trade. Let us not forget Mexico’s position. It is one of the biggest economies and the one most swallowed up by the United States. 88% of its trade is with its major NAFTA partner, and barely 5% with Latin America.

Disintegration as a viable process, although preserving the names of the old integration schemes and adding others such as Mercosur, was the tonic of the neoliberal cycle.

It is argued with dogmatic rigour that the market provides the best possible solutions for all issues. Based on this logic, three sets of policies, fatal for integration, were put in practice.

The first was conceptualizing trade as a competitive race for exports to the United States and Europe. That was in practice the so-called integration of Latin America into the world economy. All that Latin American economies with similar export-driven structures achieved was a race to suicide: they exported to those extra-regional markets while their national markets and the regional market shrank even further on account of growing poverty and exclusion, brought about by neoliberalism. These markets were converted into marginal under-producers that lacked appeal.

Another step for disintegration: abandoning preferential treatment for less developed countries.

It is easy to understand why this preferential treatment is so necessary, provided we accept the assumption that no group of countries may effectively integrate, by reproducing or accentuating differences in development and concentrating the advantages of integration in the strongest countries.

This elementary truth is expressed in European integration which never renounced maintaining schemes of unequal trade and neo-colonial exploitation with their former colonies, now the Third World. But it conceded substantial preferential treatment to Spain and Portugal, because there would be no European integration if these countries, situated within the area for integration, lagged behind.

This elementary truth was ignored by dogmatic, neoliberal rigor in Latin America. Preferential treatment is, for this textbook neoliberalism, much more than an anomaly. It is a heresy that strikes against the dogma of a perfect market. Thus just as personal poverty is not a failure of the system, but a failure of the individual, caused by his inability to find his way in the market, the same applies to the poverty of a country. Therefore, granting a country preferential treatment would be to deny the rules of the market and to reward incompetence.

Preferential treatment is rejected as a general principle of policy and rejected as a way of correcting systemic errors or compensating for colonial exploitation. Annihilated as a general principle of policy and not even recognized to be a pre-requisite for effective integration, preferential treatment is denatured and reduced to the alms of charity under the banner of humanitarian aid.

This market dogma had a devastating effect on regional integration. Although with undeniable coherence, the following actions took place: the IMF applied identical structural adjustment programmes to countries as different as Brazil and Haiti and the FTAA proposed similar disciplines for investment, government procurement, competition policy, the intellectual property regime, trade liberalization in these countries and accepted only different time limits for doing so.

The third fatal blow to integration was the massive privitization of public companies through a privitization frenzy. This included some four thousand state-owned assets and created a favourable atmosphere for such a tide of corruption and illicit enrichment that Latin America fiercely competes for the global championship of presidents taken prisoner and submitted to tribunals for the democratic theft of public funds.
The significance of privitizing companies and intensifying the private sector for the fate of the myth on super-efficiency and a wealth-generating force, was to strip states of the capacity to formulate economic policy, to regulate by their own means the functioning of the economy and to offer essential public services to the entire society.

As far as integration is concerned, the neoliberal cycle caused the rupture of modest intra-regional ties and progress accelerated by another type of integration; one that involved transnationals, especially the speculative capital that takes advantage of financial liberalization; but also, those interested in gaining even more control over national markets, by obtaining absolute concessions to guarantee their investment, seizing government procurement, looting the regional sources of biodiversity and controlling oil, gas and water.

The involvement of transnationals in the progress of this integration through financial and trade liberalization was tantamount to integration to the outside and internal disintegration. Continuing to pursue this path holds, as pointed out, the fate of the finishing line. The FTAA represents integration with the United States as the subordinate appendix. The FTAA means abandoning whatever plan we had for our own regional integration and accepting [instead] to play the role of choristers.

The FTAA claims to be clasp that fastens the neoliberal chain that has, for three decades, been welded in the region. [The FTAA] claims to convert the neoliberal policy of “free trade” into a legal agreement binding states and making it impossible for them to abandon it.

If the FTAA comes into force – which seems impossible if the fight against this imperialist project continues with maximum intensity –Latin American integration would too be blocked. The neoliberal policy and the FTAA as its legal culmination, demonstrate that integration modelled by the transnational market and liberalization, simply leads to annexation with the United States.

Cepaline integration failed; so too did neoliberal integration. But integration is, more than ever, assumed vital for the region, devastated by three decades of “open and free trade”.

Reflection on the failure cannot be found in an inventory of errors. We are not talking about extending the death certificate following a meticulous autopsy of the cadaver that establishes the causes of death.

Regional integration is not a cadaver because the struggle against and the resistance to the FTAA continues; because the terrain for this resistance is being fertilized by exploitation and a heap of social debts. And because there is a new plan for integration that is different and far apart from any previous scheme: the Bolivarian Alternative for the Americas (ALBA).

A concept of integration different to what has, for the last four decades, gone under the banner of integration is this: integration seen through the eyes of Bolivar and Martí, reviving their forgotten and silenced substance; integration of the people rather than capital; in sum, genuine integration called for by history and by culture as necessary to survival and development. This is what President Hugo Chávez propounded in the Summit of the Association of Caribbean States that took place on the Isla Margarita, Venezuela in 2001.

What lessons can be learnt from the failure of that integration, that it takes ALBA to call Latin American states and Caribbean states once again to integrate?
1) The first would be that regional integration cannot take place with the United States (FTAA). Nor can it take place by falsely claiming to make no mention of the US government. The US government and US transnationals intend to integrate the region as an area of guaranteed financial and commercial exploitation and the supplier of oil, gas, water, biodiversity and enclaves of military bases. Not only do FTAA and ALBA differ in their logic; their logic is exclusive. The position with respect to FTAA and its alias, bilateral or multilateral free trade treaties, draws the line between integrating people and integrating capital.

It is not conceivable to participate in ALBA and, at the same time, to enter into CAFTA or a Bilateral Trade Treaty, effectively a tailored version of the FTAA. Integration will neither be achieved with the United States nor with the neutrality of its government, but by respecting ALBA in the struggle against hegemony.

2) The region’s oligarchies will not lead integration. For the latter failed to perform the stellar role that CEPAL allotted to them when integration was first attempted in the 60s and 70s, when the industrializing bourgeoisie was assumed to exist, notably, in big and middle countries; this is because they were no more than the rest of them, since neoliberalism retarded a good part of national industry and established oligarchies. These oligarchies now structured around liberalization and financial speculation, established by well-paid employees of the subsidiaries of transnational finance, traders linked to importation or to services targeting a narrow sector, capable of consuming in as a wasteful way, as in New York, Paris or London.

These transnationalized oligarchies are captives in the discussion on free trade and formal democracy. They can no longer direct the flight of their capital and the opposition —telegraphed from Washington— to any government or popular movement that raises its head in the region.

3) Integration cannot be reduced to trade, nor can its progress be measured through an increase in trade. Integration cannot be locked up behind the bars of so-called “free trade”.

It is not a question of abolishing trade but recognizing that the process of integration involves far more than simply trade; furthermore, that genuine integration cannot be satisfied by a trade clause, of any kind. “Free trade of FTAAs, Free Trade Agreements and the WTO, is nothing more than a supplemental formula to demand free trade and oligopolistic control for those countries that are more developed, to penetrate markets of countries that are less developed and to obtain, for their benefit, unequal trade.

This unequal exchange that normally applies to relations between developed and developing countries, can also take place between different levels of underdevelopment to the detriment of the poorest among the poor, if the unregulated market is allowed to decide the course of exchange.

The glorification of “free trade”— that has never before existed in more pure a state than in the elegant abstractions of liberalism— and the consequent demonization of protectionism and “managed trade”, are expressions found in the warm heart of unequal exchange.

For those in the losers’ camp, trade is a necessary instrument that must be stimulated; however, it must always be subject to the objectives of developing integration. This implies compensating the weakest with formulae such as preferential prices, barter or others, at the same time that tariff and non-tariff barriers and technical obstacles to trade are being eliminated far more quickly through the traditional schemes for integration.

On 14 December 2004, the Presidents of Cuba and Venezuela signed in Havana the Joint Declaration and the Agreement for its Application which gave birth to Alba. These documents conceptualize trade as an instrument (not an end in itself) for integration. The sale of Venezuelan oil to Cuba under the concessional terms of the Caracas Agreement, Cuba’s purchase of Venezuelan non-oil exports for only 412 million dollars in 2005, Cuba’s guarantee to fix a minimum price per barrel of oil exported by Venezuela that would be payable even if the world market price fell below this, are genuine expressions of this new type of integration.

4) The integration process can neither be reduced to economics. Yet clearly, it is may be true that the economy may never be neglected and that without it, integration would lack support.

The process of integration must, with utmost speed, have an impact where the deficit is greater and must begin to alleviate social ills. The “social” [dimension] cannot continue to lag behind the economic aspect. Using the available resources, the maximum effort must be deployed to reduce the social debt.

The traditional integration schemes were extreme forms of economic integration. This was emphasized far more acutely with the arrival of the neoliberal cycle and its essential lack of respect for the social sphere. However, the sad catastrophe of poverty, education, health, social security and employment, forced neoliberals in recent years to half-close the “social” discussion and claim to fight with “focussed” concepts, the inevitable results of the economic policy being applied. This position is adopted by those that understand social policy to be an ambulance that picks up the dead and injured and triggers economic policy.

The social debt that weighs on the region is of such magnitude, that for integration to have a meaningful impact on the lives of vast portions of the population of the region, action to reduce it, cannot be left for later on.

To treat the sick that never had medical care, to make the illiterate literate, to provide education from the primary level to the higher education to those that cannot access it, is to launch an attack on the very basis of social exclusion and to restore the lives of many millions of people for whom then Latin American integration would have an indelible concrete meaning.

This is the equivalent of sowing integration into feelings and experiences, having strengthened its roots by attending to the most excruciating shortages.

To be continued ...

 source: CUBARTE