FTAA vs ALBA - Choosing trade routes

Newsday (Trinidad and Tobago) | 19 June 2008

FTAA vs ALBA - Choosing trade routes

By Denise Balgobin

Even as the FTAA cools on the back-burner and Venezuela President Hugo Chavez pitches ALBA as a viable trade alternative, there are concerns that ALBA may not suit Trinidad and Tobago’s palette.

At a recent luncheon, outgoing Venezuelan Ambassador Christy Gonzalez stated that she believed the FTAA formula was oppressive for smaller economies, while ALBA or Bolivarian Alternative for Latin America and the Caribbean was a more favourable initiative for countries in the region.

“ALBA represents the first attempt at regional integration based on solidarity, non-interference and complementing, instead of competing,” she said.

Gonzalez is of the view that any programme for the region should give priority to overcoming poverty and reducing inequalities, while sustaining its culture and implementing modalities to build an environmentally sustainable future in light of the severe restrictions facing the world.

AlBA is not the first attempt to harness the economic power of the region. It was preceded by the FTAA which began at the Summit of the Americas, held in December 1994 in Miami, USA.

The Heads of State and Government of the 34 democracies in the region agreed to construct a Free Trade Area of the Americas, or FTAA, in which barriers to trade and investment would be progressively eliminated.

There was a concerted bid by Trinidad and Tobago to become the headquarters of the FTAA, which would have brought untold benefits to this country, in terms of economic gain and liberalisation of trade.

However, it is now common knowledge that the FTAA, which was pushed by US President George Bush, has been put on the back-burner, while TT is pursuing bilateral trade relationships with other countries.

According to former Trade Minister Ken Valley, there is now an incremental approach to the FTAA. “However, I understand that CARICOM is supposed to be conducting negotiations for its implementation, since the countries in the region are in support of FTAA.”

This, despite suggestions from some sectors that TT should rethink its position on the FTAA and instead examine Latin American proposals on the formation of a Latin American-Caribbean trade grouping.

According to additional information provided by the Venezuelan High Commission, Venezuela had already established the Bank of Alba as a suitable replacement for both the World Bank and the International Monetary Fund (IMF).

ALBA is based on concerns that are central to the international relations aims of the Chavez government, namely Latin American Unity and the promotion of a regional social agenda.

In recent years, growing support for regional integration has led to the development of smaller economic alliances, such as Mercosur.

Venezuela’s ALBA project is that which most closely matches historical and ongoing aspirations for progressive regional movements for economic, political and social integration, analysts say.

Venezuela has also emerged as a leader in developing a regional social agenda to address problems of poverty, hunger, disease and social exclusion that are rampant in the hemisphere.

The Commission representative added that the Chavez administration is committed to helping neighbouring countries, including TT, cope with social crises stemming from failed economic policies imposed by international financial institutions like the International Monetary Fund (IMF) since the 1980s.

According to Tanya Carr, Communications Officer at the Ministry of Trade, the FTAA is on a back-burner, not just for TT but for the region.

“The future of US trade via the Caribbean Basin Economy Recovery Act (CBERA) and the Caribbean Basin Trade Partnership Act (CBTPA) seems to have more relevance to our circumstances,” she said.

According to Mahendra Ramdeen, a Trade Development Specialist at the Trinidad and Tobago Manufacturer’s Association (TTMA), the organisation remains committed to locking in the preferences it presently enjoys under the Caribbean Basin Iniative (CBI).

“We are working with the government and Caricom to move to have an extension of the CBI approved,” he said, noting that the ALBA alternative being suggested by Venezuela is not being considered at this time.

Ramdeen added that as far the TTMA is concerned, the merits and demerits of ALBA would have to be analysed. However, he said that the TTMA was committed to a trading relationship with the US, who remains its number one trading partner.

The TTMA, he said, recognises that the country is moving towards becoming the financial hub of the region but believes there is some time to go before it attains such a status.

The best situation for TT manufacturers, according to Ramdeen, would be an extension of the existing preferential arrangement (CBI), where TT goods can enter the US duty free.

However, the waiver to the CBI extension does not materialise, one possible way of locking in the preferential treatment the country presently enjoys (TT goods entering US duty free) would be to seek to forge a Free Trade Agreement with the US. “This would be an agreement that encompasses more than trade, it would include negotiations in investment, services, for instance.”

However, “it may be the only way to secure TT exports into that market on a duty free basis,” he said.

Ramdeen stated that when CBTPA expires in September this year, there will definitely be some setbacks for manufacturers. The reality of the situation is that if TT goods are allowed to enter the US duty free after the expiration of the waiver for this programme, the WTO can challenge it, he said.

If that was to happen, the US would then be asked to adhere to the principals of the WTO and allow TT goods to enter the US on an Most Favour Nations (MFN) basis.

As a result, a percentage of TT’s goods would now be made to face a duty when it enters the US, he said.

“This is one of the reasons why government should still focus on becoming the FTAA headquarters. FTAA is going to come at some point in time,” said Valley, noting the hiatus created by the stalled negotiations has actually been a blessing in disguise, since the country was able to capitalise on other opportunities which cropped up.

“The more prosperous countries in the Americas and Caribbean become the better markets for our manufactured goods,” he added.

“In the region, we are a leader in the manufacturing sector. And whatever happens with the Petrocaribe deal, there will always be ready markets for our oil, gas and downstream products,” he said.

Whatever trading blocks come into being, Trinidad and Tobago will hardly lose out, he said.

source: Newsday