Is an ’FTAA Lite’ a real possibility?

IPS, 9 November 2005

TRADE-LATIN AMERICA :
Is an ’FTAA Lite’ a Real Possibility?

Diego Cevallos

MEXICO CITY, Nov 9 (IPS) - Most of the countries in Latin America and the Caribbean want a Free Trade Area of the Americas (FTAA), even in a less ambitious form, as opposed to a handful of nations - albeit an economically powerful minority - that reject the idea.

Experts and activists are thus wondering if it is still possible to relaunch the initiative, originally proposed by the United States.

"To speak of an FTAA without Mercosur (Brazil, Argentina, Uruguay and Paraguay) and Venezuela is not a risky assertion. In fact, it already partially exists," said Germán de la Reza, a professor specialising in trade integration issues in several Mexican universities.

He was alluding to the trade agreements that the United States has already signed with Chile and with five Central American nations plus the Dominican Republic (CAFTA), as well as others that it is negotiating with Colombia, Peru, Bolivia and Panama.

"There may be a later attempt to join these bilateral treaties into one," thus giving rise to a new version of the FTAA, he told IPS. The problem is that this strategy, emanating from the United States, "isolates each Latin American country from the regional context, reducing their bargaining power."

Luis Macas, president of the powerful Confederation of Indigenous Nationalities of Ecuador (CONAIE), partly agrees with de la Reza. "At the level of bilateral accords, it is true that progress is being made towards a different FTAA, but it will never come into existence because, even though the majority of governments may want it, the people will resist it," he remarked to IPS.

The fourth Summit of the Americas, held Nov. 2-3 in Argentina, concluded with a final declaration in which 29 countries, whose visible leader was Mexico, reaffirmed their interest in reviving the FTAA talks.

The remaining five countries stated that conditions are not ripe for moving ahead with the FTAA at present. This group, composed of Argentina, Brazil, Paraguay, Uruguay and Venezuela, accounts for 75 percent of South America’s combined gross domestic product.

The first Summit of the Americas took place in Miami, Florida in 1994, and all active members of the Organisation of American States (OAS) - all of the countries in the hemisphere with the exception of Cuba, which was expelled in 1962 - were invited.

According to Venezuelan President Hugo Chávez and social activists who met last week in Argentina at the third Peoples’ Summit, the FTAA is already dead.

That statement is true if it refers to the original version of the initiative, outlined at the first Summit of the Americas, said de la Reza.

The leaders meeting at the April 2001 Summit of the Americas in Quebec City, Canada had agreed that the negotiations for the hemispheric free trade treaty should be completed by January of this year - a goal that was not met - and that the accord was to go into effect this December after ratification by the legislatures - a target that is clearly impossible.

However, trade ministers meeting in Miami in 2003 agreed on a scaled-back version of the hemisphere-wide free trade zone, involving an "a la carte" approach in which each country can join under flexible terms and timetables. This version, dubbed "FTAA lite", may begin to take shape now, after the failure to reach an agreement at the Argentine summit.

At last weekend’s summit, Mexican President Vicente Fox, whose country is the global leader in terms of the number of free trade treaties signed - a total of 12 - said 29 countries in North America, Latin America and the Caribbean wish to go ahead with the FTAA, and will do so even without the dissenting nations.

The pro-FTAA group includes countries that trade predominantly with the United States, or are especially keen on making headway in the U.S. market.

If others wish to create an FTAA among themselves, that’s their affair, replied Celso Amorin, the Brazilian foreign minister. Brazil, along with the other countries of Mercosur (Southern Common Market), trades mainly with other South American nations or with countries outside the continent.

"There is evidently a regional split, but fortunately at least some countries are willing to fight for real integration, not the hegemonic and annexationist kind represented by the FTAA," said the head of CONAIE.

To the civil society organisations meeting at the Peoples’ Summit, the FTAA is a refined form of U.S. neocolonialism which is trying to exploit weak Latin American markets.

Under the banner of the so-called Bolivarian Alternative for the Americas (ALBA), advocated by Venezuela and Cuba, CONAIE and other social organisations in the region are pushing for the total derailment of the FTAA process and the creation of a different model of integration which puts people first.

This alternative project arouses a certain sympathy among Mercosur countries, whose political power in the region is increasing, especially that of Brazil, the main instigator of the South American Community of Nations that came into being last year at a regional summit in Peru.

But according to some observers, this stance is flimsy.

If ALBA or the South American Community of Nations work in a commercial sense and bring about economic benefits, Brazil, Argentina and others will stick with them, but if they fail to do so and it begins to look as though the FTAA might be more effective, the countries will switch allegiance, Mexican professor of economics Carlos Vásconez commented to IPS.

"It’s all a question of interests," he said. The original FTAA proposal lost ground, among other reasons, because of Washington’s refusal to phase out its own protectionist measures, especially in agriculture, where the continued subsidies hurt strong agricultural competitors like Brazil, Argentina and Uruguay.

Washington argues that the issue must be dealt with in the framework of the World Trade Organisation (WTO), and says that the U.S. cannot back down when other countries that shell out farm subsidies, such as Japan and nations in the European Union, continue to do so.

Agricultural protectionism will be on the agenda at the next ministerial conference of the WTO, to be held in December in Hong Kong.

Brasilia affirms that it may even reconsider the free trade agreement with the U.S. after the WTO meeting, on condition that progress is made in Hong Kong on the question of subsidies. But everything indicates that there will be little movement on the thorny issue of agricultural trade.

"Everything depends on the bottom line. We have to forget about all the political paraphernalia and understand that what countries are really interested in is closing good business deals, whether in the FTAA, the ALBA or wherever," said Vásconez.

For his part, de la Reza maintains that above and beyond the discussions on the future of the original FTAA or the "lite" version, the free trade project has clearly already had an impact on the region.

As he sees it, thanks to the FTAA process, there has been "a step forward in

facilitating business on a continental scale, and the harmonisation of legislation has been directly or indirectly stimulated in several areas of economic interest (dumping, property rights, investment protection, etc.)."

Besides, "it has created a basis for fairly rapid negotiation of bilateral free trade treaties, which are already in effect in 10 countries in the continent, and could soon be operating in 13," he pointed out.

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source: IPS