Thursday 28th April 2005

 

FTAA: RIP or stuck in the mud?

 
 
 
 
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By Dr Anthony T Bryan

Last week, Brazilian President Luiz Inácio Lula da Silva shook up hemispheric trade negotiators with the resonant statement that the FTAA is low priority for Brazil.

As he told a group of labour leaders: “For two years, FTAA has not been discussed in Brazil because we took it off the agenda.”

The remark was sufficiently provocative that a Republican in the Florida Senate feels bolstered in his efforts to strip $525,000 in state funding for Florida FTAA, the group lobbying to have Miami named as the headquarters for the proposed FTAA Secretariat.

Since the Ministerial Meeting of November 2003 the FTAA process appears to have ground to a halt.

In addition, during the past few weeks the postponement of a scheduled end of March meeting of the Trade Negotiations Committee (TNC) and the cancellation of plans for Brazilian and US negotiators—the two key countries and co-chairs—to meet this month indicate a further delay in the resumption of negotiations.

The process is not yet completely moribund.

The FTAA is expected to be on the agenda while US Secretary of State Condoleeza Rice is in Brazil this week and the TNC co-chairs expect to meet in Washington, DC on May 12 as a step toward the resumption of the seventeenth TNC meeting.

Despite the intention of the office of the US Trade Representative to pursue the FTAA goals, and indications from the Brazilian Foreign Ministry that they still have an interest in the trade pact, some issues have to be addressed even before the resumption of negotiations.

These include the funding of the FTAA Secretariat after June 30 and beyond 2005 and the outcome of the request for an extension of the US Trade Promotion Authority (TPA) by President Bush on March 30.

The TPA as it currently exists would apply only to trade agreements concluded by July 1. The President’s request would provide for an extension to include agreements entered into before July 1, 2007.

With respect to the latter, unless the President’s request is granted, in less than two years US officials will lose their authority to implement international agreements or proceed with an FTAA in the absence of TPA or a similar congressional mandate.

In the meantime, understandably, the other potential member countries of the FTAA are growing worried about its future.

Why the impasse?

Trade economist Jeffrey Schott, speaking at a conference at the University of Miami in early April, placed part of the blame for the lack of movement toward an FTAA on the seeds of delay planted at the Ministerial in Miami in November 2003 when an FTAA compromise was pushed through at the trade ministers’ meeting.

At that time, wounded by the failed WTO meeting in Cancun in September 2003 that had resulted in a breakdown in the Doha round of multilateral trade negotiations, trade officials at the FTAA were under pressure “not to fail.”

The substantive differences between the major actors at the FTAA negotiating table were even greater than in the WTO talks, so the co-chairs of the FTAA process—the US and Brazil—constructed a procedural compromise that allowed them to shake hands and promise to resume negotiations in early 2004. In reality they put a plaster on their differences and then got out of town.

In short, the Miami Declaration adopted a two-track approach to the FTAA that allowed talks in all the existing negotiating groups, but offered countries greater flexibility to opt out of making commitments in sensitive areas, take specific issues or products off the negotiating table or assume different levels of commitments.

According to Schott, “This diplomatic double-speak basically accommodated two levels of negotiation: a core FTAA in which countries could exclude sensitive issues, and supplementary accords by a subset of FTAA participants that covered ‘FTAA-plus’ commitments’ otherwise known as ‘plurilateral’ agreements that only obligate those countries that sign the specific part.” In essence the weak Miami agreement moved away from the comprehensive trade accord that hemispheric leaders had promised at the Summit of the Americas in 1994 and subsequently.

At another level the ongoing Doha round talks, leading up to the sixth WTO Ministerial at the end of 2005, have shifted the focus of the US and other countries from the hemispheric wide trade talks.

Current initiatives

While the FTAA process may have stalled the region has moved ahead with a number of bi-lateral free trade agreements (FTA). Assuming that, despite a fierce fight in the US Congress, the US-Central American Free Trade Agreement (CAFTA) does become a reality all that is left for the US to negotiate are potential FTAs with Caricom and Mercosur. Free trade agreement will turn Caricom “preferences” into commitments. Mercosur is much more elusive given Brazilian opposition.

Brazil’s strategy is similar. It has signed basic bi-lateral FTAs with most of its Latin American and Caribbean neighbours, and product specific agreements with Mexico and China and is negotiating a free trade pact with the European Union (EU). But given the current impasse the US seems to be taunting Brazil and its Mercosur partners to catch up by surrounding them with FTAs.

Kick-starting the process

As a practical matter, in order for the FTAA negotiation to move forward and succeed, Brazil must negotiate on services, government procurement and intellectual property issues, and the United States must be willing to improve market access for a number of Brazilian agricultural and processed agricultural products.

The political opposition by domestic sectors in each country has effectively constrained their respective negotiators.

First, unless the co-chairs Brazil and the US agree to move the FTAA process forward it will be mired in the mud for a long time. They bear the responsibility for the negotiations going off-track and they bear the responsibility for putting them back on track.

Second, for both Brazil and the US the FTAA is not important unless both countries are members.

Third, the keys to success in the FTAA are agreements on a hemispheric package of market access reforms (including agriculture and other goods and services), liberalisation of existing tariffs and quotas, and reform of regulatory and administrative practices (including inter alia customs procedures and sector-specific investment reforms).

In addition, political leaders throughout the Americas must reiterate their original objective of achieving free trade in the hemisphere.

Such a renewal of commitment must be embedded in the Declaration of the next Summit of the Americas in Buenos Aires in November 2005.

Catching its breath

For the Caribbean countries, the delays in the FTAA negotiations may allow some breathing space. Several of the countries in the region are still far from able to cope with the changes and need time to adjust.

The full CSME needs to be operational before additional steps toward hemispheric, or wider global liberalisation, is agreed. In trade negotiations, at this point the region seems to be heading sequentially toward a completed Economic Partnership Agreement (EPA) in 2007, an FTA with the US and an eventual full FTAA.

Dr Anthony T Bryan is a senior associate in the Americas Program at the Centre for Strategic and International Studies in Washington, DC and Professor Emeritus at the University of Miami.

 

 

 

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