Economy & Trade, Headlines, Latin America & the Caribbean, North America

TRADE-AMERICAS: Asymmetric Trade Negotiation Get Underway

Estrella Gutierrez

CARACAS, Apr 16 1998 (IPS) - When 34 American leaders join to launch negotiations for the Free Trade Area of the Americas (FTAA) Sunday, they will initiate an enormously complex process marked by challenging asymmetries between the participants.

Countries of economic dimensions as different as the United States and St.Kitts-Nevis will negotiate the progressive liberalisation of trade in goods, services and investments over the next ten years.

And this is the first time a whole continent has united to create a tariff-free zone, and it just happens to be the group with the greatest North-South gap in terms of development.

The American leaders will even try to regulate aspects the World Trade Organisation (WTO) has not yet produced a ruling on, and the only country excluded from the jamboree is Cuba, expelled from the Organisation of American States (OAS) in 1962.

The heads of State and government of the Organisation of American States’ members will approve the opening of the FTAA negotiations at the close of the II hemisphere summit in Santiago this weekend.

According to expectations, the FTAA will only take up four paragraphs of the Santiago Declaration, which will use the Joint Declaration of Trade Ministers, drawn up in San Jose on March 19 as a basis for negotiations.

This declaration mapped out the discussions, setting the structure, objectives, principles and sites for the meetings.

Those who defend the project, say the FTAA will represent “Latin America and the Caribbean’s contract with globalisation, and an orderly, not savage, globalisation.” Meanwhile, its opponents say it is a one way instrument for the “neoliberal annexation” of the region by the greatest power of the industrial North.

Amongst the mists swirling around the beginning of the negotiations one especially important factor is that the US government has not won its plea for a ‘fast track’ facility, which means Congress will not be able to modify the commitments assumed by the Executive.

But in the strictest sense, the fast track is not needed for negotiation and south of the Rio Bravo, which separates the United States from Mexico, the governments generally accept this fact as “an opportunity” which only means the process will be “more hemispheric, without Washington being able to impose its conditions.”

WTO data explain why the United States and Canada want preferential access to Latin America. For as a whole, in 1997, the continent bought 1.42 trillion dollars of imports, 27 percent of the world total.

The United States and Canada accounted for 1.1 trillion dollars of the hemisphere purchases. But the WTO stressed that Latin America had the biggest increase in imports, with a respective rise of 21.5 percent on 1996, compared with a world average of nine percent.

The WTO and other multilateral bodies predicted the dynamism of the regional market would be maintained in future and that in a few years more, the Latin American and Caribbean countries would form a market bigger than that of the United States.

Figures from the Interamerican Development Bank stressed that by 1997 the intracontinental market in America already absorbed 55 percent of hemisphere trade.

Without Canada and the United States, this proportion rises to 70 percent, showing that for Latin America and the Caribbean their market is also withing the Americas and that exports could possibly grow at a rate still higher than the 13 percent of 1997, when they totalled 319 million dollars.

And while the reach of the negotiation and its consequences for Latin America and the Caribbean, and the world economy in general, are an unknown which only time will make clear, the path of the discussions has already been completely traced out since more than a month ago.

The San Jose Declaration stated the differences in the development and size of the continent’s economies will be taken into account in the negotiation and commitments.

But the ministers did not stipulate just how these asymmetries would be taken into account except in the case of the smallest economies. These will have a special consultation group active in the nine months of discussion and will report to the main body of the process: the trade negotiations committee.

Instead, they set out 12 general principles, stressing that all the countries of the continent would participate in the negotiations (except for Cuba), the decisions would be made by consensus and the discussions will open simultaneously in all areas.

Furthermore, the countries will be able to negotiate either in blocs or individually.

Canada, the United States and Mexico (partners in the North American Free Trade Agreement, NAFTA) negotiate individually, while the Andean Community, the Southern Cone Common Market (Mercosur) the Caribbean Community and Central America will act as blocs.

Only Panama and the Dominican Republic have still to make up their minds whether to join the Andeans or Central Americans in the case of Panama, or only the latter bloc for the Dominican Republic.

Another principle is that the agreements should be congruent with the rules imposed by the WTO for the regional tariff reductions, which in practice means the liberalisation must be completed in a maximum of 10 years from its starting date, by which time no goods can remain excluded.

At the same time, each negotiating group will advance at the fastest rate possible, but the agreement will be “a whole,” meaning nothing will be definitively agreed until everything is settled.

The FTAA will be a new, independent agreement, which will coexist with the other bilateral or bloc liberalisation conventions of the continent, but will not be the outcome of amalgamating part or all of these.

Civil society will have a role to play in the process, especially the business organisations and the unions, but this will only be in an indirect manner, as their proposals will be taken up by a committee and passed on to the current chair of the process.

The negotiations must end with the close of 2004 and show concrete advances two years earlier, especially on business facilitation front.

The nine negotiating groups define the sectoral objectives of the FTAA project. These are Market Access, to be presided over by Colombia in the first 18 months, Investments (Costa Rica), Services (Nicaragua), Government Procurement (United States) and Dispute Settlement (Chile).

Also, Agriculture (Argentina), Intellectual Property Rights (Venezuela), Subsidies and Antidumping (Brazil) and Competition (Peru). The smallest economies consultation group will be presided over by Jamaica to start with.

The site of the negotiations will also be divided into three periods. Miami will be the headquarters until March 2001, followed by Panama in the following two years and Mexico City until December 31, 2004.

The chairmanship of the negotiations will be held by Canada until November 1999, with Argentina as vice chair, and then, these posts will be passed on to Argentina and Ecuador until May 2001. From then until November 2002 Ecuador will lead the process, with Chile in support.

Brazil and the United States will co-chair the final phase.

The trade negotiations committee, will be made up by the vice ministers of trade, and will meet every six months. Argentina, Suriname and Bolivia will host the first three meetings.

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