TRADE: Latin American Development the Unifying Objective

By Mario Osava Reprint | | Print |

Mario Osava

BELO HORIZONTE, Brazil, May 17 1997 (IPS) - In order to be viable, the Free Trade Area of the Americas (FTAA) must accelerate development in Latin America and the Caribbean, in a new front of potentially beneficial industrialisation for all.

This objective, which could reconcile apparently contradictory interests, was clearly expressed in the Business Forum of the Americas, which preceded the third ministerial FTAA preparatory meeting in the Brazilian city of Belo Horizonte in the last week.

Latin America is the region presenting “the greatest capacity to generate a consumer market,” in such a way that free trade could encourage the growth of employment, said Osvaldo Douat, head of the Integration Council of the Brazilian Industry Federation.

The backwardness of the region offers “fantastic” investment opportunities for the investment capital of the North, both for the construction of the lacking transport, energy and telecommunications infrastructure, as for industrial updating, said Douat.

In order to grow by five percent per year, Latin America needs annual investment of 65 billion dollars in infrastructure, said Chairman of the InterAmerican Development Bank, Enrique Iglesias, in his presentation to the Business Forum.

The inadequate infrastructure steals trade competitiveness from Latin American production, but also opens up possibilities for big business, which will generate employment and consumption. This is an opportunity which the rich countries of the North, with their complete infrastructure can no longer offer, said Douat.

In order to reach the minimal conditions for competition with the United States and Canada following the elimination of tariffs on the continent, the Latin Americans must also invest in industrial modernisation. In Brazil alone, this would mean some 300 billion dollars by the year 2005, said Douat.

These resources do not exist internally, in the public or private sectors, but internationally where they are plentiful and are only awaiting the opening of the market, democratic stability, the progress of the privatisations and investment guarantees.

This enormous potential is obvious to the North. Towards the year 2010, the US exports to Latin America will reach 232 billion dollars, outstripping those destined to the European Union and Japan, said former US Trade Secretary, Mickey Kantor.

Taking into account the great market of Latin American infrastructure the US government sees the issue of government purchases as a priority, both in the FTAA and the negotiations within the ambit of the World Trade Organisation, said current Trade Secretary, Bill Daley, in the Business Forum.

Without this perspective of general growth, which could even convince sectors usually opposed to trade liberalisation, it would be impossible to reconcile the interests of the 34 countries participating in the FTAA project.

The meeting of trade ministers, which ended Friday, made the difference of interests expressed in various semantics and adjectives of the diplomatic discussions all the more transparent.

The Southern Common Market (Mercosur) proposed negotiating with the FTAA in three stages, while the United States and Canada are more keen on the simultaneous treatment of all the issues.

For the first time, the Parallel Forum, promoted by union centres, had some influence on the negotiations between governments.

Brazil took up the request for the recognition of a Workers Forum. “It makes no sense to exclude the workers, when there is a Business Forum” with a voice and influence in the official negotiations, said Brazil’s vice foreign minister, Sebastiao do Rego Barros.

The proposal is, however, up against the veto of a group of countries led by Mexico. The United States looks favourably on the inclusion of a union forum, also because it defends the incorporation of labour conditions into the trade agreement, in line with the almost unanimous stance of the continent’s unions.

Brazil – which is against the social clause for fear it will become a barrier to its exports – appears to have union backing for the gradual implantation of the FTAA respecting the conditions and needs of each country.

President Fernando Cardoso, stressed an agreement would only be successful if it counted on the “political backing” of society and did not annul the social conquests.

The powerful AFL-CIO (American Federation of Labour and the Congress of Industrial Organisations), of the United States, declared in Belo Horizonte that it was opposed to a “fast track” (which means Congress renouncing the right to amend trade treaties) not imposing labour and environmental clauses on new agreements, like the FTAA.

The internal divisions faced by the countries in reference to the FTAA are not only caused by differences between unions and governments. The agricultural and industrial sectors also disagree, and in some cases, there is dissent within the government itself – as is the case in Chile.

Chile’s foreign ministry is keen on development of the Mercosur, while the financial sector would prefer inclusion in the North American Free Trade Agreement (NAFTA).

The biggest discrepancies on the how, when and with what aims to negotiate the FTAA are, however, based in the differences in interests of the majority of the Latin Americans to those of Canada and the United States.

Under the banner of “a trade agreement for the 21st century,” Daley stressed the FTAA must go beyond the World Trade Organisation and deal with new issues, like intellectual property, technology, the electronic trade, services and government purchases.

“All sectors need to be dealt with,” answered Brazil’s vice minister. What interests Brazil and many Latin Americans is mainly the elimination of the non trade barriers with which the United States blocks the export of agricultural and traditional produce, like textiles, shoes and sugar.

For this reason, the Mercosur is proposing three stages, leaving the removal of tariffs to last, once the other concessions made by the North are already known. Rego Barros said the barriers on the products were “the essential point” as the South is more competitive.

These differences of opinion could be overcome by substituting the dispute on existing markets for shared expansion, which could only be based in a Latin America which still has a lot of infrastructure and industry to build and modernise.

This was the point of view of the Brazilian entrepreneurs who presided over the sector forum in Belo Horizonte – an outlook which would demand time, and hence the defence for a gradually imposed FTAA tended to come out on top, they concluded.