DEVELOPMENT: FTAA Will Be Big Adventure for Small Economies

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Apr 20 1997 (IPS) - The proposed Free Trade Area of the Americas (FTAA) would need special treatment to prevent it becoming a wild unmanageable adventure for the majority of members, a conference heard here last week.

Economic and trade representatives of Latin American and Caribbean nations agreed if the FTAA comes about, it will be the most unbalanced trade block in the world. It would cover 34 countries, including the United states – the world’s biggest economy – and many of the smallest, like some in the Caribbean, where there are island nations of less than 100,000 people.

As well as having such different sized economiess, delegates pondered on the differences in the level of development among prospective FTAA members.

The Caribbean bloc proposed the “smaller economies” be granted a period of grace and longer periods of time in which to fulfill their obligations, as well as technical assistance, an Integration Fund and access to technology and training.

Special attention for such economies, which are somewhat loosely defined at present, was also suggested by Canada and the Andean Community, including differentiated periods for removing tariffs at least on some products.

In the preliminary discussions to define the parameters, these countries appeared as virtual by-standers watching the arguments between the United States and Canada, on one side, and the Southern Cone Common Market (Mercosur), on the other, and especially the quarrels between the US and Brazil – the most powerful members of each bloc.

For any country, however, “there is no alternative, because the cost of not participating is far higher than that of joining,” Miguel Rodriguez, coordinator of the preparatory stage of negotiations for the Organisation of American States (OAS).

As well as the priviliged access to a wider market, this also represents a strong attraction for foreign investors, an aspect which can be more important than increasing foreign trade for many countries, he said.

The FTAA adventure could represent the possibility of attracting previously unimaginable investments, with an impact which could totally change local life. Due to these advantages, the countries who remain outside the blocs are trying to make advances on the mulitlateral front in a manner which basically aims at free trade on a world scale, Rodriguez said.

In the case of the FTAA, it has already been agreed that all the accords should be compatible with the World Trade organisation and seek “to go beyond this,” not only eliminating tariffs, but also establishing policies on competition, investments, and their own conflict resolution body.

The diversity of the countries involved meant “great political ability” was needed from all sides, said Rodriguez.

“Uruguay is also a small economy,” said this country’s vice foreign minister, Carlos Perez de Castillo, who headed the delegation in the third FTAA viceministers preparatory meeting.

Uruguay’s experience within the Mercosur shows the importance of negotiating a common investment regime when the trade frontiers open, said Perez de Castillo.

The tough fighting over investments, especially in the motor industry, between Brazil and Argentina caused conflict in the Mercosur. The smaller partners have little chance of button-holing these capitals until the customs union becomes totally credible, he said.

Apparently secondary questions, like the role of a FTAA Secretariat, could aggravate the disadvantages of the smaller economies in the insertion into a hemisphere market.

The United States and Canada want a “merely administrative” Secretariat, to support meetings and keep archives of documents, while being barred from offering technical help, carrying out studies or proposals.

This could be fatal for the smaller countries not in conditions, or lacking the structure to manage the mass of information on the various issues, laws, effects and conditions imposed by a negotiating process of the size of the FTAA, said one Caribbean diplomat.