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

TRADE: Draft FTAA Deal Waters Down U.S. Agenda

Emad Mekay

MIAMI, Nov 19 2003 (IPS) - The Free Trade Area of the Americas (FTAA), an ambitious plan for a common market of the 34 countries in the western hemisphere, might be fading from its original vision articulated here nine years ago, a leaked document showed Wednesday.

The original plan envisions a common market for the region by Jan. 1, 2005 but a copy of the final draft declaration gives countries the freedom to pick and choose their free trade obligations.

It is a change some observers are calling a second victory for the developing countries opposed to the U.S. agenda, following the failure of the Cancun round of talks of the World Trade Organisation (WTO) in September.

Trade ministers from the 34 countries are expected to sign the declaration in this Florida State city by Friday.

In what is seen here as a small victory for developing countries from South America’s Mercosur group of Brazil, Argentina, Paraguay and Uruguay, the draft speaks of how countries can commit only to certain obligations of the embattled deal.

Another leaked document on the position of Canada, Mexico and Chile, three countries that already have free trade deals with the United States committing them to a broader range of trade in goods and services, appears to drop their initial opposition to the transformation of the FTAA.

At the start of the week-long talks here Sunday, the three nations said the deal should remain as comprehensive as originally visualised in order for it to benefit all countries. It is not clear yet why they shifted their position.

Trade ministers are arriving in this beach city to forge ahead with official talks Thursday and Friday towards the pan-American trade deal that would encompass 800 million consumers from Argentina to Canada.

But discussions on the original plan snagged on disagreements between the United States and Brazil, the co-chairs of the meetings, over the scope of the deal.

The United States has been the most vocal country calling for the opening up of Latin American markets, but Brazil, the largest economy in South America, says that Washington should be prepared to do the same.

Yet the United States refuses to cut its domestic farm subsidies, which Brazil says undercut poor farmers by pushing prices to ever-lower levels, or to change its anti-dumping laws, which the South Americans say raise tariffs and other obstacles to Brazilian exports like citrus and steel.

Brazil and other countries have also painted the deal as an avenue for mammoth U.S. corporations to pry open Latin American economies.

They have refused to accede to U.S. demands to widen the FTAA to include giving access to U.S. services or to discuss government procurement issues, foreign investment and intellectual property rights, except under the World Trade Organisation (WTO), where the developing nations have a better negotiating position.

These countries, now sitting next to formidable trade allies like China, India and South Africa in the WTO, have a better chance of resisting pressure from rich nations like the United States, Japan and the European Union.

To the dismay of rich nations vying for more markets for their products, the alliance of developing countries helped bring the WTO talks in Cancun to a dead halt, partly because rich nations failed to budge on cutting their whopping farm subsidies.

In an echo of southern nations’ newfound assertiveness, the final draft of the FTAA, seen by IPS, leans clearly towards Brazil’s position by allowing countries to opt out of certain parts of the proposed FTAA and to discuss others.

“Negotiations should allow for countries that so choose, within the FTAA, to agree to additional obligations and benefits,” says the draft. “One possible course of action would be for these countries to conduct plurilateral negotiations within the FTAA to define the obligations in the respective individual areas.”

The draft also talks of working to reach an agreement on market access by Sep. 30, 2004, without committing to a date to resolve other sticky points like government procurement and foreign investment.

Insiders say the transformation of the plan into what is now known as “FTAA lite” constitutes a defeat for the U.S.’ corporate-backed vision of trade in the western hemisphere, and a victory for developing countries’ solidarity.

“What that demonstrates is that if developing countries are assertive, they can change the rules,” said Phil Bloomer, chief of the trade campaign of the international charity organisation Oxfam.

One source close to talks said the draft also signalled the increasing weight of the Mercosur block, which has forced the United States to back down to save public embarrassment.

“The Americans realised the realpolitik when they are negotiating with Mercosur, and that this is as good as it gets right now,” one source said, insisting on anonymity.

“They (the Americans) did a cost-benefit analysis and said ‘let’s have a lot of this constructive ambiguity (in the draft) or risk a major fight with Brazil and the Mercosur in another trade meeting, leading to a collapse’. And I think they have taken the first option.”

Mercosur accounts for 65 percent of the 34 nations’ gross domestic product (GDP) aside from those countries included in the North American Free Trade Agreement (NAFTA) – Mexico, Canada and the United States.

Brazil, a country of 180 million people, has the world’s 10th largest economy.

U.S. businessmen have been particularly itchy to open up Brazil’s markets as the country has maintained a high level of protection, including restrictions on foreign investment.

If endorsed, ”FTAA lite” means U.S. companies will have to wait longer than planned before they can get their hands on major Latin American markets ¡- if at all.