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FTAA: The Discrepancies in the Negotiation Agenda
Dr. Lourdes María Regueiro

Changes in the Context

In the article published in number 22 of the magazine dedicated to this theme we tried to identify the most relevant positions of some social actors involved in the FTAA. With the intention to of presenting the extremes, we labelled them as complacency, negotiable resistance and structural resistance. At that time, when the first draft of the project was just coming out the summary of these positions inclined the balance in favour of complacency and negotiable resistance; if we review the summary today, perhaps the final result with respect to the correlation of forces would be the same, but those actors find themselves in a qualitatively different context and therefore interpretation of that result must be distinct.

The dynamics of the relation between the Executive and Legislative in the matters of trade policy has been characterized by a complex relationship of cooperation and resistance concerning trade accords. While the events of September 11, 2001 lightened the load on the road to cooperation between democrats and republicans, the recession made the positions of members of congress more pragmatic and functional for the economic interests of the states, re-enforcing the protectionist demands of various economic sectors.

The Trade Promotion Authority(TPA) formerly known as "fast track", was approved in the package entitled "Trade Law 2002"- in August of this year- after a complex process of debate and negotiation. The package also contains the renewal and broadening of the Andean Trade Preferences-now the Andean Trade Promotion Law-, the General System of Preferences(GSP) and a law that protects the workers and firms displaced by the trade accords, known as Trade Adjustment Assistance(TAA).

In an environment of distrust and disbelief used to exist in Latin American and the Caribbean that without "fast track" the FTAA would be unviable, that danger has been formally overcome.

The approval of "fast track" has had a significant cost. President Bush had to make important concessions to achieve. The Farm Bill, which increased agriculture subsidies for the next ten years and the use of safeguards for certain categories of imported steel put the real commitment of the United States to free trade in doubt. The protection of these and other sectors were part of the negotiation process to achieve the TPA. The voting in the House was extremely tight with 215 in favour and 212 against, indicating the sensitivity of this matter. Nevertheless, the TPA approved is not a blank cheque for the bearer; it has large restrictions such as the White House's obligation to consult Congress about any measure affecting more than 300 products considered sensitive.

Although the TPA constitutes a very important instrument to advance the FTAA and other trade negotiation in which the U.S. is involved, it remains to be seen how effectively the Bush administration can make use of it. That will depend in good measure on the organizations of lobbyists, the unions and other interest groups.

Nevertheless, beyond what it can really advance for the Bush administration, approval of the TPA is a kind of symbol for the Latin American countries that revives confidence in the viability of the FTAA although in practice and in the short term it only serves to speed up some accords functional and complementary to it, such as the accords functional or complementary to it, such as the signing of a free trade agreement with Chile and probably with Central America, countries that do not have a trade agenda contending with Washington.

In spite of the protectionist resurgence institutionalised and legally sanctioned in the United States, the countries of Latin America and the Caribbean maintain a special adherence to the FTAA as a mega project, while it is true that in the course of the negotiations contradictions arise that go beyond technical divergence, although there is special care no to give them another dimension.

The referendum held in Brazil is an important landmark for the resistance to the hemispheric project. It has particular importance since, organized by the National Council of Bishops of Brazil, the organizations of Jubilee South, the movements, it managed to mobilize more than 10 million people. Of them, 98% voted for the government of Brazil not to sign the "accord", almost 96% already stated that the government not continue the negotiations, and almost 99% were against handing over the Base of Alcantara to U.S. military control. Although this referendum has no legal force, it is an unprecedented expression of civic will in which the option of leaving the negotiations is presented directly. And by typing the FTAA to the handing over of the Alcantara base, it goes beyond the matter of the trade impact, which is the centre of analysis by the governmental entities.

Another relevant aspect is that this movement has also had an impact in Europe(1). The Brussels declaration not only makes an evaluation of the hemispheric project and takes up the demands from the perspectives of the organizations of Latin American civil society, it also makes a call to European governments, demanding among other things, that they "undertake the ethical commitment to become knowledgeable about the FTAA and its consequences for the societies of the American continent, breaking with their apparent neutrality and indifference to this process"(2), and likewise put forward "alternative models for trade accords and asymmetrical logic of the FTAA"(3). A more active and critical posture in the face of the process, and the creation of new forms of "social observation" and presence in the events, is demanded of European societies. The agencies and organizations of cooperation with development are also asked for their commitment as mediators to sensitize European society, solidarity and political circles on the basis of a vision of development committed to the most vulnerable sectors of the Americas(4).

The resistance to the project continues to have a shortcoming- its weakness to propose, which is a central, but should not give rise to pessimism. From the standpoint of the anti-FTAA movement, a structural resistance implies the deconstruction" of structures, and a non neo-liberal model of accumulation.

Without prejudicing the unacceptability of the FTAA, it is important to recognize that the process of negotiation itself can be a better utilized space for resistance to this project. The greatest enemy envisioned by the chiefs of the FTAA within the negotiations is the potential danger of its politicisation, for which there is fertile ground.

United States - Latin America: Divergent Agendas

One puzzling feature of a project like the FTAA continues to be that the asymmetries in development and size of the economy and in scientific-technical developments a primary source of value added, as well as profound asymmetries of power, perceptions and interests in the negotiation process itself-at two levels: between the participating countries and between the different economic sectors on the national scenes- has not been the object of more debate in Latin American societies.

In spite of the effort on the part of the governments interested in pushing the FTAA at all costs and in reducing the profile of the friction in the negotiating process by attributing a technical character to them, the simple comparison of the expectations and the agendas given priority by Latin America and the Caribbean, on the one hand, and by the United States on the other, and likewise, the positions defended in the Negotiation Groups, would reveal the structural nature of the contradictions and Washington's hegemonic design.

At the present time the debate is concentrated on the following themes:
· Forms of market access
· Agriculture
· Anti-dumping
· Subsidies
· Intellectual property
· Services
· Governmental purchases
· Environmental and labour rules
· Special and differential treatment for the small economies

Those mentioned above constitute the negotiation process's "hot topics", but not those of the FTAA.

It would be logical to expect that two sides in negotiation would have common expectations, beyond the particular interests.

EXPECTATIONS FROM THE FTAA
Latin America
· Market access
· Attracting investment
· Modernization of the productive forces
· Conversion of the benefits of preferential systems into permanent agreements
· The dispute resolution mechanism

United States
· Market access and resource exploitation
· Institutionalization of Latin America and the Caribbean as its area of influence
· Consolidation and deepening of the neo-liberal reform
· Conversion (of the FTAA) into the reference point for global negotiations

As can be appreciated, the Latin American expectations highlight benefits derived from institutionally approved access of a permanent nature to the United States market, and have a fundamentally commercial character, while the American ones add those of a geo-economic and geo-political character within an hegemonic design that transcends the bounds of the hemisphere.

PRIORITIES OF THE NEGOTIATION AGENDA

Latin America
· Access to the U.S. market
· Agriculture
· Subsidies
· Anti-dumping

United States
· Access to markets, specially to services
· Access to and control of resources
· Services
· Governmental purchases
· Intellectual property

By putting these agenda priorities face to face, the incompatibility of interests between the parties becomes much clearer.

For Latin America and the Caribbean, real access to U.S. market depends on changes.

That could take place in the United States´ policy of trade protection, especially in the agricultural sector; that is, Latin America proposes markets access and perfection of the rules while the United States liberalization of financial services and telecommunications, access to strategic resources like water and petroleum, deregulation of governmental purchases and almost monopolistic preservation of intellectual property rights, are the areas of prime importance. It is difficult to understand how such divergent agendas can be conciliated, except in a balanced negotiation, which does not seem to be the FTAA perspective. Meanwhile, according to the provisions of the U:S: Congress, the TPA conceded to the Executive is valid only for those operations that do not put in question the foundations of the trade protection laws; as well, the list of sensitive products affects important export items of Latin American countries, like fresh and frozen meat, soybean and other vegetables oils, fruit, raw and refined sugar, cacao, citrus juices, coffee preparations, wines, sorbitol, tobacco and cotton, among other things.

The divergent positions in the Negotiation Groups about which it has been possible to collect information, indicate that the differences go beyond the technical aspect.

DIVERGENCES DURING THE NEGOTIATION PROCCESS(5)

Latin America
Market access: a single position does not exist, but some countries propose use of the consolidated tariff before the WTO as the basis for initiating reduction of tariffs.

Agriculture: elimination of subsidies for agricultural production and exports.

Reduction and elimination of the tariff that affect exports.

Services: Resort to what is stipulated in the GATS.

Maintain Path 3(Trade Presence) in the chapter on services.

Adoption of the positive lists in the negotiations on access to the Sector.

Subsidies, anti-dumping and compensatory rights: divergent positions in favour of the elimination of agricultural subsidies, but not those for industry and exports.

The necessity for interaction between the SACRNG(Subsidies, Anti-dumping and Compensatory Rights Negotiation Group) and the AGNG(Agriculture Negotiation Group).

The need to modify and clarify the application of the instruments of the U.S. policy of trade protection.

United States

Access to markets: they propose the base tariff be the one applied in January, 2004.

Agriculture: while they support the position of the CAIRNS(6) Group, they refuse to carry on the discussion about subsidies in the hemispheric negotiations and transfer it to the WTO.

The so-called Farm Bill, which raises the subsidy to this sector to 180 billion dollars over 10 years, was recently approved.

Services: An accelerated process of sectoral liberalization(pro-NAFTA).

Transfer of the Third Path to the chapter on investments, where there are more rigid rules.

Negative lists: (Supported by some other countries).

Subsidies, anti-dumping and compensatory rights: discuss agriculture subsidies in the AGNG, clearing the way for discussion of elimination of other kinds of subsidies. (Supported by Canada).

NO SACRNG-AGNG INTERACTION

No modification of the anti-dumping laws

Market access for the signatories is the basic idea associated with the advantages of a free trade agreement, and more so when a market with the dimensions of that the U.S. is involved in the negotiations. Nevertheless, access of Latin American products to the U.S. market is not fundamentally affected by customs duties since 74.6&(7) of exports from Latin America and the Caribbean enter the United States free of charges and the average value added tariff is les than 3%, so these are not the principal obstacle to U.S. market access, in spite of the existence of peak duties and seasonal tariffs. The basic hurdles are Non-Tariff Barriers(NTB), such as quotas and quantitative restrictions, import licenses, export promotion mechanisms, including subsidies and rules, sampling, labelling and certification, etc.

60.8% (8) of Brazilian exports to the U.S. are affected by peak duties, health restrictions or anti-dumping measures and compensatory rights. Thus, the advantage of a reduced average tariff is wiped out in the face of restrictions for important lines in the pattern of Brazilian export like sugar, tobacco, orange juice and textiles. In the case of Argentine exports to the United States, they are affected by 5,657 NTB´s concentrated on agro-industrial items, a category in which 80% of exports face non-tariff barriers(9).

The elimination of export subsidies for agricultural products in the hemisphere is foreseen in the FTAA, but the United States and Canada hold that this is not possible if the European Union and Japan do not also commit to their elimination, and because of this they defer the discussion of this theme to the WTO, which in fact means leaving one of the mandates of the Agriculture Negotiations Group without effect, and one of the key issue of debate about market access and competition policies, without solution.

In this sense, it is important to clarify that the United States is interested in the elimination of subsidies, but is not prepared to do so unilaterally within the framework of hemispheric negotiations. That is, does not assume the cost of liberalization of the sector within the region, which first of all indicates the dynamics between hemispheric and global affairs and second, the unwillingness to make concessions to the region that would affect the interests of its producers in the face of other global competitors.

The policy of agricultural production subsidies in force in the United States affects the exports of milk and soybean among others, and various competitive Latin American producers in these areas. The agricultural subsidies provided by that country in the year 2000 reached 30 billion dollars(10), which means three times the average reached between 1990 and 1997. Added to this already delicate situation is the approval of the Farm Bill, which foresees growth of the subsidies for the next 10 years.

In July 2002, the United States proposed a global trade reform according to which agricultural subsidies would be eliminated over five years, and the establishment of a limit to them of no more than 5% of agricultural production; the average tariffs allowed for that sector would be reduced from 62% to 15%(11). Nevertheless, this proposal is also to be approved within the framework of the WTO, not the hemisphere. The U.S. Secretary of Trade is quite precise about this: "The United States is ready to deal with its own policies that distort trade, provided that the rest accept to do the same"(12).

For its part, the approved TPA should not give rise to hopes for substantial changes, since it establishes avoidance of accords that would diminish the effectiveness of the U.S. policy of trade protection.

Concerning services it is important to mention they are now the centre of attention for the transnational corporations; trade in services today covers almost 20% of global trade flows and is growing at a greater rate than trade in goods(13). According to the principles of the FTAA, everything agreed to in the WTO must be carried out as the starting for hemispheric negotiations. In the GATS(General Agreement on Trade in Services), the countries commit to open their services markets to foreign capital according to a List of Specific Commitments, and along those lines they must implement the principles of national treatment, market access, most favoured nation and transparency ; those commitments are established through positive lists wherein specific services are normalized in which the participating governments commit to fulfil the principles previously stipulated.

According to what is established by the WTO, the countries must define the degree of opening they will concede to foreign investors and under what conditions and with what limitations, although at the heart of that multilateral organization there are many pressures to restrict the limitations and promote a broad process of liberalization in that sector. Once it has registered its offer, the country cannot back out for three years; then it can do so but must pay compensation to the parties concerned.

In general, our countries are not particularly demanding about this area, which makes it a bargaining chip in relation to other areas of negotiation.

Another relevant aspect concerning services is the United States´ interest in having the Third Track or Trade Presence discussed in the Negotiation Group on Investment(NGOI) that copies NATA´s Chapter 11, wherein the rules of liberalization and the pre-eminence of the transnational corporations over local governments and national states is defined and sanctioned with greater precision, in what could be the consecration of the policy of neo-liberalism as international law, with the danger that later this will be the reference point for negotiations within the framework of the WTO, and that in this way the control of national services by the transnational corporations would be sanctioned internationally.

The indiscriminate use of the anti-dumping policy is an habitual practice of U.S. trade policy. In an interview with Thelma Askey, director of legislative duties for the Trade Sub-Committee of the House Ways and Means Committee, during the previous administration, she stated, "In general, it has been much easier for a firm to present an anti-dumping charge and put on hold trade even though at the end it does not win the case. In effect, the United States attitude toward dumping has been spreading as a result of the negotiations. Basically, we have convinced our European counterparts to follow our example- that use of the dumping law is the best way to protect national industries from unwanted competition"(14).

The realization of effective access for Latin American exports to the U.S. market depends on a positive solution to the priority themes on the Latin American agenda: agricultural subsidies, anti-dumping policy and compensatory rights. Nevertheless, these are themes, one deferred at the multilateral level-subsidies- and another, the dismantling of the anti-dumping policy as a protectionist mechanism, being apparently non-negotiable. Thus, the Latin American expectations of market access succumb under the divergence of agendas.

Another contentious theme at the heart of the negotiations concerns special and differential treatment for the small economies. At the first Meeting of Trade Ministers in Denver, 1995, seven working groups were established, one of them on the smallest economies. When at the fourth meeting of Trade Ministers, held in San José, Costa Rica, most of those Groups became Negotiation Groups, except for the Group on Smaller Economies, which did not achieve that status. With certain initial reticence on part of the United States, the necessity for special treatment for the smallest economies is recognized in FTAA rhetoric, but in the course of negotiations the demands of the small islands of the Caribbean in favour of differential treatment has had no echo among the Latin Americans themselves, who have interpreted them as hold-ups to the process and claim that differential treatment should be conceded depending on relative levels of development rather than due to the size of the economies. This is a divisive element that has caused tension in the latest discussions on the FTAA, to the point that it has produced a relative isolation of the CARICOM countries. This, in turn, could provoke a tendency to silence the contradictions so as to not be labelled as conflictive in the negotiation process.

The results of the negotiations underway, up to the meeting in Panama, reflect the space gained by the U.S. proposals:

Access to markets: The tariff now in effect will be taken as the base, not the consolidated one before the WTO.

Services: The initial offer will be broad, centred on the negative lists.

Special and differential treatment for the small economies: to date it means flexibility for the date for CARICOM to hand over the base tariff. Most of the countries will do so between August 15 and October 15, 2002, and the (Caribbean) block has an end date of December 14, 2002.

Outlining the positions previously presented is an effort of synthesis to simplify reality. Its objective is only to reveal the range of contradictions that are to be presented as circumstantial and technically soluble, hiding their structural nature, but this does mean one can speak strictly of contradictions between the Latin American block and the United States. There really is not a Latin American position as a block in the face of the FTAA, except on very particular points. Thus, the establishment of alliances occurs in recognition of the segmentation of interests and positions on the project, as well as in relation to the different themes and disciplines this accord involves.

Nevertheless, it would be interesting to investigate the reasons of the paltry resistance in the Negotiation Groups, to a project that would put at risk numerous sectors of the Latin American economy, without there being reciprocal concessions on the part of the United States. Equally, it is important to interrelate certain variables like the level of trade concentration with the United States and the degree of transnationalization of the economies, with the strategy of the transnational corporations for the different sub-regions, as well as the composition and government mandate of the national negotiation teams.

The possible delays in access to the Latin American markets, resulting from displacement of these markets by more efficient competitors in industrial production, as are the United States and Canada, require special mention. A recent study of the ALADI(Association for Latin American Integration) indicates the threats to interregional trade resulting from the establishment of the FTAA, and in very general summary with respect to those available to the United States and Canada. In this case, the preference would be diluted with the realization of the FTAA and what is worrisome is the weight of the threats to trade in manufacture. The reversion of levels of interregional trade and the erosion of trade preferences would be a severe blow to Latin American integration, which is essentially of a commercial nature.

A FINAL THOUGHT

· While it appears that hypothetically, with the approval of fast track, the FTAA will proceed on a faster course, this does not necessarily have to be the case. U.S. protectionism continues to gain force and it could neutralize on the ground what was gained by fast track. The products considered sensitive by the United States form part of the Latin American pattern of export. If this products do not enter into negotiation, the FTAA could loose its attraction for many Latin American sectors with the illusion of selling in the U.S. market; this could also exacerbate the frictions in the negotiation process and potentially politicise a discussion that until now has remained on the technical level.
· The contradictions could lead to the departure of some country from the negotiation. Brazil has threatened to do so. On the other hand, what is being negotiated is very important and complex and in some cases the negotiators may have a technocratic and segmented vision of the process, and when accord is to be ratified by the parliaments, in 2005, the discussion could take on another character, above all if it id accompanied by a strong movement of popular resistance in the national and regional arenas that would make the accord too costly in political terms.

Notes
1- See the Brussels Declaration on the web site of the Continental Social Alliance.
2- Ibid
3- Ibid
4- Ibid
5- These aspects should be better defined after the meting of the vice-ministers of trade held in the Dominican Republic at the end of August.
6- The Cairns Group: the group of countries exporters of agricultural products that are lobbying for the liberalization of agricultural trade. They owe their name to their formation in that Australian locality in 1986, before the Uruguay Round of the GATT. Argentina, Australia Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand and Uruguay are members of the group.
7- CEPAL: Panorama de la inserción internacional de America Latina y el Caribe,. 2000-2001. Internet: www.cepal.org, 2002.
8- Celso Lafer: "Agenda comercial do Brasil para 2001". Brail-U.S. business Council. February 1, 2002.
9- Raul Alfonsín: Seminario "O Brasil e a ALCA" Painel de Abertura do Evento. October 23, 2001.
10- Celso Lafer: Op. cit.
11- Robert Zoellick: "Derribar las Barreras", Financial Times, July 25, 2002.
12- Ibid.
13- Fátima Mello: ¿Servicios para quem precisa? As negociaçoes de servicios no GATS e na ALCA, REBRIP/ Rede Brasileira Pela Integracao dos Povos, Initial Versión. July, 2002, at http: //www.asc-hsc.org.
14- Thelma Askey: "Elaboración y aplicación de la ley de comercio de los Estados Unidos", Internet