U.S. Trade in the Americas: Regional Update

Alexandra Spieldoch

(February 2005) The U.S. Trade Representative (USTR) has been pushing a variety of trade initiatives throughout the Americas region (i.e. Free Trade Agreement of the Americas, Central American Free Trade Agreement - Dominican Republic, Andean Free Trade Agreement, and U.S./Panama). More recently, it has run into some difficulties. It is clear that the pace of the negotiations is not realistic to the needs of the negotiators to flesh out the specifics. Additionally, the U.S. public is increasingly concerned that the so called gains from trade liberalization in the U.S. may not be as substantial as had once been touted or hoped.

The momentum for free trade the U.S. strived to achieve through bilateral negotiations - particularly post-collapse of the WTO Ministerial in Cancun - has waned, along with the global opinion of the U.S. in other areas of its foreign policy. Is it the loss of faith in the U.S. as a responsible superpower that has contributed to stalled regional negotiations? Is it the U.S. Trade Representative's over-extension in the variety of agreements it has initiated and is now struggling to complete? Is the U.S. public waking up to the failed promises of NAFTA trinationally? These are some of the questions that have emerged and are being debated today. In the meantime, trade talks in the region are not moving as smoothly, perhaps, as was planned.

FTAA

Since 2003 and the stalled multilateral WTO talks, the USTR has worked to build energy for free trade in the Americas in spite of a stalled FTAA. However, the free trade mantra for the region is increasingly in trouble relative to shifts in regional political relationships and U.S. politics.

Since the FTAA Ministerial in Miami in November, 2003, negotiators have been unable to agree on the scope and definition of the agreement. At Miami, countries agreed to a flexible agreement in order to save the negotiations from being entirely deadlocked. FTAA Ministers did manage to get through the talks and agreed on the continuation of the FTAA talks for a completion date in January, 2005. However, ministers and vice ministers are so far from agreement that virtually no progress has been made. In August, USTR announced that the FTAA deadline would not be met and that negotiators would, perhaps, meet sometime in 2005 to set a new timeline (a date has not yet been set). In other words, FTAA completion is not on the close horizon.

In the meantime, Brazil and Argentina have revitalized Mercosur which has, in turn, engaged in aggressively paced negotiations with the European Union. Brazil has initiated new global energy for South/ South talks between key trading partners such as India and South Africa. And, more recently, Brazil has been initiating dialogues to explore a 'South America Community of Nations' which could eventually include a trading bloc among Mercosur, the Andean Community, Chile, Guyana and Suriname if it were realized.

CAFTA - D.R.

With the Central American - Dominican Republican Free Trade Agreement (CAFTA-DR Agreement), the U.S. Trade Representative moved ahead with negotiations in early 2003 for a speedy one-year completion of talks that they hoped would be followed by congressional ratification once President Bush and the Central American Presidents (of Guatemala, Honduras, Nicaragua, El Salvador, Cost Rica and the Dominican Republic) sent a letter of intent to Parliamentarians for approval. Although negotiations concluded in January, 2004, there has been no congressional approval. In fact, the U.S. president has not presented it to Congress (many have speculated that this is because it would lose on the House floor).

In response to unclear U.S. Congressional approval and while waiting for the results of the U.S. national election, the Central American governments have also retreated from pushing ahead as quickly with CAFTA-D.R., with the exception of El Salvador whose legislature is scheduled to vote on it in December 2004 and will probably ratify it in spite of strong opposition from the FMLN and other groups. One interesting twist is that the U.S. may seek to exclude the Dominican Republic from the CAFTA-D.R. agreement because of its tax on soft drinks made with high fructose corn syrup which the Dominican legislature has not yet overturned. USTR has prepared a new version of the agreement without the Dominican Republic in order to signal its willingness to move ahead without this country.

The Center of Concern, as part of the Alliance for Responsible Trade, has repeatedly spoken out on the relatively small gains for U.S. industry as well as the miniscule gains that Central American producers, including small farmers, could expect in the Central American countries relative to access to U.S. markets. In other areas being negotiated such as services, investment and procurement and intellectual property, Central American countries could expect an overall net loss in terms of their social and economic gains from U.S. foreign direct investment and trade.

Groups in El Salvador (some 10,000), Honduras (some 15,000) and Costa Rica have become increasingly vocal to their parliaments that CAFTA has not been negotiated democratically and does not represent their best interests. In August, 2004, tens of thousands of Costa Ricans demonstrated against a foreign company's control of vehicle inspection services, against the possible ratification of CAFTA and for much needed wage increases. These protests led to the resignations by four ministers (including the trade and finance ministers) and other top economic advisors. The result is that CAFTA is not on solid ground. Large numbers of people, including U.S. special agricultural interests, do not support this agreement. What was supposed to be a quick and easy sub-regional set of talks is quite shaky - the results of which will not be known until sometime in early 2005.

Andean FTA

In May, 2004 the U.S. launched negotiations for an Andean Free Trade Agreement with Colombia, Peru, and Ecuador. Bolivia is expected to be integrated at a later date. The U.S.-Andean Agreement is expected to be negotiated over a year's time as was CAFTA, with one round taking place each month until the talks are completed. The launching round took place in Colombia in May, 2004. Six rounds have now taken place with the last one in Tucson, Arizona in December 2004. Participating countries have scheduled the Andean Free Trade Agreement for completion in the spring of 2005.

The U.S. considers Colombia its most important partner in these talks, presumably because it has been a major ally in the war on drugs. However, a comprehensive sub-regional agreement with at least three of the four countries would help to consolidate the U.S. position in the region. Investment disputes between U.S. investors and the governments of Ecuador and Peru still need to be sorted out. It is also unclear when Bolivia will officially enter into the talks.

As for Colombia, there is strong support from the government to enter into a trade deal with the U.S. However, Colombian negotiators expect further gains than what they already receive through the Andean Promotion and Drug Eradication Act (ATPDEA) which is scheduled to end in December, 2006. In particular, Colombia seeks more trade preferences and a decrease in U.S. subsidies in the area of agriculture as it contends that there is a strong connection between agriculture and rural employment and the war against drugs and terrorism.1

During the third round of negotiations, Colombian negotiators also walked away from the Intellectual Property talks over major disagreement with the U.S. proposed language that did not include the Doha TRIPS and Public Health declaration on which developing countries had insisted in 2001. The Doha Declaration, although not strong enough in its language, allows a loop hole for countries to prioritize social development needs over intellectual property rules of patenting and production. Andean countries are also concerned that patents for companies could be extended at the expense of their countries' ability to protect their own natural resources.

While negotiations in intellectual property have continued, there is no agreement between the U.S. and the Andean countries in this area to date and is unclear what direction these talks will take.

NAFTA Revisited

The ten-year review of NAFTA received strong criticism from civil society, including the unions, environmental groups, faith groups, national women's groups, human rights groups, farmers, and social justice groups in the U.S. Ten years after NAFTA, the U.S. citizens have seen important shifts. NAFTA has restricted the three participating countries from imposing labor and environmental standards, including wage requirements or local content rules to protect communities.

Although statistics on U.S. job loss post-NAFTA are difficult to calculate, over two million jobs in manufacturing alone have been lost. Communities in North Carolina, Tennessee and parts of the Midwest have been particularly devastated financially with no prospect of incoming investment. Union membership is at a historical low. Shifts in agricultural ownership and production have all but eliminated American small family farming. Prices for commodities plummeted, as have family farm incomes. The number of undocumented workers crossing into the U.S. from Mexico has grown exponentially (largely due to hike in rural unemployment in Mexico post-NAFTA), with over 4,000 people crossing into the U.S. every day. The gap between the rich and the poor has widened. The opening of the borders has not been achieved. The problems with this model are increasingly apparent. And, yet, the U.S. Trade Representative has repeatedly stated that NAFTA is a positive model for the other trade agreements it is initiating and negotiating.

Conclusion

It is striking that, even with the current resistance coming from official governments and civil society, the same model keeps getting put forth by the U.S. administration as the blueprint that must be used as a basis for negotiations in the different trade talks.

Perhaps we can see the stalled processes in the different sets of talks as a sign of hope that governments and their communities across the Americas are resisting the aggressive nature of trade and investment liberalization rules that will not benefit their national development. Rather than a set of rules simply aimed at speeding up transactions and boosting global trade volumes, trade agreements should embody a fair set of rules that benefits two or more countries based on a variety of social, economic and political indicators. This reaffirmation seems critical at this time when new openings for resistance and developing alternatives may be emerging. Trade and investment could lead to positive social and sustainable development in the Americas region. We have a responsibility to make it happen.

Reprinted from the Center of Concern's quarterly newsletter, CENTER FOCUS,Issue # 165, January 2005  http://www.coc.org/pdfs/coc/cf/2005/cf165_2005-01_US.pdf  For further information about the Center of Concern, see www.coc.org. 

Notes:

1 Andean FTA Negotiations Begin Sixth Round. Kristin Sampson, International Gender and Trade Network Secretariat. IGTN Bulletin, Vol. 4 No. 9. November, 2004, p. 6.

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