The Free Trade Area of the Americas after Buenos Aires: Much ado about

nothing?
Diana Tussie

Last weekend in Buenos Aires, Trade Ministers forged compromise on issues

affecting substance and process of the FTAA. In terms of process, it was
unanimously agreed to publicize the draft of the text including all pending
brackets in the four official languages after the Quebec Summit. In terms of
substance little was agreed aside from a timetable for negotiations over tariff
barriers. It was agreed to end negotiations before January 2005. The deadline
for the entry into force for the agreement is December 2005. This deadline
represented a setback for those countries interested in bringing forward the
negotiation for its completion in 2003.

A basket of issues over which agreement was not forthcoming was left aside
with instructions for the Trade Negotiations Committee to continue to work on.
Among these were such major issues as anti dumping legislation, agricultural
subsidies and non-tariff barriers, the core of any trade agreement.

Minimal as this package may be it is quite an achievement. Until recently the

coming into being of the FTAA seemed empty rhetoric or a waste of time. The
crucial phase of exchanging concessions is yet to come, but negotiations
gained a momentum of their own in the last three years. Both the public and
private sector were heavily invested in the process, which in turn, became a
self-propelled engine. This turnaround has reflected not only the push of this
self-propelled engine but also the attitudes of Latin American governments
which shifted from either initial zeal or foot-dragging towards realistic
acceptance and active negotiating.

What does Latin America expect from the FTAA process?

Latin America encompasses countries with uneven levels of development,
different economic structures, great disparities in terms of economic size and
perhaps much more relevant in view of the FTAA process different trade
concerns. However, a basic expectation for Latin America as a whole is to
achieve steady economic growth through trade and investment. In this respect,
many countries expect the FTAA to revert their disappointment with the WTO
where small country concerns have always been relegated.

The FTAA process must be also seen as a part of the race to attract
investment. Behind each trade policy move, either lowering or increasing
barriers, lies an investment decision. An increase in tariffs or non tariff barriers s
induces tariff jumping investment. A reduction enables the enlargement of
markets which also triggers export oriented investment. Here lies the delicate
balance of trade policy today.

Winners and losers

Latin America is the region in the world with the most unequal income
distribution. This situation is an indictment for political stability, human security,
and environmental degradation. FTAA goals include the promotion of prosperity
through free trade and economic integration and also poverty eradication. To

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the extent that goals are met, then the FTAA will have a positive impact on the
Latin American people.

In the short run trade liberalisation will create a set of winners and losers.
Adjustment will create a fault line between groups who have skills and mobility
to flourish in global markets and those who dont. Without a gradual phase-in
the result may be severe tension between generations, big business and small
firms and workers who lag behind. A gradual phase-in is not sufficient to
dissipate fears. One cannot wish away resistance present in broad sectors
across the hemisphere, which without adequate support for adjustment will
suffer.

A environmentally friendly liberalisation

Both widespread poverty as well as growth (whether it is trade led or not) have
an impact on the environment. Four points illustrate what is at stake.

1) Latin America has 23 % of worlds potentially arable land.

2) 12% of the worlds cultivated land lies in the region.
3) Almost half of the worlds of tropical forests are located in Latin America.
4) More than 200 million hectares of land, amounting to almost one third of
total agricultural land, are moderately or severely degraded

Less than a decade ago, the scepticism against the greening potential of trade
was widespread. Early studies at the World Bank and the GATT found that
improvement and upgrading followed trade liberalisation. Enhanced market
access has been particularly effective in inducing countries to upgrade
standards.

However, fast export growth can exacerbate pre-existing poor conservation of

natural resources. Without conservation, export growth based on exhaustible
natural resources may make the country very well off today, but at the price of
compromising future development.

Latin American and Caribbean countries reject linking trade with environmental
and labour issues, fearing disguised protectionism. This stance prevailed at
Buenos Aires.

Participation and Accountability

Since 1998 after the Santiago presidential summit in 1998 the agenda has
advanced steadily. During the last three years negotiating groups have met
regularly and the technical work has been fleshed out. The bulk of the process
lies in this dense network of middle ranking negotiators even though the trade
ministerial meetings and the presidential summits monopolise the attention.

This represents a serious democratic deficit, which the Buenos Aires Meeting
took a step to amend. In response to critics from civil society organisations, the
Ministers took a series of measures with the aim of enhancing transparency. In
addition to the publication of the draft, civil society has been promised new
avenues for participation. As such, the proposals submitted by civil society will
be referred to the relevant negotiating group.

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Beyond these procedural initiatives, from a civil society standpoint, the most
serious challenge for the FTAA in the years ahead lies in ensuring that
economic integration does not contribute to domestic social disintegration and
environmental degradation.

The paucity of agreements in Buenos Aires augur a tricky stage for the
Presidential Summit of the Americas at Quebec. The main challenge lies in
subsidies, non-tariff barriers anti-dumping procedures over which little progress
(if any) has been achieved. An agreement without effective market access will
not be easy to sell in Latin America.