Volume 4, Number 22, Page 1

Western Hemisphere Trade Ministers Meet

"Go Slow" Approach Prevails

by David A. Gantz

Part two of a two-part series

The thirty-four Western Hemisphere Trade Ministers who met May 15-16 in Brazil failed to agree on a timetable for negotiating a Free Trade Agreement of the Americas (FTAA), or even on what issues would be negotiated and when. Negotiations on negotiations were deferred until the March 1998 Santiago Presidential Summit and the preparatory trade ministerial meeting to be held in Costa Rica in February 1998.

The lack of concrete results is a victory for Brazil, which advocates a "go slow," piecemeal approach to the FTAA negotiations, and a defeat for the United States and Canada (backed by most of the other nations in the hemisphere), which had favored early initiations of simultaneous negotiations covering a broad range of issues to be included in the FTAA.

It is evident that Brazil and its Mercosur partners (Argentina, Paraguay and Uruguay) prefer to defer the all-important tariff reduction negotiations until last, to begin in 2003.

This would give Mercosur an opportunity to become more competitive in the world market (and additional years of protection to Mercosur industries). More generally, a delay in substantive FTAA negotiations permits Mercosur to consolidate its economic relations with other South American countries. Mercosur already has association agreements with Chile and Bolivia. Recently Peru announced it would withdraw from the Andean trade group (now Colombia, Venezuela, Ecuador and Bolivia) and seek associate status with Mercosur.

It is highly likely that by the time FTAA negotiations are well underway Mercosur will comprise most of the nations of South America and constitute a formidable negotiating group to counter the power of the United Sates and Canada.

The United States' effectiveness as a lead negotiator in the FTAA context has been drastically reduced by the lack of "fast track" trade negotiating authority since mid-1994. As Brazil's president, Fernando Henrique Cardos, suggested, without fast track, negotiations to implement the FTAA are "merely imaginary." No one will negotiate with the United States under conditions that permit Congress to demand changes in the results of the negotiations after the fact.

The "window" for obtaining fast track legislation in the United States is fast closing as the Clinton administration and Congress remain preoccupied with balancing the budget, campaign finance scandals and, soon, debates over extending "most favored nation" treatment for China and the impact of NAFTA on the United States. Influenced by these factors and by opposition to free trade from the Democratic congressional leadership, the Clinton administration has apparently postponed introducing fast track legislation until fall, despite pleas for more prompt action by free trade-oriented Republicans. Yet, if time runs out this fall, passage in 1998 is unlikely because scheduled congressional elections will further erode congressional support for the politically unpopular cause of free trade.

There is thus considerable doubt whether the United States will have trade negotiating authority by the Santiago Summit.

Among the few concrete results of the Brazilian ministerial meeting was the creation of another "working group" (the twelfth), in this instance devoted to analyzing hemispheric dispute settlement procedures and mechanisms. Among the responsibilities of the working group will be discussion of possible approaches to dispute settlement under the FTAA and specific recommendations in this area.

The ministers also reiterated the 2005 deadline for completing the FTAA negotiations; confirmed that the FTAA would be a single "package," with none of the items taking effect until all issues had been resolved; determined that decisions would be based on consensus; and reaffirmed that the FTAA would be consistent with the World Trade Organization agreements.

The relationship between an FTAA and existing regional trading blocs such as NAFTA and Mercosur proved to be one of the most contentious issues. The United States has accepted the concept of coexistence provided that the same issues are not covered in the FTAA. Brazil and other Mercosur members appeared to prefer treating the FTAA as simply another regional trading bloc, but in the end appear to have accepted the U.S. position in principle.

It is obvious that the ardor of both the United States (notwithstanding protestations to the contrary) and Brazil (freely admitting its go-slow preferences) for the FTAA has cooled significantly since the initial commitment to the FTAA concept at the Miami Presidential Summit in December 1994.

Much as the remaining nations of the hemisphere might wish to push forward, there can be no significant negotiations unless and until both Brazil and the United States are ready, willing and able to move forward. Whether such conditions can be re-created between now and March 1998 (or thereafter) remains a very significant question.

David A. Gantz is the Associate Director of the National Law Center for Inter-American Free Trade. He is also Professor of Law and Director of Graduate Studies at the University of Arizona College of Law.