The U.S. Meets Defeat: Thwarted in the FTAA Negotiations, The U.S. Looks to Smaller Trade Deals

by Robert Weissman

U.S. plans to impose a NAFTA-style free trade deal on the entirety of the Western hemisphere were defeated in Miami in November, as Brazil outmaneuvered the United States in negotiations at the Ministerial meeting for the Free Trade Area of the Americas (FTAA).

But U.S. trade negotiators don't give up easily. Rebuffed in their effort to create a hemispheric agreement of their own design, they announced plans to commence a series of smaller trade agreements on the North American Free Trade Agreement (NAFTA) model.

At the Miami meeting, Brazil succeeded in putting forward a framework -- widely touted as "FTAA-lite" -- that would alleviate the most extreme aspects of the U.S.-backed proposals that critics say would threaten public health, the environment and worker rights.

"We have a notion of balance and flexibility that takes into account that we are 34 very different countries," said Brazilian Foreign Minister Celso Amorim, at the Ministerial's concluding news conference. "We have different sizes, different levels of development, and we also have a different structure for our foreign trade."

In at least four separate places, the final statement of the meeting, known as the Ministerial Declaration, reiterates the need for a "balanced" agreement. The key phrase of the Declaration states that, "Ministers recognize that countries may assume different levels of commitments."

What this means in practice is that countries will not be required to adhere to the proposals advanced by the United States for intellectual property, investment, services and other areas. Public interest groups charge that these proposals would extend drug company monopolies and dramatically raise the price of essential medicines [see "Patents, Profits, Power and Poverty," Multinational Monitor, July/August 2003]; give corporations broad authority to challenge a range of consumer, health and environment regulations [see "NAFTA's Investor Rights: A Corporate Dream, a Citizen's Nightmare," Multinational Monitor, April 2001]; and squash the ability of FTAA countries to protect public services from demands for privatization [see "Serving Up the Commons," Multinational Monitor, April 2001].

Under the new FTAA framework, those countries that agree to specific commitments, in the investment area, say, will be required to honor them. But they will not be required to make such commitments.

The developing country members of an FTAA will have little reason to agree to such commitments -- Honduras does not have many investors seeking protections in the U.S. market -- though critics fear these countries will be pressured one-on-one by the United States to accept such commitments.

Brazil gained the upper hand in the FTAA negotiations by responding effectively to the U.S. position that it could not negotiate key agricultural issues within the FTAA. U.S. negotiators said they wanted to move on agricultural issues of concern to Brazil and other countries, but these matters had to be handled at the World Trade Organization (WTO), where they could be negotiated as well with the European Union and Japan. Brazil argued that if agriculture is a WTO issue, then so is intellectual property, which is already covered by a WTO agreement, and so are other controversial issues.

Given this move by Brazil, the United States was happy to maintain even opt-in agreements as part of the FTAA.

But there's no question the United States has lost its ability to impose its NAFTA vision on the hemisphere. "This is not what we wanted, and we have serious concerns," said Frank Vargo, U.S. National Association of Manufacturers vice president for international economic affairs.

Where business lobbyists expressed disappointment, global justice advocates found hope. "The Free Trade Area of the Americas (FTAA) is in such a state of crisis that at the Miami Ministerial, the United States was forced to choose between no FTAA and FTAA-lite," said Lori Wallach, director of Public Citizen's Global Trade Watch. "All that was agreed upon was to scale back the FTAA's scope and punt the hard decisions to an undefined future venue so as to not make Miami the Waterloo of FTAA."

"Powerful social movements in Latin America against the FTAA have made it impossible for those governments to agree to a full NAFTA expansion," said Wallach. "Thus, the United States chose this week to make the uber concession -- to move away from its ësingle undertaking' vision of the FTAA to an ý la carte approach to ensure that the FTAA lives to stagger on another day. It is hard to overstate what a huge shift this is in the U.S. position. Because the Miami Ministerial simply delayed all of the same intractable problems the FTAA faced coming into Miami, whether there will even be an FTAA-lite is far from certain."

But even as the United States was forced to retreat in the FTAA negotiations, it announced an intensified strategy of negotiating bilateral and mini-regional agreements containing exactly the same proposals -- on intellectual property, investment, and other areas -- that it failed to ram through in the FTAA.

The United States has already concluded a free trade agreement with Chile, and finished negotiations over a free trade agreement with the Central American countries in December. In Miami, U.S. Trade Representative Robert Zoellick announced that the United States would soon commence negotiations over trade deals with the Dominican Republic, Panama, Colombia and Peru, as well as supposedly with Ecuador and Bolivia.

"Most countries in the hemisphere have concerns" about the U.S. approach, Bahamian Minister of Trade and Industry Leslie Miller told Multinational Monitor. "It's just pressure tactics. The U.S. wants to consolidate its position."

The strategy is called "competitive liberalization" by its advocates. Critics say it is little more than divide and conquer. The idea is to pit countries in the hemisphere against each other, negotiating individual deals that offer incremental benefits of improved access to the U.S. market, in exchange for concessions for U.S. multinationals. As countries watch others enter into free trade deals, they worry about being left behind, and agree to similar terms.

Whereas developing countries when united can stand up to U.S. pressure and demands, in isolation and in competition with each other, they are easy pickings.

Notwithstanding the benefits, this strategy has significant limitations from the U.S. corporate perspective, which is why some business groups have been publicly critical. The strategy requires too many negotiations with too many countries, and may leave the biggest markets out. Noting that Chile and Mexico already have free trade deals with the United States, Mark Weisbrot of the Washington, D.C.-based Center for Economic and Policy Research points out that 70 percent of the remaining Latin American market (measured by economic output) is attributable to Brazil, Argentina and Venezuela -- countries with no interest in signing on to bilateral agreements with the United States with NAFTA-style provisions.

Still, there's no getting around the fact that existing trade pacts, plus those under negotiation and those for which negotiations are pending, will lock up a huge chunk of Latin America, and significantly deprive countries of freedom to pursue independent economic policies.

The future success of the U.S. bilateral trade agreement offensive may turn on the U.S.-Central American agreement.

If brought before the U.S. Congress in 2004 and defeated, U.S. trade negotiators may be forced to abandon their present approach. A Congressional victory for U.S. negotiators and their business allies will give renewed life to a NAFTA model subjected to withering criticism in each of the NAFTA countries.