Is the FTAA floundering? Trade deal deadline passes with no agreement in sight.

The January 1, 2005 target launch date for the Free Trade Area of the Americas (FTAA) came and went without a murmur after months of limbo and stalled negotiations for what, in theory, could shape up to be the world's largest trade zone.

The project, launched some 15 years ago by then-U.S. President George H.W. Bush (father of the current U.S. president), would be a significant advance toward the commercial integration of the region. If only they could all agree.

But some 10 years of intense negotiations have not been enough to reach a political accord that would allow the FTAA, a hugely ambitious plan, to go ahead.

On paper, the planned free trade zone would encompass a population of 800 million, with GDP of US$ 8.5 billion. In comparison, the European Union is comprised of 380 million citizens with a GDP of US$ 8.3 billion.

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A perennial problem for the FTAA is the disparity of the markets involved in the project, and although the EU does include countries with differing levels of development, these gaps are nowhere near as wide as those that exist amongst the diverse countries of the Americas.

This fact was openly recognized during the Eighth Trade Ministers' Meeting in Miami in November 2003, in which ministers from 34 participating countries underlined point 14 of their final declaration:

"We recognize the differences in levels of development and size of economies in the hemisphere and the importance of guaranteeing that all countries participating in the FTAA should be able to benefit from economic growth, improvement in quality of life for their people, and sustained and balanced economic and social development for all participants."

This disparity becomes all the more evident when one takes into account data such as that published in 2003 by the U.N.'s Economic Commission for Latin America and the Caribbean (ECLAC). This report showed that for 2002 the number of people living in poverty in Latin America reached 220 million--or 43.4 percent of the total population--and that this figure was rising year on year.

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Spreading The Wealth

Negotiations to create a free trade area of the Americas started in 1994 just after the launch of the North American Free Trade Agreement (Nafta), which joined the United States, Canada and Mexico in a free trade area. Talks took place during the First Summit of the Americas in Miami.

Then-U.S. President George H.W. Bush called on the 34 heads of state taking part in the summit--with the lone exception of Cuba--to begin negotiations for a free trade accord that would span the American continents and allow them to consolidate changes augured by growing globalization.

The Miami Declaration expressly stated that: "Our continued economic progress depends on solid economic policies, sustainable development and a dynamic private sector. A key to prosperity is commerce without borders, without subsidies, without disloyal practices and with an increasing flow of productive investments."

The basic principles of the accord were aimed, at least on paper, at including the entire Americas in achieving development, well-being and democracy.

"It is politically intolerable and morally unacceptable that some sectors of our society find themselves marginalized, and do not fully enjoy the benefits of development," the declaration stated.

Between 1994 and 1998 negotiations focused on defining the structure and organization of the process, and from 1998 onward, they were directed at specifying content. This process was supposed to conclude on December 31, 2004, in order for the congresses of the participating countries to be able to approve or reject the agreement in its entirety, with an expected start date of December 31, 2005.

So, to all intents and purposes, we should be in the home stretch of a 10-year negotiating process.

Trade And Development

Areas of negotiation identified so far have been: market access, agriculture, services, governmental purchasing, subsidies and anti-dumping, competency, intellectual property, conflict resolution and investment. They must also make sure that any agreements reached do not contravene rules already set down by the World Trade Organization (WTO), or come into conflict with provisions of the International Monetary Fund (IMF) and the World Bank.

In the interim, Mexico has signed bilateral accords with the European Economic Community and with the European Free Trade Association, with Israel, with almost all Latin American countries, and with Japan.

The United States has taken a similar route, negotiating commercial accords with various countries in the Americas. The tactic of the United States so far has been, therefore, to negotiate separately. It has already done this with Central America and Chile, while looking for similar agreements with Peru, Colombia and Ecuador. But this is a long road, and does not guarantee they will definitely accept the FTAA.

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In the 21st century we cannot expect trade and development to remain as entirely separate entities. Since the end of World War II, the world has gone through a series of processes directed at creating, firstly, multinational organizations, and secondly, large national conglomerates.

What we are seeing at the global level is a process that helps create large multinationals that are better able to defend themselves against the dangers inherent in political and trade threats.

This is the path the European Union has taken--one designed to protect its members against external threats. Europe has closed in on itself and negotiates by bloc, giving it more leverage, but also forcing it to seek accords that benefit all its members as much as possible.

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Last year's elections in the United States, which returned George W. Bush to power for another four years, temporarily sidelined the FTAA theme and the questions that still remain are how far can the United States advance this project and, above all, when might its implementation finally be announced?

The impossibility of a January 2005 start date has been clear since October last year when U.S. Secretary of State Colin Powell said during a brief visit to Brazil that, although the negotiations were deadlocked, his country was "totally committed" to the creation of the FTAA.

Around the same time, then-Mexican Economy Secretary Fernando Canales said an FTAA accord was unlikely to be reached by the following January.

"It will be difficult for us to reach an accord by January 2005 on this subject [FTAA]; there are many imbalances," Canales said.

To emphasize his point, Canales recalled that trade negotiations had been non-existent since the February talks in Puebla among trade officials had ended with discussions deadlocked and no future meetings scheduled.

Failure Foretold?

But the problem is not only the imbalance of the economies involved. The lack of fairness, especially in terminology that most affects areas such as agriculture (on which most developing nations depend), was a key stumbling block.

Those who oppose the accord say its real intention is not only to set new rules for global commerce but, above all, to promote an ideological, judicial and political framework designed to benefit international capital.

"What is true is that in the last 10 years there have been many meetings and negotiating rounds at the highest level in which progress has been made on the easy themes, but very little--or no progress--on the trickier ones," Roberto Alvarez Quinonez wrote in the Los Angeles paper La Opinion.

Among the more complicated topics are: agriculture, tariff application (and what sectors and products would be free of tariffs), and how to take into account the differences in development levels and size of economies in the region.

It is very difficult to address, in one free trade document, the imbalances among Caribbean countries with small populations and economies based on tourism, and countries such as the United States, Canada, Brazil, Mexico, Argentina and Chile, which make up the bulk of the GDP of the Americas.

The major problem for U.S. negotiators, say other critics, is rooted in the position of Mercosur countries, all exporters of products protected in the north. They are adamant about not allowing any imposition by the United States and have successfully maintained this position due to their unified trade front, backed by Venezuela and other Caribbean countries.

As such, the FTAA finds itself in a cul-de-sac. The southern countries consider it suicide to sign a free trade accord with the conditions the United States insists upon.

Washington will surely exert pressure to reach an agreement this year at the Doha round of the WTO, and will continue its bilateral free trade approach, say analysts.

"It is difficult to declare that the United States will invoke a tough protectionist policy when it faces a trade deficit of around US$600 billion," said Jeffrey Schott, an expert at the Institute for International Economics.

The failure to reach an accord by the agreed-upon date could mean there will never be an FTAA, or at least not on the terms hoped for by the U.S. government.

Gilberto Meza is a journalist with over 30 years experience in Mexico and Europe. He is currently a counselor with Cimac (Comunicacion e Informacion de la Mujer, A. C.).