Trade Scene: Inter-American free trade? Ma–ana!

Trade Scene: Inter-American free trade? Ma–ana!

WASHINGTON -- With scarcely a blink of an eye, the United States and 33 other countries have missed an important trade negotiating deadline.

By Sept. 30, they had agreed nearly a year ago, they would wrap up the market access negotiations of the proposed Free Trade Area of the Americas. They reportedly did not come close.

Once in place, the FTAA, as it's known, would become the world's largest free trade area, stretching from Argentina to Alaska. But the negotiations establishing it are taking the longest of any free trade area.

It soon will be 10 years since President Clinton announced at a Summit of the Americas the plan to create a hemispheric free trade area. Since then there have been eight FTAA meetings of the hemisphere's trade ministers and 17 meetings of the FTAA's Trade Negotiations Committee, the FTAA's policy-setting group.

Yet the TNC, as it's known, has still not fleshed out FTAA's basic negotiating rules, such as the exact product coverage, the timing of tariff cuts and the linkage between FTAA's work groups which range from market access, agriculture and services to subsidies, investment policy, government procurement, competition policy, intellectual property rights and dispute settlement.

It looks as if the FTAA is being put aside as the United States and other countries focus on the World Trade Organization's Doha trade round. U.S. negotiators also have been busy lining up bilateral trade pacts with countries both in and out of the hemisphere.

There has not been a meeting this year of any FTAA negotiating work group and none appears likely in the near future.

FTAA trade ministers, who had been slated to meet this autumn, are not expected to get together until next year no matter who wins the U.S. presidential election.

The Jan 1, 2005 target date for concluding the FTAA has gone with the wind.

The FTAA disarray came apparent last November at a trade ministers meeting. While the ministers reaffirmed their support for a "comprehensive and balanced" FTAA, their declaration was criticized by U.S. businessmen as short on specifics.

The ministers, however, did endorse the idea of plurilateral trade negotiations, whereby a relatively small number of countries negotiate deeper tariff cuts and more "ambitious" trade-related rules than provided in the FTAA's own baseline.

This plurilateralism, some businessmen argue, would undermine FTAA's common baseline of trade obligations. Countries urging a high baseline might abandon that quest and opt for plurilateral accords. But some others say the plurilateral pacts could serve as "building blocks" for the region's economic integration.

Meanwhile, if Sen. John Kerry is elected president, he is expected to take a hard look at the FTAA -- and other free trade pacts -- to make sure they don't harm U.S. workers. If he tries to insert labor rights into the FTAA, he is certain to risk a battle with Brazil and other FTAA participants.

Brazil and the U.S. are the two key players in the FTAA negotiations, given their size and their co-chairing of the TNC.. Their differences helped lead to the breakdown in February of a TNC meeting. And, despite months of efforts, the meeting has not been reconvened.

While both the U.S. and Brazil are pressing for deep tariff cuts, the Washington also is pushing for "improved" trade-related rules, such as those covering investor protection, government procurement and intellectual property rights enforcement. But Brazil has been cool to rules changes.

At the same time, Brazil has criticized the U.S. market access proposal as seeking to exclude some "sensitive" products such as sugar and tobacco from the tariff cuts.

Their recent exchange of tariff cut offers didn't help matters. Brazil offered the United States less than it has offered the European Union in another negotiation. The U.S. offered Brazil less than it already receives under the U.S. Generalized System of Preferences.

Meanwhile, Brazil and its three common market partners -- Argentina, Paraguay and Uruguay -- may be about to conclude a free trade agreement with the European Union. If they do, they are expected to use the EU pact as negotiating leverage in the FTAA talks.

Despite all this, there still is optimism that the FTAA will be successfully concluded. Peter Hakim, president of the Washington-based Inter-American Dialog, sees a more cooperative Brazil, given its recent role in the Doha Round farm trade breakthrough. And Brazil's recent economic recovery should help give the government more flexibility at the FTAA, he suggests.

Basically, say both he and Mark Smith, the U.S. Chamber of Commerce's managing director for Western Hemisphere Affairs, there is too much at stake for the FTAA to fail.

Actually, there has been some progress in the FTAA talks. Brazil, for example, has stopped insisting that the United States negotiate its domestic farm subsidies at the FTAA. Washington has instead offered such concessions at the Doha Round.

In another step forward, the United States has agreed to end its agricultural export subsidies, if subsidized imports from non-FTAA countries are "deterred."

Moreover, the two countries appear to have narrowed their differences on rules governing investor protection, government procurement practices and the negotiation of services trade. Even on intellectual property rights, they report some progress.

A senior Brazilian official recently proclaimed that the FTAA talks are not dead, just sleeping. He didn't say what it will take to wake them up.

Save that for 2005.

Richard Lawrence was a long-time trade reporter for The Journal of Commerce. His column appears exclusively in The Journal of Commerce Online.