LATIN AMERICA: Is FTAA Integration or Annexation?

"We don't want to be an American colony!" shouted demonstrators who staged massive protests in Quito, Ecuador, on Oct. 31, as the region's trade ministers held their seventh meeting on the Free Trade Area of the Americas (FTAA). Meanwhile, thousands of Brazilians took to the streets of So Paulo to protest the deal, set to take effect in 2005, which would create the world's largest free-trade zone, with a market of 800 million people.

The FTAA "will bring more poverty and will leave Latin American countries powerless before the steamrollers of the north, like the United States and Canada, which are pushing the agreement," said Pedro de la Cruz, president of the National Federation of Campesino, Indigenous and Black Organizations of Ecuador, which took part in the demonstrations.

The administration of US President Bill Clinton (1993-2001) launched the idea of a hemispheric free trade area in 1994 at the first Summit of the Americas in Miami, although formal negotiations did not begin until four years later, during the second summit in Santiago, Chile. Leaders of the 34 countries that would make up the FTAA agreed then that the negotiations would be transparent and take into account differences in levels of development and the sizes of national economies. Critics say that has not happened (LP, April 30, 2001).

"All the negotiations have gone on under the table," Peruvian economist Oscar Ugarteche said. "The issue hasn't even been discussed by national legislatures. As members of civil society, we have the obligation to openly debate and analyze anything that is going to directly affect us."

Ugarteche joined representatives of other Latin American and European countries at an anti-FTAA conference in Quito at the same time as the trade ministers' meeting. The conference, with the slogan "Another America is possible," was part of a series of protests known as Continental Resistance Days that are being held throughout Latin America.

Ugarteche said the negotiations are skewed, with the United States, the driving force behind the agreement, on one side and the rest of the region's countries on the other. One example, he said, is the issue of US agricultural subsidies, which came up at the Quito meeting. Early this year, the United States increased farm subsidies by 80 percent, from US$30 billion to $54 billion. In the past decade, its farmers have received more than $180 billion in subsidies.

The price supports allow US corn to be sold in Latin America at prices that are 20 percent below production costs and wheat to be sold at half its real cost. As a result, Latin American countries have virtually stopped producing wheat, and the region's corn producers are unable to compete.

Although the ministers meeting in Quito drafted a joint statement that would require the United States to eliminate its agricultural subsidies, the issue was not settled. US officials have said they will take the case to the World Trade Organization (WTO), "where there are no goals, timelines or mechanisms for negotiation," Ugarteche said. "As a result, the subsidies will never be eliminated."

Many FTAA critics believe that the only way to ensure equitable negotiations is for Latin American countries to solidify their trade groups first, then enter as a bloc into negotiations about the hemispheric trade area (LP, Aug. 26, 2002). Ugarteche suggested that the Andean Community, which is made up of Bolivia, Colombia, Ecuador, Peru and Venezuela, should develop closer ties with the Southern Common Market (MERCOSUR), which consists of Argentina, Brazil, Paraguay and Uruguay, with Chile and Bolivia as associates. This, he said, would create "a South American free trade area of more or less homogeneous economies."

Governments in Latin America and the Caribbean have taken different stands on the FTAA. Officials in Bolivia, Brazil, Colombia, Ecuador and Venezuela have strongly criticized the way the negotiations are being carried out. Ecuadoran Foreign Minister Heinz Moeller has said that his country will not take part in the FTAA if conditions are not favorable. He criticized developed countries for continuing to protect their own products while requiring developing nations to dismantle protective measures.

"If developed countries do not clearly recognize the economic and development asymmetries that exist, and do not provide special and differentiated treatment for economies like that of Ecuador, it's obvious that there can be no FTAA," Moeller said.

US officials have admitted that the FTAA could have a negative impact on small economies like those of Caribbean countries, and have offered special treatment to those nations.

"The United States is fully aware that the countries of the Caribbean Community face some very special problems," US Secretary of Commerce Robert Zoellnick said. "We want them to take part in the process of trade and growth, but if we are going to do that effectively we have to recognize their special problems and challenges, and be able to design solutions for them."

Brazil, with 170 million people and a gross domestic product of $503 billion, has also warned that the FTAA negotiations could fail if the United States does not eliminate non-tariff trade barriers. President-elect Luis Incio Lula da Silva (LP, Nov. 4, 2002) has called the FTAA a "policy of annexation, not integration."

Peru, meanwhile, has indicated that it will join the FTAA independently if necessary. "Peru must join the FTAA even if other Andean countries don't go along," Foreign Trade Minister Eduardo Iriarte said. Venezuela has proposed postponing the start of the FTAA until 2010, but Iriarte added, "If everyone else wants to wait, we'll have to go it alone."

Some Peruvian business leaders have proposed pulling out of the Andean Community, embracing the FTAA and even negotiating a bilateral trade deal with the United States similar to one established by Chile.

"In the case of Peru, the only beneficiaries of the FTAA will be the mineral exporters, because other businesses won't be able to compete with the invasion of US products," Ugarteche said. "Even Ecuador, Colombia and Venezuela, which have an efficient industrial base, will be jeopardized. Flower exporters in Colombia and Ecuador are extremely worried about the future of their businesses."

Andean small-business owners participating in the 17th Pan-American High Fashion Congress in Ecuador in early October worried that the FTAA would lead to the bankruptcy of small companies unable to compete with international clothing manufacturers. Farmers and livestock producers in Ecuador have raised similar objections.

"Trade within Latin America, which is mainly based on value-added products, will disappear and will be replaced by exportation of raw materials to the United States, while the continent will be inundated with high-tech products made in the United States," Ugarteche said. The result, he added, will be the virtual disappearance of national industry. "The FTAA is a US initiative to open up a market to its transnational companies," he said.

• 110 Trade Justice