TALKING POINTS #3 - CAFTA and AFTA

A central component of the U.S. trade strategy is using bilateral and
subregional trade agreements to leverage increased liberalization of
trade and investment flows at the regional and global levels. The
Central America Free Trade Agreement (CAFTA) and the current
negotiations to establish an Andean Free Trade Agreement (AFTA) are
regarded as the building blocks of the proposed Free Trade Agreement of
the Americas (FTAA).

1. NAFTA Model has Met Significant Resistance in Latin America

NAFTA was negotiated over a decade ago. Since then, many countries in
Latin America have seen the growth of civil society movements in
opposition to the NAFTA trade model. The governments of several
nations, notably Brazil , Venezuela , Argentina , and Uruguay , have
criticized the model and urged modifications while emphasizing
alternative forms of regional integration under Mercosur. The Free
Trade Agreement of the Americas (FTAA) is at an impasse.

2. Model Remains the Same

CAFTA is a close cousin of NAFTA, and the AFTA proposed by the United
States follows the same model. Despite being given side-room status,
for example in El Salvador , civil society actors failed to modify the
agreement. Their proposals were consistently squelched either by the
negotiating teams of their own governments or U.S. refusals.

3. U.S. Bilateral and Subregional Trade Strategy

Instead of heeding the wave of opposition to free trade models, the
United States has dug into its trenches, and in economic policy those
trenches are the bilateral trade agreements . From the FTAs, the U.S.
government hopes to gain the strength to launch renewed trade offenses
in broader multilateral organizations like the WTO and any eventual
FTAA. Each NAFTA-style FTA signed not only locks the partner country
into a series of pro-corporate measures but also sets a precedent for
later negotiations.

4. Free Trade Faces Opposition in United States

The U.S. Congress ratified the Central American Free Trade Agreement in
a close vote in July 2005. The time it took to negotiate and ratify
this agreement was much longer than what the Bush administration had
anticipated. Some of the obstacles that faced CAFTA proponents-concerns
of an increasing trade deficit, pressures from affected unions and
industries, and a deepening disenchantment with free trade policies-are
illustrative of what’s in store for future negotiations.

5. Free Trade Faces Opposition in Central America

Popular protest has broken out in most of the Central American nations,
led by farmers and labor organizations . The political costs for the
governments involved are high. Just as the Bush administration was
forced to delay ratification in the U.S. Congress due to lack of votes,
Nicaragua and Costa Rica are delaying ratification due to fears of
major opposition in their legislatures and in the streets. In Guatemala
, the CAFTA debate took a life when a demonstrator against ratification
was killed by police.

6. Free Trade Faces Rough Going in Andean Region

In the Andean countries, the political prospects for free trade
agreements are even worse. Bolivia is out of the picture because a
showdown over the Andean Free Trade Agreement (AFTA) could cause the
fall of yet another government, caught between the dictums of the
economic model and the anger of a people fed up with empty promises.
Venezuela under the U.S. nemesis, Hugo Chavez, has denounced all
prospects of an FTA with the United States . Both Ecuador and Peru face
possible referendums on the issue in their countries and may be barred
from participating anyway by the United States , which-acting openly as
a corporate advocate rather than a government-has premised their
participation on resolution of several cases of investor claims by
major U.S. transnational corporations.

7. United States Plays Hardball

In both CAFTA and AFTA, rather than take a conciliatory stance faced
with the probable negative and destabilizing impacts of the agreements,
U.S. negotiators have played hardball. They have threatened to withdraw
or not renew the current trade preferences these countries enjoy-under
the Andean pact for Trade Promotion and Drug Eradication in the Andean
case and the Caribbean Basin Initiative and others in Central America .
Since many industries had already oriented production toward markets
assured under these measures, the threats have real weight. Even
government officials have complained that in effect the FTA process
means that these nations are forced to concede in non-trade areas such
as intellectual property and investor protection only to assure the
market access they already have.

 TALKING POINTS #4 - Lessons in Latin America

As the world’s leaders and trade officials gather at three
international meetings in late 2005-the Summit of Americas in Mar del
Plata (November), Asia Pacific Economic Cooperation forum in Busan,
South Korea (November), and the World Trade Organization ministerial in
Hong Kong (December)-to discuss trade and development issues, they
would do well to consider the impact of free trade agreements in the
Western Hemisphere.

1. Negative Trade-Offs

The trade-offs between gaining greater access to the U.S. market and
the displacement caused by loss of national markets to imports often
lead to negative net results. When compounded by a decrease in
participation in other regional and global markets, the result is both
politically and economically negative.

2. Long-Term Harm

Concessions to U.S. demands in FTA negotiations can have long-term
detrimental effects. Under the North American Free Trade Agreement,
Mexico has seen the erosion of the smallholder farmer economy, the loss
of traditional knowledge of land and biodiversity use in rural
communities, food dependency, obstacles to the construction and
consolidation of South-South links, and greater inequality in income
distribution. It is also losing national sovereignty, cultural
diversity, and important policy tools for national development.

3. Insufficient Protection

Special product protection, safeguards, or longer liberalization
periods are insufficient to solve the problems caused by massive
imports. A strategic product cannot be left to distorted market forces.
Moreover, the examples of sorghum and white corn displaced by yellow
corn imports illustrate the insufficiency of offering special
protection to specific products.

4. Preempt Other Integration Strategies

The Free Trade Agreements with Mexico, Chile, Central America, and
potentially the Andean region severely hamper the development of other
potentially more advantageous options of economic integration. The
value of regional integration is not merely to create a trading bloc to
compete and negotiate more effectively with developed countries but to
rethink regional integration and develop joint tools for sustainable
production and trade. When done ideally-in a more horizontal manner,
among nations that share common challenges, with national development
and wellbeing cast as primary goals-regional integration could be a far
more equitable and sustainable course than the FTA model currently
imposed by the United States.

5. Divide and Conquer Strategy

Washington’s divide-and-conquer strategy forces nations to concede in
other areas in order to assure market access, and uses sticks over
carrots to impose a model that benefits U.S. economic and security
interests and large corporations. For this reason, FTAs with the United
States should be avoided. Nations must evaluate alternative forms of
economic integration and assess all options. The gains offered are
limited and short-lived; the price is likely to be the long-term
sustainability and stability of the country.

6. Trade Tied to U.S. Foreign Policy

Not all trade costs are quantifiable, and among the highest costs of
FTAs with the United States today are the political costs. In U.S. FTA
negotiations, everything-trade being often a minor issue-is on the
table, whether explicitly or implicitly. And in the center is the
renewed U.S. drive for global hegemony. Trade policy is an instrument
for this hegemonic control, and it is now closely tied to security
policy. Political costs of trade dependency on the United States can be
very high. In the “with us or against us” mentality of the war on
terrorism, trade relations become another lever of control. Another
cost is the erosion of possibilities for greater regional economic
integration.

7. Incorporate Silent Voices

Trade agreements should incorporate the silent voices in the
negotiations process and debate. Small producers, especially farmers,
are particularly vulnerable and have a weak voice in national politics.
Incorporating them into talks is necessary not only to enhance
democracy and transparency but also to arrive at a better agreement.
They hold important truths about the productive and social structures
of their countries.

8. Trade Must Consider Other Values

Cost-benefit analysis of extraterritorial trade and investment must
include benefits and values that are now ignored by the international
market but which are vital to developing countries and the world. These
include livelihood generation, cultural diversity, food sovereignty,
protection of ecosystems, and biodiversity.

9. Invert Current Trade/Development Equation

The current equation that has trade policy driving national development
policy must be inverted. Development policies should drive trade and
investment policies and agreements, not vice versa. As is, trade
agreements, together with imposed rules about investment and finances,
systematically supplant or preempt the formulation of national
development policy. Sustainable and equitable development policies must
be the result of bottom-up not top-down planning that give priority
consideration to local, national, subregional, and regional needs
rather than to the demands of the world’s largest economies and
corporations.