Non-regional Actors Play an Important Role in FTAA

 
As we digest the results of the Buenos Aires Trade Ministerial and look to the Quebec Summit, the role of many countries not at the table needs to be considered. Both the European Union and China exert an important influence over the negotiations.

The actions of the European Union helped shape US desires to accelerate the FTAA. The US had proposed "fast forwarding" the start date from 2005 to 2003 and favoring an "early harvest" over the idea of a "single undertaking." Both of these efforts floundered in Buenos Aires, mostly over agricultural and dumping questions. The US has cited European agricultural subsidies and protections in its refusal to budge on these issues. In reality, the concern over agricultural subsidies involves two issues: European and US domestic price supports and barriers to market access, and promotional/financial supports for agricultural exports. Although the US signaled that it might be willing to put the issue of agricultural supports on the table, it certainly had no interest in discussing opening its market or changing the way it markets US agricultural products. Latin America believes that US market access-mostly for its agricultural products-is the plum it needs to pick from the FTAA. The US claims that its hands are tied by the Europeans' refusal to deal on this issue. Latin America understands this position all too well, since it also has been disappointed by the EU. In the end, agriculture could be the "bottom line" that makes or breaks the FTAA.

Another, lesser-known factor will complicate the approval process of the FTAA. This is the growing role of China in those sectors that provide the best chance for smaller economies in the Caribbean and Central America to export value-added products to the US. Business Week reports that, according to the World Bank, if China joins the WTO in November its share of world trade will double by 2005. Some of that will be new trade flows, but much of the increase will come at the expense of other nations. The Multi-fiber Agreement will end in 2005, giving new impetus to China to increase its share of the US and European markets' shoe and garment sectors. Citing World Bank figures, the magazine estimates that this would increase China's share of global garment exports (not counting Hong Kong) from 20% to 47%. The effect of this increase would be devastating for not only the smaller economies of Central America and the Caribbean, but for Mexico as well.

These pressures will come precisely at a time when the FTAA treaty is up for approval. It doesn't seem to be the best of climates to overcome the already skeptical attitude of public opinion in Latin America and the Caribbean concerning the real benefits of integrating their economies with the United States at zero tariff levels.