Mercosur and the end game of the ftaa negotiations: challenges and prospects after the argentine crisis

Abstract

The negotiations to create a Free Trade Area of the Americas (ftaa) by January 2005 are at a crossroads. Although goals and deadlines have been met, the hard bargaining to reduce trade barriers among the 34 participating countries has just begun and there are formidable obstacles to concluding the negotiations on schedule. On the other hand, the Southern Cone Common Market (Mercosur) is slowly emerging from the crises provoked by the Brazilian devaluation of 1999 and the implosion of the Argentine economy in December 2001. This article examines the interplay between Mercosur, the ftaa negotiations and the parallel Doha Round of global trade talks. It takes stock of the impasses in Mercosur and examines the challenges faced by the ftaa: US protectionism, the divergent positions of the USA and Brazil, the need to accommodate the demands of the small economies, the loss of legitimacy of the neoliberal model, anti- ftaa sentiment among vast segments of civil society throughout the hemisphere, and the election of populist leaders in several Latin American countries. The article discusses five Mercosur/ftaa scenarios and argues that Mercosur's best strategy for survival is to stick to its original goal of becoming a common market.

Notes

Mario E Carranza is in the Department of Political Science, Texas A & M University-Kingsville, MSC 165, Kingsville, TX 78363–8203. Email: [email protected].

‘The survey’s findings also reveal a certain affinity between the viewpoints of the Brazilian elite and the foreign policy currently more favorable to intraregional than to hemispheric integration. For example, 66.2 percent of the total sample agreed with the statement “Brazil should put a priority on sub-regional integration within the MERCOSUR.” On the other hand, the statement “Brazil should put priority on a free-trade agreement with the United States” was chosen by only 16.4 percent of those interviewed' (Soares de Lima, 1996: 155). The labour–business coalition supporting the Lula government shares this view.

Larry Rohter, ‘Giving Argentina the Cinderella treatment’, New York Times, 11 August 2002, p 14.

Marcos Jank, professor of economics at the University of Sa˜o Paulo, quoted in Edmund Andrews, ‘As US seeks a trade accord, Brazilians recall discord’, New York Times, 30 October 2002, p A3.

The Brazilian footwear industry envisages a potential market in the USA and the rest of the western hemisphere of 1200 million pairs of shoes per year if the ftaa comes into existence in 2005. The other side of the coin is that ‘hundreds of firms’ will go bankrupt in several Latin American countries, including Brazil, as a result of the elimination of trade barriers. See ‘El desafio del alca’, Informe alca, 4, November 2002, p 4.

‘US exports to its partners in the Americas, excluding Canada and Mexico, almost doubled from US$30 billion in 1991 to US$55 billion in 1999, making this the most dynamic market after the other nafta partners in those years’ (Salazar-Xirinachs, 2003: 46).

According to one source, ‘the United States is offering less generous terms in the talks on a 34-country ftaa than it did to Mexico in nafta’. See ‘Wanted: a new regional agenda for economic growth’, The Economist, 26 April 2003, pp 27–29. However, most analysts believe the USA is prepared to make some concessions to Brazil, eg on the steel issue, in the context of the ftaa, even if anti-dumping and agricultural subsidies are deferred to the Doha round of global trade negotiations. See Schott (2002a: 12).

See Roberto Bouzas, ‘El bloque puede desaparecer’, Pagina 12, 12 April, 2001.

Quoted in Larry Rohter, ‘A fiscal crisis, paid in credibility: consequences for the United States in Argentina’s collapse', New York Times, 25 December 2001, p A9.

See ‘Dispute-settlement protocol signed’, intal Monthly Newsletter, 67, February 2002, pp 6–7.

After Cancun, Robert Zoellick, the US trade representative, wrote: ‘The US will not wait: we will move towards free trade with can-do countries’. See Robert Zoellick, ‘America will not wait for the won’t-do countries', Financial Times, 22 September 2003, p 23. On the other hand, Brazilian President Lula has said that Brazil will be ‘aggressive’ in the final round of the ftaa negotiations. See Elizabeth Becker, ‘Brazil stands firm amid criticism on trade talks’, New York Times, 26 September 2003, p W1.

nafta precludes the free movement of people, and lacks supranational institutions a` la EU, except for dispute settlement. See chapter 11 of the nafta Treaty.

For example, the Bahamas, Dominica and St Vincent rely on trade taxes for more than 40% of their current tax revenues; they cannot agree to drastically eliminate their tariffs during the ftaa market access negotiations without some type of special treatment.

Paul Blustein, ‘Bush defends free-market path’, Washington Post, 17 January 2002, p A2. See also Elizabeth Becker, ‘US begins talks for trade pact with Central Americans: a duel with Europeans for Latin influence’, New York Times, 9 January 2003, p C1.

See Larry Rohter, ‘Argentina and the US grow apart over a crisis’, New York Times, 20 January 2002.

US Trade Representative Robert Zoellick has said that America's willingness to make concessions on anti-dumping depends on progress in the global talks to liberalise trade in agriculture, but the Doha Round is deadlocked on the controversial issue of how to reduce (and eventually eliminate) farm subsidies. Since the September 2003 Cancun conference failed to make progress on this and other issues, the deadline for finishing the Doha Round will probably be postponed until 2007. See ‘The Doha Squabble’, The Economist, 29 March 2003, pp 63–64.

See ‘In Geneva, patience with US runs thin: Mercosur threatens to scupper Doha negotiations’, Latin American Weekly Report, 5 November 2002, p 525.