Can the United States and Brazil Spur Free Trade in the Americas?

Christina R. Sevilla

Cancun versus Miami

Coming only nine weeks after the spectacular collapse of world trade talks at the WTO Cancun meeting in mid-September, pundits predicted that the Free Trade Area of the Americas (FTAA) Miami Ministerial in November would surely end in similar disaster.  Cancun’s aftermath was characterized by bitter acrimony and finger-pointing between the United States and Brazil, the two FTAA co-chairs charged with leading the regional free trade negotiations among 34 countries in the Western Hemisphere to conclusion by 2005. The acrimony was precipitated by a North-South clash of interests at Cancun, with a G-21 group of developing countries spearheaded by Brazil and India refusing to negotiate from WTO draft compromise texts that sought to address, among other topics, agricultural reform and U.S. and other developed country subsidies on a global basis.  Few believed that the chasm which separated the two hemispheric heavyweights could be bridged to forge a common vision for regional free trade in the Americas by the time trade ministers were to meet again in Miami.  Indeed, a preparatory meeting of FTAA Vice Ministers in Trinidad and Tobago in late September only highlighted the wide gulf, on the one hand, between the position of the U.S., Canada, Mexico, Central American and Andean countries in favor of a comprehensive FTAA covering all negotiating areas, and, on the other hand, the desire of Brazil and the other Mercosur countries (Argentina, Paraguay, Uruguay) to completely remove sensitive subjects such as government procurement, services rules and intellectual property rights from the purview of regional negotiations.  It seemed that a collision course was set, both figuratively and literally, since anti-globalization groups had proclaimed that tens of thousands of protestors would shut down the Miami meeting in a confrontational Seattle 1999 redux.

Yet contrary to most expectations, the trade ministers in Miami reached agreement on a common vision for the FTAA negotiations a full day in advance of the scheduled conclusion of the talks.  Protestors did not materialize in the predicted numbers.  And at the closing press conference, rather than trading recriminations, United States Trade Representative Robert B. Zoellick and Brazilian Foreign Trade Minister Celso Amorim spoke of “personal chemistry” and conjured metaphors of dancing to the same tune.

How can this seemingly abrupt turnaround between Cancun and Miami be explained?

The delicate compromise Declaration agreed to at Miami by the 34 trade ministers can be viewed as a pragmatic success and perhaps the only politically achievable one, in light of the alternative of no agreement and a probable collapse of the FTAA negotiations officially launched by Heads of State at the Miami Summit of the Americas in 1994.   The fact that agreement was reached at all, as well contours of the agreement -- which is essentially a general framework intended to guide the negotiation of specific details over the course of the next year – can only be understood if one looks at the dynamics of the Bush Administration’s three-level trade strategy of simultaneous multilateral, regional, and bilateral trade liberalization crafted by USTR Zoellick.

Competitive Liberalization:  A Three-Level Trade Policy Strategy

The “competitive liberalization” strategy is intended to move the U.S. trade agenda forward concurrently on multiple fronts – globally in the WTO, regionally through negotiations such as FTAA, and bilaterally through a series free trade agreements (FTAs) with individual countries in Asia, Africa, the Middle East, Latin America and elsewhere – so that blockage in one forum does not preclude progress in opening markets and establishing rules of commerce in other areas.  The competitive liberalization strategy is designed to maintain domestic political momentum for free trade, by assembling dynamic coalitions of business and manufacturing interests, farmers and consumers in support of particular agreements.  At the international level, it also creates policy pressure on recalcitrant nations at the bargaining table, with the prospect that “won’t-do” countries will be disadvantaged in lucrative U.S. markets vis-à-vis “can-do” competitors who are willing to negotiate state-of-the-art FTAs with the United States.  

Recent outcomes on the multilateral chess board of the WTO and the bilateral chess board of individual FTA initiatives created a matrix of pressures that explain both the positive outcome of the Miami Ministerial (a common Declaration among 34 countries of vastly different sizes, levels of development and economic interests) and its broad contours (a general framework for negotiations that meets competing demands for both comprehensiveness in the trade topics covered, and flexibility in the commitments undertaken by individual countries).

Multilateral Moves

Multilaterally, the highly visible breakdown of the Cancun WTO Ministerial was a setback for the U.S. trade agenda in light of America’s key role, along with the European Union, in launching the Doha Round 22 months earlier.  Whereas the United States came to Cancun prepared to negotiate with very serious and ambitious proposals, many others sought to use the talks as a platform for rhetoric and unilateral demands, precipitating the collapse. With the global economy faltering, the dim prospects for reviving multilateral negotiations in the near-term raised the economic and political importance of avoiding another collision over the regional trade agenda in Miami, particularly for the United States as the host country of the meeting. 

Agriculture had been a key flashpoint for strife at Cancun.  In the WTO, the U.S. had pressed the EU to agree to a framework for agricultural reform that would have substantially slashed farm subsidies and tariffs well beyond what was achieved in the last multilateral trade negotiation, and it sought to work with Brazil and other major agricultural exporters to achieve consensus for freer trade in this historically sensitive area.  Instead, Brazil made an alliance with protectionist India, refusing to even negotiate from the draft agriculture text put forward at Cancun by the WTO’s Uruguayan agriculture chair and spearheaded a bloc of 21 developing countries which unsuccessfully sought unilateral concessions from the industrialized world.  If a framework for global agricultural reform had been achieved at Cancun, it might have been possible to seek a higher level of ambition for the FTAA Declaration by addressing a key issue of regional concern (US domestic farm supports) in advance of Miami.  Since the United States had made it abundantly clear that subsidies could only be addressed in the WTO context due to massive subsidization by the EU and Japan, Brazil’s strategy at Cancun was counterproductive to its own agenda of achieving greater agricultural liberalization. 

Brazil, for its part, was criticized in the aftermath for its strategy of confrontation and blockage, when many developing countries faced the reality that they came away from the talks empty-handed and perhaps missed their best chance in the foreseeable future for achieving meaningful agriculture reform and market access.  In the weeks following, several Latin American nations including Costa Rica, Colombia, Peru and Guatemala broke off from the WTO G-21 group, and Brazil was finding itself increasingly isolated and its leadership questioned in the Hemisphere.  Raul Diez Canseco, Peru’s commerce minister, indicated that it would not participate in “a group that adopts positions that hinder the progress of the Doha round negotiations.”  And Jorge Humberto Botero, Colombia’s commerce minister, said:  “It is evident that once the emphasis of the negotiations turns from the WTO to the Americas, the G-21 ceases to be a useful tool for our country.” In sum, the failure at Cancun increased the stakes for both the U.S. and Brazil to shoulder the responsibilities of FTAA co-chairmanship and avoid a similar catastrophe at Miami.

Bilateral Moves

Bilaterally, the U.S. kept the pressure on Brazil for an FTAA compromise by laying the groundwork for a series of individual free trade agreements with other willing countries in the region, further isolating Brazil and signaling that the United States was ready to go ahead in the Hemisphere with countries that were ready to negotiate.  The U.S. had recently signed an FTA with Chile and was preparing to conclude free trade negotiations with five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) by December, plus the Dominican Republic by spring of next year.   At Miami, in the midst of the Vice Ministerial preparatory meeting and just hours before Ministers were scheduled to arrive, the United States held two press conferences announcing the initiation of FTA negotiations with the Andean countries of Bolivia, Colombia, Ecuador, and Peru, as well as Panama.  Brazil surely got the message when the U.S. declared that the markets of the Central American countries, plus the Dominican Republic, exceeded U.S. bilateral trade with Brazil.   The United States, in turn, was certainly cognizant of Brazil/Mercosur’s negotiation of its own FTA with the European Union, which would greatly disadvantage U.S. firms vis-à-vis European competitors if no agreement was reached with Brazil within the FTAA

Regional Compromises

Thus, the pressures arising from the multilateral and the bilateral levels created the impetus and the opening for the U.S. and Brazil to reach accommodation on the vision for a regional FTAA agenda at Miami.  In the Miami Declaration, the U.S. achieved its top objective of  comprehensiveness – that each of the areas under negotiation since the Miami Summit of 1994 would be addressed within the FTAA:  market access; agriculture; services; investment; government procurement; intellectual property; competition policy; subsidies, antidumping and countervailing duties; and dispute settlement.  While negotiators are directed to develop a common set of rights and obligations in these areas applicable to all countries, subsets of countries may voluntarily choose to negotiate additional obligations and benefits.  Thus, Brazil achieved the flexibility to make a more limited set of additional commitments in areas of particular sensitivity. Smaller countries, including the Caribbean nations, achieved greater recognition of their special needs as developing economies through various provisions and mechanisms and other countries were brought along in light of the political reality of a delicately worded compromise between the major protagonists and the strategic and economic ramifications of tolerating another trade negotiating failure so close on the heels of Cancun.

Conclusions

The FTAA Ministerial meeting in Miami was the first major trade convocation on U.S. soil since the WTO Seattle Ministerial in 1999 – the latter famously marred by images of rioting protestors, tear gas clouds and damaged storefronts outside, coupled with insuperable disagreements by countries negotiating inside.  Whereas Seattle was both a logistical and policy fiasco for the United States, Miami, by contrast, was a pragmatic success due to careful U.S. preparation and a strategy of competitive liberalization on three levels.  The Miami Declaration achieved the realistic U.S. objective of maintaining a forward momentum on FTAA talks, seemingly implausible just a few weeks beforehand and produced a tentative rapprochement on FTAA goals with Brazil.  However, the real hard bargaining on market access and a host of thorny topics, ranging from investment to services to government procurement, lies ahead. Over the next 12 months, it will become clearer whether the vision of regional free trade and greater integration in the Americas, a U.S. foreign policy goal which has proceeded in fits and starts since as early as the 1820s, will finally take a major stride forward in 2005, or whether it will once again be a vision deferred.

Dr. Christina Sevilla is a professorial lecturer in international relations at the George Washington University Elliott School of International Affairs.  She has been a MacArthur Fellow at the Weatherhead Center for International Affairs at Harvard University.