FTAA agreement confounds observers

MIAMI, Nov. 21 (UPI) -- In the end, agreeing to nothing was better than not agreeing at all.

As 34 trade ministers from every nation in the western hemisphere except Cuba concluded Friday the latest round of talks for creating the Free Trade Area of the Americas, observers are left wondering what exactly has been accomplished.

"It's going to be twice as hard as we thought to get free trade in the Americas. It's a shame that Brazil doesn't see liberalization as the way for its future," said Frank Vargo, the spokesman on trade issues for the Washington-based National Association of Manufacturers.

Vargo's comment was echoed by many business leaders in attendance at the talks.

Almost uniformly, officials from a myriad of U.S. industries repeatedly said that they wanted a high-quality trade deal that requires countries to give something up in return for access to the U.S. market.

But what was concluded on Thursday night was far from reaching any ambitious goals.

Coming off the collapse of World Trade Organization talks in Cancun two months ago, and with the sharp exchanges between U.S. and Brazilian negotiators in the weeks following, there was intense pressure to simply keep the FTAA talks alive.

And that is what they did. Negotiators approved a watered-down version of the FTAA, which was first started in 1994. The details of the agreement have not been ironed out, that will be done between now and the next time top negotiators meet as a whole next year in Brazil.

But trade ministers agreed on Thursday to a framework for continuing the talks, which is certainly an accomplishment considering that just more than a week ago the consensus was that the FTAA would collapse.

From the beginning on the week, it was clear that Brazilian and U.S. officials planned to do just that. A week before the talks, trade negotiators from both countries had met in the United States and hammered out a new flexible architecture for trade talks, which have become known as the "FTAA light."

This new approach requires countries to agree to a minimum set of obligations, with countries wishing to liberalize certain sectors further - and subsequently receiving more benefits -- being able to do so.

The architecture was put into place to keep Brazil at the negotiating table.

Brazil has blasted the U.S. refusal to address its agricultural subsidies and tariffs on certain goods. The Latin American country has said that it won't address intellectual property rights, or liberalize investments or government procurements -- all top issues for the Americans -- until it sees agriculture subsidies in the United States come down.

The framework FTAA agreement approved this week was a tradeoff between these interests, with Brazil implicitly agreeing not to stall talks because of the subsidy issue, while the United States will allow Brazil to maintain the lowest levels of free trade in the areas where it is most sensitive.

The United States has long said that it will only discuss agricultural subsidies in the context of the WTO.

"The U.S. is committed to eliminating export subsidies, to getting significant cuts in domestic subsidies," said top U.S. trade negotiator Robert Zoellick. "We believe that we can't do that in this forum, because then what leverage do we have with the Europeans and the Japanese?"

Both the European Union and Japan have higher levels of agriculture subsidies than the United States. Combined, all three fork over $300 billion in subsidies each year to support their farmers.

Jorge Pinto, director of the global finance center at Pace University in New York, and who served as Mexico's chief negotiator at the first FTAA talks in 1994, said he is pleased with this week's outcome.

"Very few people in 1994 thought it was an achievable goal. Everybody thought that because of the differences in the regions," he said.

Pinto dismissed criticism that this FTAA framework agreement is too weak. He said that considering the world economic situation of the last few years and the impact of the WTO collapse at Cancun, it is commendable that any agreement was reached.

"There were a lot of ominous signs. In this context to have a success -- even if not the agreement that everybody wanted -- is a positive step," Pinto said.

Sara Fitzgerald, a trade policy analyst at the Washington-based Heritage Foundation, said she was mystified as to what occurred in Miami.

"I think it is hard to figure out what the U.S. has agreed to," she said. "But people need to remember that this isn't the final agreement. The good news is that whatever we've agreed to isn't written in stone."

Fitzgerald, who spent the week in Miami following the talks, said she was alarmed at how various U.S. industry groups were still posing protectionist at meetings of business leaders early in the week.

"Everybody was trying to protect their own special interest," Fitzgerald said. "The sugar industry said that sugar should be excluded, as did Florida orange growers."

For that reason, any agreement is going to be a tough sell to the U.S. Congress.

Fitzgerald pointed out that when she has briefed lawmakers on trade issues, many leaders from farm states have expressed their fear at not being able to compete with the powerful Brazilian agriculture sector.

Pinto said, however, that despite all the complaints about where the FTAA is -- or rather where it isn't -- there is no arguing with the fact that it is a step in the right direction.

"At a time when we have a lot of protectionist tendencies making the world's economy more unstable, I feel that all the negotiators should be commended for what they've done," he said.

What they've accomplished, Pinto said, is to push free trade in the Americas in the right direction.

"The only thing they cannot do is go back. They can't destroy what has been done," he said. "It is a positive step for those that believe in free trade."