The Free Trade Area of the Americas (FTAA) is a proposed trade agreement that would link all the states of the Western Hemisphere, except Cuba, by the year 2005. The FTAA proposal was presented at the Summit of the Americas, convened by the United States in Miami, Florida in December 1994.

At this Summit, a "Plan of Action" was approved that instructed the "ministers responsible for trade" to take steps to achieve FTAA with the assistance of such agencies as the InterAmerican Development Bank, Organization of American States Special Unit on Trade and the United Nations Economic Council on Latin America and the Carribean.1

Eleven working groups were set up as of March 1996. A twelfth Working Group, on dispute resolution, is to be created at the next FTAA ministerial meeting, in the summer of 1997 in Belo Horizonte, Brazil.2 The following countries chair FTAA Working Groups:

Market Access El Salvador

Customs Procesures and Rules of Origin Bolivia

Investment Costa Rica

Standards and Technical Barriers to Trade Canada

Sanitary and Phyto-Sanitary Measures Mexico

Subsidies, "Antidumping" And Countervailing Duties Argentina

Smaller Economies Jamaica

Government Procurement United States

Intellectual Property Rights Honduras

Services Chile

Competition Policy Peru

Disputes in FTAA Discussions

Controversy about how and what to achieve in the FTAA surfaced at the March 18-21, 1996 trade ministerial meeting in Cartagena, Colombia. The U.S. plan for FTAA, supported by Mexico and Canada, is either to add member states to the North American Free Trade Agreement (NAFTA) or to draft a new agreement using NAFTA as a model. Brazil, supported by several member states of other existing regional trading blocs, argues that FTAA should be negotiated among NAFTA, MERCOSUR and other regional trading blocs.3

Signs of struggle spilled out despite diplomatic communiques and closed door meetings. A Brazilian diplomat, responding to the U.S. preference for a hemispheric NAFTA, said "[w]e did not negotiate Mercosur to undo it." An internal U.S. cable described "Mercosur intransigence and Brazilian obstructionism" at a vice-ministerial meeting and "warned of dangers of substantive backsliding, tactical bad faith and procedural irresponsibility."4 At a Cartagena business forum on technology and intellectual property rights, an Argentine businessman characterized the U.S. position as "imperialistic." Discussion reportedly became so heated that the U.S. called in heavily armed security guards.

There is also a dispute about the pace of negotiations. U.S. business groups led by the Bush Administration's chief NAFTA negotiator, Ambassador Julius Katz, have pressed for a 1997 start to FTAA negotiations, a position supported by the U.S. government.5 Brazil's Foreign Minister Luiz Felipe Lampreia stated that hemispheric nations need first to meet their recent commitments to regional trading blocs and the World Trade Organization (WTO) before negotiating an FTAA. Canadian Trade Minister Art Eggleton argued that negotiations could begin for some economic sectors in 1997. WTO commitments, he said, could change as a result of "common front" lobbying by an FTAA.6

At issue is not simply the pace of the negotiations or appropriate legal frameworks, but the struggle over whether or to what extent Latin America will remain the "back yard" of the United States. Will the FTAA overshadow the WTO in order to keep Latin America in the U.S. trade orbit? Or will the FTAA be negotiated to permit Latin America to trade more freely through regional blocs, the WTO and the European Union? The result of this struggle will have broad effects, not the least of which is to define hemispheric patterns of agricultural production, trade and consumption.

Food Security Implications in the FTAA Process

One issue not directly addressed in FTAA Working Groups is food security - the ability of households, localities, nations and regions to buy or grow food of sufficient quantity, variety and quality as to meet nutritional needs.7 Indirectly, however, food security is at the heart of the agenda. Even "free" trade agricultural proponents acknowledge that food security has been declining in Latin America for at least fifteen years.8

Subsidized agro-exports "dumped" at below the cost of production make importing countries food insecure. Import dependent countries whose farmers have been driven out of farming by "dumped" products are vulnerable to commodity price increases and supply scarcity (the current situation), as well as to exchange rate volatility.9

Some argue that agro-export subsidies constitute a trade restriction for those producers. In a December 1995 letter to the FTAA Working Group (WG) on Subsidies, Antidumping And Countervailing Duties, the U.S. identified "state trading enterprises, differential export taxes and export rebates, and European Union subsidies on agricultural goods such as grains and dairy products" as practices it was interested in addressing.10

That same month, Argentina submitted to the WG a paper entitled "Subsidy-Free America," which outlines the elements of an FTAA agreement concerning agro-export "dumping" and subsidies. The paper proposes that the FTAA "deepen" commitments made in the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) to eliminate agro-export subsidies and to impose countervailing duties on those countries that "dump" exports at below the cost of production.11 Chile and Colombia supported the discussion framework outlined in the Argentine paper.

Three months later, however, in Cartagena, the U.S. and Mexico contended that the WG on subsidies had not carried out its mandate and postponed approving its report12 - probably in opposition to "Subsidy Free America." (While the U.S. wishes to discuss the use of European Union agricultural subsidies in trade with the hemisphere, this new comprehensive farm bill signed by President Bill Clinton on April 4 maintains U.S. agro-export subsidy programs at very high levels.13)

FTAA and Food Security in a WTO Context

What the U.S. is opposing may be further surmised from the content of another paper submitted by Argentina to the WTO Committee on Trade and Environment (CTE) about a week after the Cartagena meeting. In this paper, Argentina said that the CTE's goal at the WTO meeting in Singapore in December 1996 should be to produce "a balanced report acknowledging the negative environmental consequences of trade restrictions and distortions in agricultural trade".14

The Argentine CTE paper cites a report from the Organization for Economic Cooperation and Development (OECD) criticizing agricultural trade policies and subsidies of OECD member states, including the U.S. and European Union, as environmentally and economically harmful to developing countries.15 Argentina's CTE contribution identifies several environmental benefits that would accrue to the EU and US, as well as to developing countries, if trade restrictions such as those on export subsidies were adopted.

This Argentine paper frames the issue of trade-restrictive subsidies and the environment in the following terms: "When and in what circumstances would members of the WTO be prepared to accept restrictions on trade as consistent with WTO rules, for the sake of an environmental advantage?"16 The paper concludes with a call for a full and frank four-year discussion of this and other questions related to the revision of the WTO Agreement on Agriculture.

Conclusion

The Argentine contributions to the FTAA and to the WTO CTE offer two complementary approachs to freeing agriculture from a regime of agro-export subsidies that has undermined food security around the world. Furthermore, this regime has prompted agribusinesses and most farmers in the hemisphere to adopt environmentally harmful and unsustainable production practices. The Argentine papers call for WTO disciplines on subsidies and countervailing duties to be tempered by the flexibility needed to confront "emergency situations in the matter of food security".17

Whether or not the U.S. allows contributions such as Argentina to frame the agenda of WTO or FTAA negotiations, the likelihood of high grain prices and food shortages for the rest of the decade will keep the issue of food security front and center in the agricultural trade policy arena.18

Sources

1 "Summit of the Americas Plan of Action," Advancing the Miami Process, ed. and foreword Robin Rosenberg and Steve Stein (North South Center Press: Miami, FL, 1995),17.

2 "Final Cartagena Declaration on FTAA", Inside U.S. Trade (March 22, 1996), 36.

3 "Trade ministers chart year's course toward Americas trade pact goal," Jounral of Commerce, April 1, 1996.

4 Kevin G. Hall, "US-Brazil tensions cast a cloud over hemispheric free-trade efforts," Journal of Commerce, March 20, 1996.

6 Hall, "America bloc proves uphill climb," Journal of Commerce, March 27, 1996.

6 Internal U.S. Cable on Bogota Vice-Ministerial,"Inside U.S. Trade (March 22, 1996), 13.

7 Hall, "Trade leaders take off their gloves in Cartagena," Journal of Commerce, March 22, 1996.

8 "U.S. Business Groups Seek '97 Americas Summit to Bring On FTAA Talks," and "U.S. Backs Second Hempheric Sumit in 'Late 1997 or Early 1998.'" Inside NAFTA (March 6, 1996), 8-9.

9 "Canada, Brazil Trade Chiefs Lay Out Different Paths to FTAA," Inside U.S. Trade (March 29, 1996), 14.

10 "Food Systems andf Food Security," Annex III of Potentials for Agricultural and Rural Development in Latin America and the Carribean, Rome: Food and Agriculture Organization, 1988.

11 Eduardo J. Trigo, "Agriculture, Technological Change, and the Environment in Latin America: A 2020 Perspective," International Food Policy Research Insitute: Washington, DC (December 1995), 1-4.

12 Kevin Watkins, "Agricultural Trade and Food Security," Oxfam Policy Department (March 1996 draft).

13 "FTAA Working Group On AD, CVD Reviews Draft OAS Documents," Inside NAFTA, (December 13, 1995), 8.

14 "Draft Minutes of November 27-28 FTAA Meeting on AD, CVD," Inside NAFTA, (December 13, 1995), 9, and "Acuerdo relativo a América como zona libre de subsidios a las exportaciones agrícolas (version definitiva)," March 1996.

15 Hall, "Trade leaders take off their gloves in Cartagena," JoC.

16 "Internal U.S. Cable on Bogota Vice-Ministerial," Inside U.S. Trade, 13.

17 "Clinton Signs Farm Bill That Preserves Most Trade Programs," Inside U.S. Trade (April 12, 1996), 18.

18 "Argentina Says Report of WTO Green Panel Must Address Farm Subsidies," Inside U.S. Trade (March 29, 1996), 13.

19 "Trade, Environment and Development Co-operation," OECD/GD (95)7, Paris, 1995.

20 "Committee on Trade and Environment: Argentine Contribution," World Trade Organization (April 1996), 1.

21 "Acuerdo relativo a América . . . ," 8.

22 Ian Elliot, "Little relief in grain prices seen before end of decade", Feedstuffs, May 6, 1996.