Global Policy Forum

The South American Consensus on the FTAA

By David Moberg*

The United States is having trouble selling the latest model of souped-up global trade deals as a cure-all for the world's economic ills. First, talks in Cancun last September to expand the World Trade Organization collapsed. Now talks scheduled in Miami for November 17-21 to create a new free trade agreement for the Western Hemisphere likely will be marked by conflict and similarly end in stalemate. One conflict will be between the Bush administration and demonstrators, who oppose the Free Trade Agreement of the Americas (FTAA) and hope to mount the largest U.S. protest against corporate globalization since the terrorist attacks of September 11, 2001, dampened a growing popular movement.

But the trade ministers will not be able to blame the protestors alone for their likely failure in negotiating the FTAA. Opposition in Latin America is widespread; hemispheric governments disagree over what should be in the agreement, and more and more economists are recognizing that the model for economic development embodied in FTAA is deeply flawed.

Negotiators had planned to wrap up talks on this new agreement, which the United States hopes will be modeled on the North American Free Trade Agreement (NAFTA), by the end of 2004. But Brazil and the United States, the negotiation co-chairs, are deeply divided. Several Latin American countries want to slow down negotiations or set aside touchy issues the United States is pushing—like expanded rights for investors—until the United States is willing to remove trade barriers and agricultural subsidies that give U.S. exports an unfair advantage. The United States also is insisting that FTAA go beyond NAFTA and deregulate all services. Countries would then have to negotiate to exclude any service they did not want deregulated. Latin Americans fear that free trade in all services could lead to the privatization of telecommunications, water delivery and even education.

Equally important, Latin Americans, having had a bad experience with "liberalization" of markets over the past two decades, are strongly against the kinds of radical free market policies that FTAA would impose.

Negotiators face sticking points

Domestic politics in individual countries also will complicate discussions. With a presidential election a year away, the Bush administration is unwilling to talk about a key issue for Brazil: the high tariffs protecting the Florida citrus industry from Brazilian competition. And most of the Democratic presidential contenders are critical to varying degrees of trade strategies like FTAA, even though it was launched under Bill Clinton. Very little in the preliminary FTAA text protects worker rights and the environment, a minimal demand of most candidates. The United States is likely to propose that countries agree to enforce their own laws, but AFL-CIO trade expert Thea Lee argues that such a provision would have less influence with traditional labor rights violators, like Central American countries, than existing labor rights protections in the U.S. trade law, which requires countries to live up to core international standards to qualify for special tariff reductions.

Neoliberal policies, including NAFTA, have not worked well for most of Latin America since they began to be imposed or adopted during the "lost decade" of the '80s. During that time Latin American countries, saddled with a massive foreign debt, averaged annual economic decline of eight-tenths of a percent per year, compared with average growth of 2.9 percent a year from 1960 to 1980. And starting in 1990, a boom decade in the United States, Latin American economies grew only an average of 1.6 percent a year. During even that period of growth, inequality and poverty in Latin America remained extremely high or got worse.

In a recent poll, only 16 percent of a broad cross-section of Latin Americans expressed satisfaction with the free market model. According to the Financial Times, "Most Latin Americans live in fear of losing their jobs and believe the free market reforms of the past decade have done little to improve their living standards."

Bolivians defend resources

In one of the most dramatic recent expressions of that sentiment, Bolivians blockaded roads and staged mass protests, bringing down neoliberal President Gonzalo Sanchez de Lozada on October 21. The protests were triggered by plans of President "Goni" to sell U.S. corporations natural gas via a new pipeline through Chile. But Bolivian peasants and miners know from centuries of experience that exports of their country's natural resources have benefited only the wealthy elite—like Goni. And they understand that since the mid-'80s when Goni was an architect of radical free market, or neoliberal, policies, inequality has increased and most Bolivians were worse off than before.

Cheap agricultural imports have since driven many peasants off the land and into urban settlements like El Alto, the center of the most militant clashes with security forces. Peasants also were incensed at the Bolivian government's enforcement of an anti-free market plan by the United States to eradicate coca, a traditional Andean crop that provided much-needed cash.

Washington Consensus crumbles

In recent years, popular uprisings against neoliberalism have led to new governments in Brazil, Argentina and Venezuela—the countries that are now the greatest FTAA skeptics. Massive popular protests also have shaken Ecuador, Peru, Costa Rica, Colombia and Mexico. The governments in Uruguay, Paraguay and the Caribbean also have resisted much of the U.S. agenda. All governments in Latin America, even those most solicitous of the United States, know they are negotiating the FTAA with a loaded and angry popular movement cocked at their political heads.

The International Monetary Fund (IMF) has greatly misjudged the effectiveness of the "Washington Consensus" model for development, which emphasizes export-led growth, open markets, deregulation, privatization and fiscal austerity. In 13 of the last 17 years, the IMF has overestimated growth in Latin America for the coming year by an average of 1.6 percent, according to Dean Baker and David Rosnick of the Washington-based Center for Economic and Policy Research.

The rosy projections also have led to the implementation of bad policies that in turn have increased unemployment and have left Latin Americans once again drowning in debt. "The principles of the Washington Consensus are not a useful guide to promote economic growth in Latin America," Harvard University economics professor and trade expert Dani Rodrik told the World Bank last March. "The periods of economic growth have no relation with the policies of integration to the world economy."

Trade talks hinder growth

Trade negotiations have been oversold as a way for countries to develop, Rubens Ricupero, secretary-general of the United Nation's Conference on Trade and Development (UNCTAD), said in October. According to UNCTAD's annual report, Latin American policies that focused on free markets and "getting prices right" blocked technological change and capital accumulation needed for growth. Former World Bank chief economist Joseph Stiglitz argues that getting institutions right, which includes greater democracy and unionization of workers, is at least as important to make trade work. Further, developing countries should grow by increasing domestic demand through implementing policies that raise incomes of workers and peasants as much as by exporting goods.

Although NAFTA is the model for FTAA, Mexico's experience is not inspiring. Timothy Wise from Tufts University's Global Development and Environment Institute recently reported that since Mexico began opening its markets, economic and job growth have been slow, job quality and wages have declined, poverty has increased, environmental quality has deteriorated, the rural sector is in crisis, and Mexico has a global balance of payments deficit despite its trade surplus with the United States. Corporations have used NAFTA's provision for investor lawsuits against governments to pursue—and typically win—millions of dollars in compensation from all three NAFTA governments for regulations designed to protect public health and the environment.

Free marketeers eye Brazil

Venezuela, which under Hugo Chavez has become the FTAA's fiercest critic, wants as a precondition the establishment of a development fund like the one the European Union established for integrating poorer member countries. Also, if the United States won't discuss its procedures to fight dumping or agriculture subsidies, then Brazil is not interested in discussing deregulation of services or investor protections. Meanwhile, Brazil is trying to consolidate Latin American trading relationships, while the United States is using a combination of threats and promises to establish bilateral trade relations with individual countries such as Chile and with smaller groups of countries like the Central American Free Trade Agreement, which may be completed this year.

The United States' veiled threats to negotiate FTAA without Brazil are hollow because that South American giant is the big corporate prize. "Going after bilaterals and the Central American Free Trade Agreement is all about getting Brazil, backing them into a corner and making them feel they have to give in," says Sarah Anderson, director of the global economy project at the Institute for Policy Studies.

While Bush has domestic political reasons to postpone negotiations, his corporate allies feel they're in a race against time. Popular resistance to the policies enshrined in FTAA is growing. "They figure if they don't lock it in now," says Lori Wallach, director of Public Citizen's Global Trade Watch, "it won't be possible."

* About the Author: David Moberg is a senior editor of In These Times. Before, he completed his work for a Ph.D. in anthropology at the University of Chicago and worked for Newsweek.

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