At the Ministerial, the Ministers agreed after 15 minutes of debate to the draft Declaration forwarded by the TNC, and the meeting ended one day early. This Declaration reduces the scope of the comprehensive FTAA to a more flexible one, in which individual countries can negotiate full liberalization in bilateral and plurilateral contexts, upon a base of an FTAA-lite that includes minimum commitments on all 9 issue areas. This is FTAA-lite is referred to as a comprehensive but flexible FTAA. Negotiations on all of the substantive contents of each of those areas was postponed until the next TNC, which will take place in the first week of February in Puebla, Mexico. Therefore negotiations have been suspended until then, as the working groups have no Ministerial mandate. The US abandoned its position, for the first time, of demanding a full and comprehensive FTAA by the end of next year, which was a major defeat for the US trade agenda. At the same time, this a la carte FTAA leaves smaller and weaker countries more vulnerable to pressure from the US for full liberalization, and leaves open a strong possibility of an FTAA-lite by the end of next year, rather than a collapse of negotiations as the social movements have demanded.

BACKGROUND

At the previous TNC in San Salvador this summer, a number of countries acknowledged that there is not enough time to negotiate a comprehensive FTAA by the January 1, 2005 deadline. In addition, it has been noted that when the FTAA negotiations were launched in 1994, there was not yet a WTO nor so many bilaterals. Hence the negotiating field is quite different. Since bilaterals, the FTAA and the WTO negotiate essentially the same issues (agriculture, services, investment, market access, intellectual property, dispute settlement, etc), it is not exactly clear under which context a particular issue should be negotiated.

For example, in San Salvador CARICOM suggested that since it was not possible to meet the deadline with a comprehensive agreement, the negotiations could either be reduced by scope (contents) or the timeline could be extended, or both (they preferred both.) In addition, the US had previously proposed moving Agriculture negotiations to the WTO, because the US is not willing to negotiate subsidies or tariffs on agriculture unless the EU and Japan do as well. Since agriculture is the main offensive interests in the FTAA for Brazil, they made a counterargument to move thorny issues such as investment, intellectual property and services to the WTO. These ideas of transferring some of the most challenging issues to the WTO would essentially gut the essence of the agreement, and is not acceptable to the USTR.

Since the WTO failed to produce negotiations on any of the 9 issues in Cancun, the US redoubled its efforts to keep all 9 issues within the purview of the FTAA (because it is a more fundamentalist trade agreement than the WTO, and the US has far more power in the FTAA negotiating context). Their objective was, if the FTAA train pulls out of the Miami station with 9 boxcars attached, we can consider it a success. PROCEEDINGS

Previous to the TNC, a long draft of a Ministerial Declaration had been circulating, upon which all the delegations had been preparing their comments. On the first day of the TNC, the Co-Chairs (Brazil and the US) tabled a new draft Declaration which was incredibly vague as it was only 5 pages. This new draft then became the basis of negotiations. In the new draft, Brazil had finally got the US to agree to reduce the scope of the FTAA, that is, to shrink the contents of each of the 9 negotiating issues. However, this was also a concession from Brazil, which seemed to be working as hard as possible to save the ministerial, so as not to be blamed for causing the Ministerial to fall apart as they were in Cancun. This indicates a shift in internal power within Brazil, as the pro-FTAA forces of the major industrialists and agribusiness sectors, that are very in favor of gaining market access in the US, seem to have gained ground in the power struggle against the social movements which are strongly united in their total opposition to the proposed FTAA. Brazil then issued an Annex to the Co-Chairs proposed draft in which it interpreted some of the vagueness of the Co-Chairs draft. This Annex suggests a minimum basis that countries would agree to across the board, and then opens the negotiations up for countries that want to negotiate full comprehensive commitments to also do so. For example, on investment, the Brazilian annex is quite reduced from the US position. Not only does it not include portfolio investment, limiting itself to just Foreign Direct Investment, but it also limits FDI to certain sectors. Additionally, on dispute settlement, it includes only state-to-state and not investor-to-state provisions, an important distinction. Government procurement includes only a commitment to transparency. There is no longer reference to transferring issues to the WTO. The group of 13 countries that are the most pro US agenda, including Canada, Chile, Mexico, Peru, Bolivia, Ecuador, Colombia, Guatemala, El Salvador, Nicaragua, Costa Rica, Honduras, Panama, and the Dominican Republic voiced opposition to the reduction of the scope of each of the negotiating areas. In an a la carte approach, they are the countries that are the most likely to opt for full liberalization within the year.

The Co-Chairs then issued a revised draft on November 18th.which forwards a framework for negotiations, that is, the comprehensive but flexible scope and the a la carte approach which is based on the reduction in scope of each of the issues. But it actually postpones the substantive negotiations until the next TNC in February. This revised draft was taken up by the Ministers on November 20th, and was accepted almost verbatim after 15 minutes of discussion. The Ministerial was then declared adjourned, one day early.

One Step to Purgatory or Two Steps to Hell

One of the basic issues that is still to be negotiated is if the current framework of the reduced FTAA is just in order to meet the end of next year deadline, or if it is a starting point towards negotiating full commitments at some point in the future. That is to say, after negotiating partial commitments this year, are countries then finished with the FTAA negotiations, or is there a promise to continue the negotiations in the future with the end goal of full liberalization commitments within another deadline. The first option maintains the deadline and actually reduces the scope; the second merely postpones the deadline while maintaining the full scope. This is a dangerous possibility to look out for, as the setback to the US trade agenda will only be short-lived if a full FTAA is eventually negotiated.

Labor and Environmental Standards

This is a key issue for the US to be able to get the proposed FTAA through the US congress. Mercosur continued to resist labor and environmental standards, and they were not included in the final Declaration.

Convergence Funds

At the meeting in San Salvador, the Venezuelans tabled a proposal on Funds for Structural Convergence which is a way to address the structural inequalities in the region. This is based upon the European experience, where the richer northern countries helped to bring up the standard of living of several of the poorer southern countries as they formed the European community, in order that the integration not bring down the standard of living for all. This Venezuelan proposal had gained support from 24 countries by the time of the last TNC before Miami, in Trinidad and Tobago, and was very similar to a proposal made by CARICOM about 2 years ago. The US has made a counter-proposal, and was able to bully CARICOM, which is a great supporter (and the most obvious beneficiary) of the Venezuelan proposal, to actually co-sponsor the counter-proposal. The US version, called the Hemispheric Cooperation Program is merely funds, to be distributed as loans (not grants), by the multilateral lending agencies and all of their conditionalities (like the IADB) and would be available only for countries to help them adjust to the FTAA. This can be interpreted something like, developing countries can come and apply for conditional loans to contract US trade lawyers to rewrite your domestic laws to be consistent with the FTAA, or to improve your customs service so that it is easier for businessmen to export, and then you can pay the money back with interest. It is a far cry from actually addressing structural inequalities among the countries. The Venezuelan proposal is something that many civil society groups are supporting, as it can be a stand-alone proposal that can actually be considered as an Alternative to the FTAA.

Reciprocity

The document also contains a conditionality of reciprocity assumed on market access. This means that countries can only expect to get out what they give in. This is contrary to the Organization of American States Buenos Aires protocol that states that there cannot be an expectation of reciprocity between the countries because of the massive differences in size and economy. This flies in the face of the basic principle of Special and Differential Treatment that is found in almost all multilateral negotiations.

Sovereignty A paragraph on sovereignty was introduced by Venezuela, which states that the commitments assumed by the countries in the FTAA must be consistent with the sovereignty of states and their respective constitutions. Chile and Canada stated that the FTAA negotiations were all about giving up sovereignty. Although this text did not receive support from any of the other countries, did make it into the final Declaration.

CREEPY CRAWLY BILATERAL ONSLAUGHT

During the middle of the week, the US announced intentions to negotiate bilaterals with six countries. In an overt attack on Andean Community unity, the US announced bilateral negotiations with Colombia, Ecuador, Bolivia, and Peru (the Andean Community minus Venezuela). This is a clear and obvious assault on the growing regional unity being advanced particularly by Brazil and Venezuela. The Andean Community and MercoSur had signed an agreement this summer to negotiate a regional agreement, in order to present a united front in negotiations with the US in the FTAA. This seems to be all but destroyed at this point, with the new bilaterals. It is also a clear attempt to isolate Mercosur by bringing more Latin Americans into the US camp.

In addition, the US announced new bilateral negotiations with Panama and the Dominican Republic, who are evidently concerned with being left out of the Central America-US Free Trade Agreement. However, it should be noted that approximately 65% of the GDP of Latin America is in Mercosur, so getting bilaterals with the other nations is not a huge economic gain for the US but rather a political one.

It will take Herculean efforts by the more progressive governments in the region to rebuild some of the regional unity that had been developed previously and strengthened in Cancun. In addition, most of the governments involved in the bilaterals have left the G-21, although there is some speculation that they only joined in order to work against it from the inside. (Either way, the G-21 still includes the major powerbrokers that made it a strong alliance, including Brazil, South Africa, and India.)

Other points to note

USTR Zoellick is looking for a new job. The Chamber of Commerce, in statements immediately prior to the FTAA Ministerial, rejected the FTAA-lite concept. They would prefer, it seems, to have NO FTAA than to have a rollback of the extremist NAFTA model upon which the original FTAA was based. It has been noted that this was probably also the last Ministerial for Trade Minister Pierre Pettigrew of Canada. Since the change in Presidents in Bolivia, the new Trade Minister is rumored to be against the FTAA, which could lead to some change in their policy.

Secretariat

It was not decided where the Secretariat will be if there were to be an FTAA. Current contenders include Miami, Atlanta, Panama, and Port of Spain (Trinidad and Tobago.) It became even more obvious that having the Secretariat in the US would be a disaster, as many social movement leaders were denied visas to attend, in addition to the obvious financial restrictions, and even Ministers; visas were reported to have been restricted.

NEXT STEPS FOR THE NEGOTIATIONS

The next TNC will be in Puebla at the beginning of February. Working group negotiations are suspended until after then. As the agenda of the Puebla meeting will be to actually set the new negotiating mandates for the working groups, it is strategically essential that this meeting fail.

Following Puebla there will be TNCs in Panama and in a CARICOM country (probably Trinidad and Tobago). Following these there will be another Minsterial in the summer in Brazil.

It was also noted that the negotiations have to be completed 3 months in advance of the signing deadline, or September, because those months are needed for legal review.