Anyone expecting a meaningful free trade agreement to emerge from last week’s FTAA (Free Trade Area of the Americas) talks in Miami, Florida, is likely to have been disappointed.
As with the WTO trade talks of two months before in Cancun, Mexico, the meeting achieved little except to highlight the difficulties inherent in establishing a borderless trade zone between different economies, especially when one is the size of the USA. In the instance of the FTAA, the proposed ‘common market’ was the entire Western hemisphere stretching from Alaska to Chile and serving a market of 800 million consumers. Attended by all but one of the 35 nations that make up the Americas (Non-democratic Cuba was not invited), the talks had been intended as putting the finishing touches to an agreement that would see the creation of the world's biggest free trade area.
But in the end politics ruled the day. A ‘deal within a deal’ between the two main protagonists of the US and Brazil meant the resultant agreement will now carry far less weight than envisioned. Unable to get the US to budge on the issue of subsidies to its farmers, Brazil had been making life increasingly difficult for Washington in the run up to the talks, to the extent that the whole idea was threatened. Seeing its vision of having unfettered market access to South America slip away, the US responded by granting Brazil a raft of concessions in the week before the talks covering everything from Intellectual Property rights to tariff cuts. The result was an agreement so full of exemptions and out-clauses that it instantly became dubbed ‘FTAA-Lite.’
In the long run, it is likely that instead of bringing countries together, the agreement could actually serve to drive them further apart. Countries with existing trade agreements with the US such as Mexico, Chile and Canada are known to be especially unhappy, as they had been hoping the agreement would result in the same rules being applied to all.
As it is, without the inclusion of the ‘non trade’ items such as intellectual property, investment and government procurement, the US is not expected to show much enthusiasm for future talks. It is also increasingly expected to favour a unilateral approach when entering trade negotiations with its South American neighbours, a trend that is unlikely to advance their interests significantly.
