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Debate: Free Trade Area of the Americas

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Should countries in the Americas agree to the FTAA?

Background and context

In 2001, at the Summit of the Americas in Quebec City, the thirty-four countries of North America and South America tentatively agreed to create a free trade zone, stretching from Alaska to Patagonia. The Free Trade Area of the Americas (FTAA) is similar to the North American Free Trade Agreement (NAFTA), negotiated between Mexico, Canada and the U.S. in 1994. It would extend NAFTA southwards, with negotiations to end in 2005 and implementation to begin in 2006. Negotiations, however, have since stalled, and in 2007, no clear end game had been established for the FTAA.[1]

The region’s population is 800 million people. Their combined GDP is US$11 trillion. Most interestingly, and largely to pacify anti-globalization protesters, the Summit agreed to exclude non-democratic countries from further summits and, presumably, the FTAA.For the United States, the FTAA is one plank of its international trade platform. It is also pursuing bilateral deals, including most recently with Chile, and is a proponent of the WTO. South American countries are no strangers to international trade agreements: MERCOSUR (Brazil, Argentine, Paraguay and Uruguay) has been around since the 1990s. Since the early 1990s, free trade has been championed as the tool to increasing growth and income levels in developing countries. For developed countries like Canada and the U.S., free trade creates access to cheap materials and inexpensive labour.[2]

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Development: Is free trade generally good for the development of poorer countries?

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Yes

  • Free trade is good for the development of poor countries. Free trade can increase income levels, growth and prosperity, thus acting like foreign aid. Even Oxfam, originally opposed to free trade, has come out in favour of trade as growth-promoting. In developed countries, free trade is a catalyst for growth. It encourages competition, lowering labour costs and overhead. Both Canada and the U.S. have seen unprecedented levels of growth since agreeing to NAFTA.[3]
  • The positive effect of the 1994 NAFTA agreement on the Mexican economy is an example of what the FTAA could achieve elsewhere. The economic gap between the U.S. and Mexico was similar in 1994. Since then, Mexico’s exports have boomed. Its GDP has risen and more and more American businesses are flocking to Mexico. Moreover, with economic prosperity, comes political stability. The election of Vincente Fox, and the end of authoritarian rule under the PRI, is proof that economic growth and democratization are connected. These same benefits will ascribe to countries in Latin America and South America with a free trade agreement.[4]
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No

  • Free trade can lead to lower labour and environmental standards. Free trade creates a "race to the bottom", whereby developing countries lower their labour and environmental standards in an effort to attract foreign investment. In Mexico, free-trade zones are rife with labour and environmental abuses, many of them committed by American companies. Further, free trade can lead to unemployment and greater income disparity in developed countries. For example, many automakers have closed their Michigan and Ontario plants, and moved their business to Mexico.[5]
  • Many Latin American countries fear that they will not be able to compete with the United States. The economic gap between the U.S. and its partners in the region is too great. Many Latin American and South American countries fear they cannot compete with the U.S. and, to a lesser extent, Canada.[6]
  • The FTAA and free trade risks worsening income inequality. The basic concern is that the wealthiest and most powerful classes in societies benefit most from free trade. This is because those who stand to profit most are those that are actually in control of businesses and trade and cash flows.[7]
  • Wealthier countries are not offering support programs to combat this problem. The U.S. rejected Mexico’s idea for a European-style "social cohesion" fund. And Canada has stated that problems associated with free trade (i.e. rise in income inequality) are to be solved domestically, not through a free trade agreement.[8]
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US commitment: Is the US really committed to free trade and willing to see the FTAA through?

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Yes

  • Premise of sub-debate. The commitment of the United States is necessary for the FTAA to succeed.
  • The U.S. is a proponent of "free trade plus". It advocates open borders with its partners in the region. Non-tariff barriers and farm subsidies are the result of lobbying by U.S. manufacturers and opposition in Congress. With a blueprint for a free trade agreement, the White House can and will strong-arm its opponents into agreeing to reduce these barriers. Further, the George Bush White House has been a strong advocate of including limited labour and environmental measures in any free trade agreement. The U.S. is also the strongest proponent of the "democracy clause".[9]
  • The U.S. wants to use its influence in the region to create economic partnerships. In the 1980s, the U.S. was seen as a meddling superpower, involving itself in many domestic conflicts in South America and Latin America. Today, its goal is to stabilize the region and promote liberalism and good governance. The FTAA can aid those goals. As proof of American sincerity, the U.S. has backed international loans to Argentina and Paraguay.[10]
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No

  • The U.S. is not really committed to "free" trade. Venezuelan President Hugo Chavez opposes the FTAA unless the U.S. agrees to changes in the U.S.’s anti-dumping laws, a reduction of non-tariff barriers and an end to farm subsidies. At the WTO, the U.S. has vigorously protected its domestic industries while demanding "free trade" from other countries. As long as the U.S. remains the region’s largest economy, it will carry diplomatic weight in any future negotiations. And, as such, an FTAA will benefit the U.S. at the expense of the rest of the Americas.[11]
  • The U.S. views Latin America as a low strategic priority, and will make few protectionist sacrifices to preserve any relations there. The way that the United States treated Latin America in the 1980s is a good example of the extent to which it disregards its diplomatic relationships there. Its military bullying in the 1980s led to large-scale killings.
  • Trade for the sake of helping Latin American development is a low priority: Even if America has ended its reign of terror in Latin America and South America, it is not interested in economic assistance to the region. It was indifferent to Argentina’s economic collapse. It has actually increased farms subsidies and tariff protection for steel-makers.[12]
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Brazil: Is Brazil likely to agree to an FTAA agreement?

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Yes

  • Brazil’s economy needs free trade. It has a huge trade surplus (US$7 billion globally and US$3.5 billion with the U.S.). To grow further, Brazil needs to grow its exports. Also, the FTAA might soothe trade disputes between the U.S. and Brazil. The U.S. is willing to discuss reducing non-tariff barriers and farm subsidies, but Brazil must show commitment to the FTAA process.[13]
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No

  • Brazil will never agree to the FTAA. President Lula da Silva campaigned against the agreement. Though he has softened his stance since being elected, many Brazilians are fearful of free trade. Liberalization in the 1990s led to job losses and massive unemployment. And Brazil and the U.S. are at odds at the WTO over orange juice, cotton and steel exports.[14]

See also

External links and resources

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