Summit of the Americas Fails to Establish Agreement on F.T.A.A.

Posted in Other , United States | 21-Nov-05 | Author: Michael Weinstein

President George W. Bush (left) talks to President Nestor Kirchner of Argentina during a brief joint press conference in Mar del Plata, Argentina, at the Summit of the Americas.

Initiated by U.S. President Bill Clinton in 1994, the Summit of the Americas (S.O.A.), which brings together the leaders of the 34 members of the Organization of American States (O.A.S.) every five years, was conceived as a vehicle for promoting Washington's plan for a Free Trade Area of the Americas (F.T.A.A.) that would extend the North American Free Trade Agreement (N.A.F.T.A.) to the entire western hemisphere according to the principles of the "Washington Consensus" -- fiscal discipline, anti-inflation policies, privatization of state enterprises, reduction of state intervention in the economy and of state expenditures, deregulation of the private sector, and receptivity to foreign investment. The F.T.A.A. was meant to be the capstone of the reforms promoted by the Consensus, opening up the economies of the hemisphere to free trade in goods and services.

At its inception, participants in the S.O.A. endorsed the concept of the F.T.A.A. and began to reform their economies along the lines of the Consensus, partly because of their interest in attracting foreign investment and partly because they were dependent on foreign lenders, particularly the International Monetary Fund (I.M.F.), which required that the reforms be undertaken.

Over the past decade, the Consensus has broken down as reform failed to produce sufficient economic growth to raise the living standards of the 50 percent of Latin America's population who live in poverty, and pressures from below grew for governments to abandon neo-liberal policies and increase social spending.

The first serious rupture came in 1998, when Hugo Chavez came to power in Venezuela and started to institute his "Bolivarian Revolution" that had as one of its essential elements the rejection of the F.T.A.A. in favor of a Latin American economic community based on cooperation to achieve a social model of development. [See: "Venezuela's Hugo Chavez Makes His Bid for a Bolivarian Revolution"]

After 2000, a new challenge to the Consensus emerged with the election of presidents in Argentina, Brazil and Uruguay who were committed to a social-capitalist model of development on the pattern of European states that included increases in social spending and regulation of the private sector. Coincidentally, the states with new democratic-socialist governments were already grouped in the Mercosur trading bloc -- along with Paraguay -- that, under Brasilia's leadership, was forming an independent power center increasingly capable of challenging Washington's trade policies.

At the 2005 S.O.A., held in Mar de la Plata, Argentina on November 4 and 5, the strains within western hemispheric geopolitics reached the breaking point when the participants for the first time in the history of the meetings were unable to agree on the wording of a final statement and did not unanimously endorse a general commitment to pursue achievement of the F.T.A.A. The split placed Washington on one side -- joined by 29 other states -- and the Mercosur countries, joined by Venezuela, which is finalizing entry into that bloc, on the other.

The divide between the two sides was made official in a statement issued at the end of the meetings that simply juxtaposed the positions of the rivals. Paragraph 8, for example, reflected the position of the Mercosur bloc: "...some countries in our hemisphere have gone through growth periods which have not reduced joblessness adequately, aggravating existing problems of income distribution, poverty and homelessness." Washington's position appeared in paragraph 15: "...we will address problems including trade barriers, unmanageable debt burdens and we will continue reforming the international financial system."

The decisive break came in paragraph 19, which acknowledged the disagreement directly and contained language inserted by the Mercosur bloc that put the F.T.A.A. on hold: "Necessary conditions are not yet present to reach an equitable and balanced hemispheric free trade accord, free of subsidies and distorting trade practices ... and taking into account the needs and sensibilities of all members."

The Hemispheric Force Field

The new power configuration that has emerged in the western hemisphere and was revealed starkly at the S.O.A. can be visualized as a force field made up of divided interests and complex dependencies energized by power differentials. The S.O.A. was merely a symptom of this deeply rooted configuration, which is likely to persist in the medium term and represents a nearly insuperable obstacle to the realization of the F.T.A.A. as it is presently conceived by Washington.

The major actors within the field -- Washington, Caracas and Brasilia -- each has its own agenda, creating a pattern in which Washington and Caracas confront one another in overt conflict and try to win the favor of Brasilia, and Brasilia attempts to open up a space of autonomy for the pursuit of its agenda by maintaining positive relations with the two adversaries.

At its present stage of development, the force field has not yet taken on a stable pattern. The theme of the S.O.A., which was selected by the host country Argentina, was "Creating Employment to Fight Poverty and Strengthen Democratic Governance," reflecting the agenda of social capitalism advanced by the Mercosur bloc. Each major actor interpreted the theme according to its own perceived interests, which created deadlock.

Refusing to concede to a democratic-socialist agenda, Washington came to the S.O.A. with a hard line, arguing that the Washington Consensus is the only effective means to create jobs, reduce poverty and foster stable democratic government. Although he admitted that progress toward realizing the F.T.A.A. had stalled, U.S. President George W. Bush, aided by Mexico's President Vicente Fox, pushed for negotiations on the pact to be resumed in 2006.

Washington's high-profile stance was, however, not its whole story. As Bush was pressing the Washington Consensus, U.S. Secretary of State Condoleezza Rice commented in an interview with the Miami Herald that although Washington stood against Caracas' vision, it looked favorably on the social-capitalist policies of the Mercosur bloc, citing Brasilia specifically: "[The Brazilians] have been absolutely committed to a social agenda, but they are doing it in a way that is responsible economically."

Behind Washington's equivocation was acknowledgment -- at least in the State Department -- that it depends on Brazil to serve as a barrier against the spread of Chavez's vision of a Latin American community excluding the United States. In Rice's view, the new power configuration is an irreversible fact and Washington has to adjust to it by surrendering its maximum program. The dominance of Rice's thinking was evidenced by the failure of Washington to join Mexico City's threat to try to get negotiations restarted whether or not the five hold outs joined them.

Emboldened by Washington's effective retreat, Caracas pressed ahead for its maximum agenda, even though there was no hope for its adoption, in order to embarrass its adversary. On the first day of the meetings, Chavez addressed a gathering of 40,000 protestors at a "People's Summit" that was held to counter the S.O.A. He told the crowd that the F.T.A.A. was dead and would be "buried" that weekend. His remarks reflected Caracas' confidence that its decision to use some of its oil profits to help other states in the region through favorable loan terms, barter agreements, investment in debt and purchases of exports was increasing its influence in the region and had rendered Washington's efforts to "isolate" the Chavez regime a failure.

Dependent on the good will of international lenders and seeking foreign investment, and dependent on Caracas to make its policies of social spending, regulation and import substitution seem reasonable by contrast, Brasilia found the room to lead the Mercosur bloc into solid opposition to restarting F.T.A.A. negotiations, at least until the conclusion of December World Trade Organization (W.T.O.) meetings in Hong Kong, at which Western and Japanese agricultural subsidies will be discussed. As large agricultural exporters, the Mercosur countries demand the elimination of subsidies before they are willing to discuss reducing tariffs on non-agricultural goods and services. Washington refuses to remove its subsidies until the E.U. and Japanese do the same, creating the deadlock that led to the impasse at the S.O.A.

Brazil and its allies face a complex situation; their left-center governments must deliver sufficient improvements for the poor in order to keep them from defecting to Chavez's "new socialist" alternative, while at the same time satisfying international financiers and their own business classes. Concurrently, they are committed to developing domestic industrial bases, which demand protection of fledgling enterprises. Brazil views itself as an emerging all-around power center, similar to China and India, and is determined to assume leadership in the Southern Cone at the expense of the United States.

The web of relations that Brazil must negotiate leads it to a strategy of attempting to buy time and fend off pressures to rush into the F.T.A.A. and to isolate Chavez. The stalemate at the S.O.A. was a victory for that strategy and a testimony to Brazil's rising power. When Bush visited Brasilia after the S.O.A. and met with President Luiz Ignacio Lula da Silva, he acquiesced in the latter's position of waiting to review the future of the F.T.A.A. until after the December W.T.O. meetings.


Due to its central position in the western hemispheric force field, Brazil will be the key determiner of the pattern that will characterize trade in Latin America in the future. Washington will likely continue to adjust to the new reality, while attempting to save face in public. The neo-liberal version of the F.T.A.A. is no more actionable than the neo-conservative unilateralism in military policy; both were utopian in a world of emerging regional power centers, and now they are being abandoned.

It can be expected that Venezuela will keep pressing its advantage. Chavez can count on the protection of Brazil as long as he refrains from trying to destabilize the governments of the Mercosur states. Those governments are aware of his appeal to the poor throughout Latin America and will try to make him a partner in their power bloc so long as he is flush with oil money.

Brazil and its allies will continue to buy as much time as they can to develop their economies in the direction of a social-capitalist model. Even if the left-center governments fail, their replacements would be unlikely to return to the Washington Consensus; the power balance has shifted against Washington and popular pressures would be channeled in a nationalist rather than global-capitalist direction. Indeed, if an F.T.A.A. ever is finalized, it will result from a bargain between Washington and a strengthened Brasilia, rather than from Washington's initiative.

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