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Latin America: FTAA divides nations and trade blocs

Rio de Janeiro, 4 Apr 2001 (IPS) -- The Free Trade Area of the Americas (FTAA) “is suicide” for Brazil and for Mercosur (Southern Common Market), says Brazilian trade expert, Samuel Pinheiro Guimaraes - a diplomat that the government is trying to keep quiet.

Pinheiro Guimaraes has joined the resistance movement against continent-wide trade integration, brandishing his credentials as director of the International Relations Research Institute, a division of Brazil’s Foreign Ministry.

The disparities in economic, technological and financial power - in favour of the United States and Canada - would lead to the disappearance of Mercosur (comprised of Argentina, Brazil, Paraguay and Uruguay), while Brazilian industry and services would not be able to survive competition with the two giants from the north, he argues.

His preaching against the “gallows,” he says, that are embodied in the FTAA, has intensified in recent months, prompting Brazil’s Foreign Minister Celso Lafer to prohibit unauthorised diplomatic declarations to the public and to issue a communique stating that comments made by Guimaraes reflect his personal opinion only.

Despite the implicit threat of removal from his post, the ambassador continues to be an outspoken voice against opening trade to North America, which he believes, would harm Brazil’s economy and its people.

The government of Fernando Henrique Cardoso supports the trade integration process of North and South America, though conditioned on greater access to the US market and on upholding the original implementation goal of 2005.

Cardoso has made it clear that he opposes efforts to speed up negotiations to enact the FTAA by 2003.

The dissidence in Brasilia, reflected by Guimaraes’ stance, has encouraged labour unions, non-governmental groups and leftist parties that plan protests at the ministerial meeting this week in Buenos Aires and at the Summit of the Americas, to be held on 20-22 April in Quebec City.

Trade ministers in the Argentine capital are attempting to hammer out an agreement on the foundations upon which the Alaska-to-Tierra-del-Fuego trade bloc will be erected.

The FTAA must be rejected through protests like those that have shut down meetings of the World Trade Organisation and the International Monetary Fund, said the international relations secretary of the Workers’ Central of Brazil, Kjeld Jakobsen.

The matter of hemispheric integration has also created tensions between Mercosur’s four member nations, and between economic sectors within each country.

Minister Lafer summed up the problems afflicting the Brazilian government when he pointed out that “the FTAA is an option, Mercosur is our destiny.”

Nevertheless, the Southern Cone bloc is participating in these crucial trade negotiations with its own unity weakened by the measures that Argentina recently implemented in its attempt to overcome its deep political and economic crisis.

Argentina’s new Economy Minister, Domingo Cavallo, who was sworn in on 20 March, ordered tariff exemptions for capital goods imports and beefed up tariffs on consumer goods, breaking ranks with its three regional trade partners.

In addition, not only did he temporarily suspend Argentina’s participation in the Mercosur customs union, he has openly defended its elimination, which would turn the bloc into nothing more than a free trade zone.

The new situation prompted Uruguay’s President Jorge Batlle, and his ministers, to mention “individual routes” for the bloc’s countries and even talks to reach a bilateral trade agreement with the United States, if Mercosur continues to stagnate or begins to fall apart.

The possibility of gaining access to the gigantic US market is a constant temptation, and one that has already distanced Chile from Mercosur and which excites Argentina and Uruguay any time there is a crisis in their own economies or inside the trade bloc.

Another stimulus is the advantages that Mexico has obtained as a member, alongside the United States and Canada, of the North American Free Trade Agreement (NAFTA).

In Brazil, fear and doubt are the factors dividing public opinion because the domestic market is much larger and more complex than those of its neighbours.  And it enjoys greater relative development - something that officials want to protect.

The textile and footwear industries and the agricultural sector are considered to be competitive on the global market and their leaders want an opportunity - the sooner the better - to place their exports inside the vast North American market, free of barriers.

Losses and even elimination are the risks most feared by Brazil’s capital goods industries - electronics, chemicals, paper and furniture - because of the unfavourable circumstances they would face in open competition with US companies.

Free trade would be a disaster for Brazil, if the country does not undergo profound tax reforms in order to lower production costs, warned the president of the Brazilian Association of Machinery and Equipment Industries, Luiz Carlos Delben Leite.

Additionally, Brazil suffers from financial and infrastructure imbalances, expensive credits and inadequate transport, communications and technology, which prevent competition on a level playing field, argue the business leaders from the less competitive sectors.

The apprehension of the Brazilian trade negotiators also involves the service sector, a priority of their US counterparts. It is an area for which the possible effects of market opening have not been studied in detail.

The strategy to strengthen Mercosur, expanding it to all of South America, has apparently failed, given the difficulties that are slowing an accord with the Andean Community of Nations (Bolivia, Colombia, Ecuador, Peru and Venezuela) and the economic crisis in Argentina.

Two recent positive notes softened the intimidation caused by so many negatives.  Venezuelan President Hugo Chavez announced in Brasilia on Tuesday that his country would join Mercosur this year as an associate member, as Chile and Bolivia have done, and would support Brazil’s positions on the FTAA.

The second encouraging factor is that negotiations between Mercosur and the European Union (EU) achieved surprising progress last month, with an European promise to negotiate an opening of its agricultural market in the second half of 2001.

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