Free trade area for the Americas

SINGAPORE: To much fanfare, as well as the noisy opposition of anti-globalization protesters, the leaders of 34 nations at last weekend's Summit of the Americas in Quebec, Canada, endorsed the creation of a Free Trade Area of the Americas (FTAA) by January 2005.

A draft agreement already exists, the product of seven years of negotiations, extending the existing North America Free Trade Agreement (NAFTA) between the United States, Canada and Mexico, southwards to all the countries in the hemisphere, except Cuba. Much remains to be done to convert this draft into a full-blown trade treaty, but when it is, the FTAA will be the largest free- trade area in the world, covering 800 million people and accounting for nearly US$12 trillion (S$22 trillion) in annual output.

If it proves as effective as NAFTA, there will be an unprecedented increase of trade in the Americas, beneficial to both emerging as well as developed economies in the region. Despite these benefits, however, it is by no means certain that all 34 nations in the hemisphere will be able to reach an agreement in the stipulated five years.

For one thing, it is not clear if U.S. President George W. Bush will get from Congress the fast-track authority that his predecessor lost. Now renamed the Trade Promotion Authority (TPA), fast-track allows the President to present to Congress a trade agreement that it can either ratify or reject, but not amend.

Without that authority, few nations will want to negotiate with the United States, for there is no guarantee that any agreement reached will not be nibbled to death by Congress. Secondly, even if Bush got his TPA, he will have to contend with the doubts of Latin America's largest economy, Brazil, which fears a U.S. inspired FTA will protect certain privileged U.S. sectors, like agriculture, at the expense of Latin American producers.

For the moment, the Bush administration has moved skillfully to isolate Brazil by dangling bilateral trade deals with other countries in the region, but the real challenge will come when the administration hears from its own domestic critics, equally suspicious of its intentions, but for different reasons from Brazil's.

Here, Bush will face a major problem, for the very scope of his trade agenda -- not only FTAA, but also bilaterals as well as a new round of World Trade Organization (WTO) talks -- may energize protectionist forces in the United States. Which item of his trade agenda will he focus on when he discovers his political capital is unequal to his ambitions?

The worry for the rest of the world is that he will press on with the FTAA at the expense of another round of global trade talks. It would be disastrous if he did, for the world can easily descend into competing trading blocs if attention shifts from the WTO to regional FTAs. Bush should clarify what he meant when he said in Quebec that he was focussing on a regional accord so that the Americas "can combine in a common market so we can compete in the long term against the Far East and Europe". Would not globalization be better served if all countries, north and south, in both the Western and Eastern hemispheres, compete on the same playing field?

Closer to home, ASEAN should take note of these developments and speed up the creation of a regional FTA. Other regions are busy reducing barriers to trade and investment; China looms large on the horizon; but ASEAN is still stuck at first base, its proposed FTA still the dream it was when it was mooted. Unless it moves fast, South-east Asia risks getting lost in the shuffle.

-- The Straits Times/Asia News Network