USTR - The Route from Miami to Economic Freedom
                 
The Office of the United States Trade Representative

The Route from Miami to Economic Freedom
12/09/2003
By Robert B. Zoellick

The recent Miami meeting of the 34 democracies of the Americas charted two complementary courses for achieving hemispheric free trade. Deepening integration among the 800m people of the Americas will - like the rise of China - help shape events globally. The extent of the New World's new influence will depend on the pace and scope of the economic synthesis, similar to the way Europe's Union worked to combine visions with realities over time.

One course outlined in Miami is to complete the negotiation by 34 nations of a single Free Trade Area of the Americas. Even as we advance along the FTAA track, the US and 11 Latin American countries are pursuing a second course of comprehensive free trade agreements that achieve the highest standards - in effect extending the North American Free Trade Agreement and the recent US-Chile FTA.

The US is working to complete an FTA with five Central American economies by year-end. We hope to integrate the Dominican Republic into this Central American FTA early next year. Panama will begin FTA negotiations with the US next spring. So will Colombia and Peru, followed, when ready, by Ecuador and Bolivia. Together, this league of accords would progress a long way towards free trade in the Americas. The US apart, these partners represent 68 per cent of the hemisphere's gross domestic product. US trade with the Central Americans and the Dominican Republic alone exceeds our trade with Brazil.

These negotiations enable us to customise for the diversity of the Americas. After Miami, headlines from our newest free trade partners gave their assessments: Colombia's El Tiempo declared "Historic News"; in Peru, El Comercio said "A Door Was Opened"; and, in Panama, La Prensa wrote of "the big smiles" of its leaders.

For Colombia, an FTA is a vital vote of confidence and an investment in economic strength as President Alvaro Uribe fights narco-trafficker terrorists trying to rip apart one of Latin America's oldest democracies. Cafta offers hope to fragile democracies that need to show their citizens they can prosper and help one another in a global competition, even with the Chinese. For the Dominican Republic, an FTA can help overcome recent financial crises, resume the high growth of the 1990s, strengthen the Caribbean economy and empower democracy with transparency. Peru's free trade with the US can bolster a restored democracy, as President Alejandro Toledo deploys economic incentives to light a path away from the shadows of Fujimori's regime and beyond the neo-populist fantasies of economic autarky. For Panama, an FTA like our recent agreement with Singapore can help build a service economy hub at a unique juncture of east and west, north and south.

To encompass the Caribbean democracies and Mercosur - Brazil, Argen tina, Uruguay and Paraguay - we need to complete a quality FTAA. Caribbean countries already enjoy special access to the US. Our goal for the FTAA is to give them new opportunities by linking connecting aid to trade liberalisation that suits their circumstances. Mercosur also wants to move towards more open markets. Given their recent financial crises, these countries are devoting considerable energy to stabilising their economies. They are working through understandable uncertainties, compounded by frustrating economic histories, about how to combine trade and new rules with development.

Critics of Miami's outcome apply an unfair standard. The FTAA envisaged in Miami would remove all goods tariffs, seek substantial openings for agriculture and services and add rules in many other sectors. Given Mercosur's average applied goods tariff of 13.5 per cent - with applied rates on vital goods of about 20 per cent and average bound tariffs of about 30 per cent - free trade in goods alone would be a huge stride. By contrast, the south-east Asian nations working on an FTA are still struggling to eliminate internal trade barriers on goods, and myriad agricultural barriers remain. Other so-called FTAs in Asia frequently involve just lowering barriers in select sectors.

With so much attention devoted to the FTAA's ambition on topics such as investment, it is useful to benchmark with other negotiations. The WTO cannot even launch a negotiation on investment. The EU, some 50 years into its integration process, has been pursuing a takeover directive that not only preserves national investment barriers but may also be at odds with international obligations.

Over time, Mercosur - and economic communities within it - will expand their interest in rules that foster investment, protect knowledge and creative industries, help to counter corruption, lower costs and improve the quality of service sectors. These topics are increasingly vital for development. Indeed, some countries are already willing to go further on these topics. Argentina has a bilateral investment treaty with the US that matches the high-quality provisions in our FTAs. Uruguay recently announced it wanted to negotiate a similar accord. Labour party governments should also want to work creatively with us to improve workers' rights and enhance environmental conditions, while avoiding protectionism.

We have a historic opportunity to expand trade, prosperity, democracy and a hemispheric partnership amid global competition. To expand the circle of political and economic liberty in the Americas, businesses, farmers, workers, Latino-Americans and US internationalists will need to advance along the two courses mapped in Miami. With support, the steps toward economic freedom and opportunity will keep climbing upward.

The writer is US trade representative