Office of the United States Trade Representative


A Free Trade Boost for Our Hemisphere
Why is the FTAA important, and why has it taken so long to negotiate? 11/17/2003

By Robert B. Zoellick

This week, ministers from 34 democracies in the Western Hemisphere will meet in Miami to discuss the Free Trade Area of the Americas (FTAA). Protestors will be there too. You might hear these questions:

-- Why is free trade important -- and how does it affect my family? To make trade freer, governments lower tariffs (taxes) on goods and services from other countries and remove barriers that increase costs for consumers and businesses. Freer trade helps promote prosperity, greater productivity, higher wages, and more choices at lower prices for families and businesses. Countries also negotiate rules to promote fairness, so trade offers equal opportunity. The last two major trade negotiations, Nafta and the global Uruguay Round, benefited the average American family of four by $1,300 to $2,000 each year through lower prices and higher incomes.

-- Why is the FTAA important, and why has it taken so long to negotiate? The goal of the FTAA is to integrate the Western Hemisphere into an 800-million-person marketplace. The idea dates back to the 1820s, when Henry Clay, speaker of the House and secretary of state, sought to strengthen U.S. trade ties with the new Latin Republics. As with other grand visions, it is not surprising that this one has taken time to achieve. In recent times, Presidents Ronald Reagan, George H.W. Bush and Bill Clinton tried to move this idea toward a reality. They recognized that transforming the hemisphere into one economic neighborhood would better lives and opportunities, strengthen democracy and stability, and help the Americas compete with other trading powers, such as China, Europe, and Japan. The FTAA discussions were launched in 1994. Under President George W. Bush, the U.S. pressed to negotiate specific rules and timetables for eliminating barriers. Detailed bargaining among 34 countries takes time.

-- Why won't the U.S. negotiate reductions in its agricultural subsidies? Global agricultural trade is heavily distorted by tariffs, subsidies, and other barriers. The U.S. has pushed in the World Trade Organization to eliminate export subsidies, cut other subsidies significantly and slash tariffs. To succeed, we need action by the two biggest subsidizers, Europe and Japan. We will not "unilaterally disarm" in the FTAA. Instead, we want to work with our hemispheric partners to cut all subsidies in the WTO negotiations, so that all of us benefit.

-- Do trade negotiations require the privatization of services such as water supplies or schools or mail delivery? No. Although we believe privatization is beneficial, it is not part of the trade negotiations. Countries will continue to make such decisions for themselves. We will seek rules that create a level playing field if a country decides to privatize a state-owned business or open the sector to competition. Given that about 80% of Americans work in service industries, we will seek more open markets for businesses such as telecommunications and computers, financial services and express delivery.

-- Why are the negotiations closed to the public? Isn't that anti- democratic? These are the most open trade negotiations in history. The text for the negotiations is on the FTAA and USTR Web sites. A special committee from each country holds public meetings and gathers input. The U.S. also conducts environmental and labor reviews, which are subject to public comment. This week, the ministers will hold meetings with business groups and NGOs to foster an exchange of ideas. All the negotiators in Miami represent democratically elected governments. Once ministers reach an agreement, the elected legislatures in each country will have to review and approve it, including Congress. There is nothing more democratic than the representatives of elected governments discussing how to increase openness to improve the lives of their citizens.

-- I've heard about feuding between Brazil and the U.S. since the WTO talks in Cancun -- will this threaten the FTAA? The world missed an opportunity to reduce global trade barriers at the WTO Cancun Ministerial, but countries are already assessing how to get those negotiations back on track. Brazil and India led a group that pressed developed countries to reform their farm sectors -- a goal the U.S. supports. However, this group could not agree on commitments by mid- sized developing economies, such as reducing sky-high tariffs that block American farm exports. The U.S. and Brazil are co-chairing the FTAA, and although we have different perspectives, we are both working to keep the negotiations on track and on schedule. We also need to take account of the views of 32 other countries. Some, like Chile and Canada, are seeking ambitious results. Others, like the 14 countries of the Caribbean, are seeking special treatment and effective links between aid and trade.

-- Why is the U.S. negotiating other trade agreements in the hemisphere? The U.S. already has free trade agreements with Canada, Mexico and Chile. We are seeking to complete an FTA with the five countries of Central America and then to add the Dominican Republic. Other countries enjoy one-way trade preferences offered by Congress, and some of the countries would like to negotiate full-fledged free trade agreements. These partners are impatient to combine internal economic, political and social reforms with cutting-edge FTAs, which can create model provisions in new areas, as well as "building blocks" for hemispheric free trade. The U.S. strategy is to move step-by-step with those willing to open their markets and to agree to modern rules, including on labor and environmental topics.

-- What about jobs going overseas -- why should we have more free trade? The U.S. market is already very open, and we benefit through higher incomes, greater productivity, more dynamism and flexibility, more investment, lower prices and more choices for consumers. Our average trade-weighted tariff is 1.6%. Since most other countries' barriers are much higher, a free trade agreement can level the playing field by achieving large gains for U.S. exporters in exchange for our smaller reductions. As others grow more, they also buy more from us. Opening and integrating markets will benefit all our countries and help the whole hemisphere compete more effectively with the rest of the world.

Mr. Zoellick is the U.S. trade representative.

Copyright (c) 2003, Dow Jones & Company Inc.

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