Chairman
My friend, Maria Eugenia, Foreign Minister of El Salvador
President, trustees and Executives of CCAA
Ministers of Government of Central America and The Caribbean.
Ladies and Gentlemen

Permit me to speak not as the Assistant Secretary-General of CARICOM, and therefore institutional, but as one who was involved in the Miami, Santiago and Quebec Summits, the Denver, Cartagena, Belo Horizonte and San José Trade Ministerials but has also had the opportunity to observe and reflect on the FTAA Project from somewhat of a distance for the last four to five years; one who has spent well over three decades involved full-time in the field of economic integration – design, construction and operation of an integration arrangement among countries of different sizes and levels of economic development. I will present a view from outside the box. (The views expressed here are those of the author and do not represent those of the Caribbean Community or its Secretariat.)

Nine years ago, to the week 9-11 December 1994, Heads of State and Government of 34 States of this Hemisphere, in the City of Miami, declared their intention to construct a Free Trade Area encompassing all independent States of the Hemisphere, except one. This was great relief, especially to the smaller States, who felt that they could participate in a process of design and construction of a Free Trade arrangement instead of being forced to “dock” on to either an already designed NAFTA OR Mercosur. 

The FTAA was to be a part of a larger design, a Partnership for Development and Prosperity; for Democracy, Free Trade and Sustainable Development in the Americas. There was a commitment not only to free trade but to economic integration; to create strengthened mechanisms to promote and protect productive, not speculative investment in the Hemisphere; to promote the development and progressive integration of capital markets; and to create a hemispheric infrastructure. There was even recognition that high foreign debt burden was a hindrance to development in some of the countries of the Hemisphere, implying the need for the process to treat with that problem.

The fundamental objective was to raise the standard of living, improve working conditions of people – all people – in the Americas and to better protect the environment.

Nine years later, to the month – November 2003, Ministers of Trade of the same 34 States, locked in a hotel with protesters on the outside, here in Miami were still in search of “A Vision for the FTAA”, more accurately another vision for the FTAA. They clearly did not find one consistent with the Vision of 1994. Their full expectation, of what they now see is an arrangement which “will result in an appropriate balance of rights and obligations where countries reap the benefits of their respective commitments” This speaks neither to prosperity across the Hemisphere, to raising standards of living across the Hemisphere nor to protecting the environment across the Hemisphere. Whatever benefits there might be will be distributed based on capacity to negotiate rights and the avoidance of obligations.

Mr. Chairman, the Ministers avoided a breakdown and kept the process alive. That was by no means a small feat. Their declaration however, is a confession that the hemisphere will not create a free trade area as envisioned in 19994 on the present approach. 

The first question for leaders and citizens of the Hemisphere must be “What has happened to bring us to such a point?” Why are we so far from what was envisaged in 1994?

I suggest that there is need for clarity on this before there can be a determination as to whether the Miami Vision of 1994 can be rescued or the Miami “Vision” of 2003 is worth pursuing.

Let me try to identify where the process went awry.

The 1994 Miami Summit itself trifocated the process of follow-through in pursuit of what was a unified Vision. Sustainable development – the overarching pillar – was directed to a Summit of the Americas on Sustainable Development in Santa Cruz, Bolivia in December 1996. That Summit produced a wonderful Declaration and Plan of Action, stressing issues such as equitable economic growth; the reduction of poverty and marginalisation; the development and transfer of technology through, in addition to market-based mechanisms, training, access to information and the strengthening of national scientific and technological capacities, and health and education. All areas which would spread development and create collaborative linkages across the hemisphere.

This Declaration and Plan of Action signed on 7 December 1996 was never to be heard of since. No follow-on Annual Meetings as envisaged in the Miami Follow-up process. I will not create any embarrassment by enquiring how many of us here are familiar with that Declaration or have even heard of it. I suggest that it might worth a read.

Second, the Summit left the economic cooperation issues to Secretaries of the Treasury and Finance Ministers. These Ministers have met under the coordination of one Secretary of Treasury very quietly with a focus on money laundering. No attention to issues of economic cooperation or integration; to the building of an economic infrastructure to support and complement a Free Trade Agreement. I would not be surprised if the majority of us here never heard of such meetings.

Third, responsibility for the construction of the FTAA was given to Ministers of Trade and Trade Officials. This group, was dominated from the onset, by free traders who had neither concept nor experience in building economic integration and certainly not involving countries of very different levels of development and sizes of economies –a major reality of the Americas. Men and women driven, but by notions and philosophy of trade liberalisation (free trade), of competition and of the survival of the most powerful. They envisaged a process of negotiation not of construction. A negotiation process in which the powerful countries, backed by their strong private sector and trade unions, would essentially determine the rules.

The tension in the group and the different philosophies were obvious from the outset. The “free traders” who represented the most dominant and economically powerful, of the interested economies in the Hemisphere and countries whose leaders had studied in or were influenced by those countries, argued for the negotiation of a balanced comprehensive, WTO-consistent agreement which constitutes a single undertaking. Balance here meant that all members would have similar rights and obligations; no sense of proportionality and positive enfranchisement. Proportionality, however, not equality is the critical factor among unequals. The negotiator of one of the largest countries was, in fact, heard to remark that “his country had no intention of entering into an Agreement with any permanent cripple”.

In juxtapostion were the smaller and micro economies, the majority of which had not only had a relatively long experience in creating, building and operating an economic cooperation agreement among countries of different sizes and at different levels of development but the experience of wider trade liberalisation under structural adjustment and GATT/WTO auspices. They understood the nature of their vulnerabilities and the permanence of certain of their constraints. They worked, against great pressure, to maintain the recognition given in the 1994 Miami Declaration to “the wide differences in levels of development and sizes of economies existing in the Hemisphere” and the commitment to “remain cognizant of these differences as we work toward economic integration in the Hemisphere”. At their insistence, the words have been repeated in the Santiago and Quebec Summit Declarations and the various Trade Ministerial Declarations. However, less than one year from the scheduled completion of negotiations, there has been no converting of recognition of these differences into specific recommended action.

Between the two main groups were countries whose main objective was to build strength for bilateral negotiations, at the strategically appropriate time.

In summary, the vision in the Declaration was trifocated, the follow through greatly unequal and the philosophy, if there was a shared philosophy, lost. The FTAA is a great project, an ambitious enterprise. Great projects require, at minimum, a shared philosophy and an agreed design. The FTAA, once cut adrift from the moorings of the Miami Summit Declaration and spirit, had neither. Prime Minister Owen Arthur, speaking on behalf of CARICOM in the Closing Session of the Miami Conference, cautioned that care had to be taken to ensure that the construction was such that the rising tide did not cause any of the 34 boats to overturn, but to raise all boats.

The dominant forces in the pursuit of the FTAA threw caution to the wind. Negotiation, based on individual capacity, replaced the concept of construction in the Miami Declaration which stated clearly “We . . . resolve to begin immediately to construct the ‘Free Trade Area of the Americas”. A negotiation is by its very nature an antagonistic process and the FTAA process has been bedevilled by antagonism over the years. A cooperation arrangement, especially one of a large and indeterminate proportion, is never negotiated but constructed through processes of analysis, assessment dialogue and collaboration among the parties. That was and is the approach of the European Union. It was and is the approach of the Caribbean Community. 

Construction of an enterprise of the magnitude and characteristics of the FTAA require, at a minimum, impartial studies of the likely overall benefits and costs and impact analyses at the level of economies, sectors and industries. Such studies would allow the grouping and individual members not only to identify benefits but risks and to develop mitigation, adjustment or avoidance strategies.

No such studies have been undertaken for what would be the largest and most complex free trade arrangement in the world. In the absence of such shared analysis, countries fall back on their experiences. For CARICOM countries this experience includes the application of anti-polarisation measures in their own arrangements. It also includes a situation in which, between 1995 and 2000, through WTO induced liberalisation globally, the unit value of seven of their eleven most important exports had fallen, five by more than 25 %.

In order to deal with the dynamics of trade liberalisation, almost all relatively successful Free Trade Agreements have had to deepen the cooperation process and to incorporate anti-polarisation and/or redistribution measures. The European Union, the most successful voluntary economic cooperation movement in the world, has an extensive array of adjustment funds, social funds and re-distributive mechanisms. The EU targets the difference in income which is tolerable between members of the Union. CARICOM, the second longest continuously functioning integration arrangement, has not only had to deepen itself and provide in its Treaty a special regime for its less economically developed Members, but to develop collaborative programmes in the socio-economic areas to raise the prospect of their feasibility and availability to the smaller and weaker Members. At the point of initiating the economic integration process through the establishment of the Caribbean Free Trade Area, CARIFTA, the Member States decided to create a development bank, the Caribbean Development Bank (CDB), and to enshrine in its Charter a responsibility to pay special attention to the Less Developed Countries (LDCs). All resources mobilised in its Special Development Fund (SDF) for concessionary lending in the first five years were devoted to the building of infrastructural and other capacity in the LDCs. The Central American Bank for Integration (CABEI) was also established to promote and facilitate the integration process in Central America. The Central American Common Market (CACM) also had other measures for the less developed members.

The FTAA, with 34 members, will be geographically the largest economic grouping in the world - much larger than the EU which initially had 10 members, is now 15, and is only now in the process of expanding to 25. It will be more economically diverse as it will include the United States of America, the largest economy in the world, and Haiti, one of the UN recognised poorest countries in the world; Bolivia, Guyana, Honduras and Nicaragua, four of the most highly indebted countries; and Canada and Brazil, two of the geographically largest countries, together with some of the smallest and most vulnerable countries in the world. Yet, after nine years of preparations and negotiations, the negotiators of the FTAA do not have a concept or plan for the treatment of the fundamental issues of differences in size of economies and levels of development and with the prospects for increased polarisation. In fact, even in the limited area of specific treatment within negotiating groups, Ministers in their November Declaration had to express concern that while text negotiations have progressed, proposals aimed at giving expression to the treatment of differences in levels of development and size of economies are bracketed across all the negotiating disciplines.

Can the FTAA be Rescued?

The greatest importance of the November 2003 Miami Declaration is that it maintained the idea of an FTAA and reduced the level of negotiating and public tension. It also takes the process off the global trade liberalisation (WTO) thread mill and it provides a possibility for re-thinking.

At the same time, the November Declaration’s effort to define a content, approach and timeframe is unlikely to lead to a meaningful FTAA and certainly not one which would meet the objectives set in 1994. First, the core set of rights and obligations could be very limited and might still not overcome the issues arising from fundamental differences in endowments and the natural tendencies to polarisation in free trade areas. There might also be difficulty with meeting the WTO criteria for a free trade agreement. Second, the process of selection from the Buffet and the plurilateral cooking of each dish by those who like it could be quite complicated. In any event, it might only create a mirage of fairness. For example, if the smaller economies were to opt not to join the “Fair” for Government Procurement because they could not bear the full obligations and the more developed economies were to conclude this area reciprocally among themselves with the smaller economies unable to benefit, would that be equitable? This is unlikely to be so. A high proportion of the procurement by Governments of the smaller economies is through loans or grants from mulitlateral or bilateral sources for which the larger and more developed economies would have a right to tender under the rules of those institutions. On the other hand, the small proportion and the size of projects large economies finance under such arrangements would rule out the smaller economies competing successfully for any meaningful share of those Governments’ Procurement.

Further, the Jury is out on whether a Free Trade Agreement structured on Paragraph 10 of the Declaration, that is, a core of common rights and obligations and a multiplicity of Annexes covering arrangements among assortments of countries not based on any principle, but self-selection, could meet the WTO conditions. Principles such as the Most Favoured Nation (MFN) treatment for countries, at least at the same level of development or below, could arise in an FTAA framework.

To rescue the FTAA, it might be necessary to go further. It might be necessary to use the opportunity created by the November Declaration to step back and to do a fundamental re-think of philosophy, content, approach, process and timing. The Special Summit in February provides the opportunity. Beyond that Summit the die will be cast. Let it not be for a continued antagonistic, unbalanced relationship in the Hemisphere, where each Meeting of Ministers, each Summit, will occasion millions of dollars in security expenditure; millions of dollars in loss economic activity and property damage, and the image of a Hemisphere at war, while unemployment and poverty spiral. To rescue the FTAA, the Summit might, at a minimum, need to –

(i) restate the philosophy of equitable cooperation to achieve the objectives that were set in 1994 – to raise the standard of living, improve working conditions of all the people in the Americas and better protect the environment. It could require of Trade Ministers an impact assessment of the proposed regime and the probability of the achievement of the objectives;

(ii) re-commit to a comprehensive and internally consistent Agreement in which Member States do not have to choose what they like from a Menu, but in which the commitments are structured to meet the capacity and objective circumstances of countries, and rights are structured to assist in building the capacity to assume greater obligations overtime. It might attach priority, not just to the restatement of the recognition, but to the treatment of the differences in levels of development and size of economies as a confidence and capacity-building exercise;

(iii) instruct a format and approach to the construction of the FTAA which de-emphasises antagonistic negotiations and promotes constructive collaboration and acceptance. In this context, promote a greater use of the collective resources of the Hemisphere to provide technical analyses and information which can be used by all the Parties to justify the arrangement and reach consensus on contentious issues;

(iv) promote a process which recognises that the construction of a Project as grand as the FTAA, in a changing global environment, must itself be dynamic, and will take time for completion. The nine years since the Miami Summit have demonstrated that building understanding, changing production structures and creating capacity in a Hemisphere as large and diverse as the Americas take time. In the establishment of targets, realism should be allowed to temper enthusiasm and expediency;

(v) revise the timeline for the achievement of agreement and possibly for the commencement of implementation of the FTAA. This will admittedly be difficult for the Summit, which had itself in Miami resolved to conclude the negotiations by 2005, and in Quebec, compressed this to December 2004. Given the state of negotiations at the end of 2003 where vision is still being clarified, the absence of overall projections of likely benefits and their distribution or impact assessments, and that there are no agreements on, or assessment of measures for the actual treatment of, issues as fundamental as the differences in levels of development and size of economies, it is difficult to imagine how the attitudinal and process changes could be achieved and construction of a realistic and balanced agreement completed within 12 months. Nothing in the experience to date would support that possibility. Fortunately, the time pressure is self-imposed. There is no pressure from the population of the Hemisphere which, at this time, is more fearful than hopeful for a 2005 implementation. Heads of State and Government could release the pressure, even without changing their original Miami date by extending the construction period through 2005.

Chairman, the FTAA process is at the cross-roads. It is still potentially a great promise for the hemisphere, but the current path and trajectory are away from the goal. Fundamental changes are required. We can serve the cause best by advising Heads of State and Government, that change is required and the time in which to make such change.

In closing, let me compliment the President, Trustees and Executives for re-branding the Organization. It was most important and effective with it carried the name CCAA and focussed on the Caribbean and Central America. I now challenge them to consider one other change, to really concentrate the focus. Consider a future in which the conferences are systematically rotated Miami, Central America, Caribbean, . . . This will be highly significant as we move investors and supporters of development into the smaller economies of the Hemisphere.