The Free Trade Area of the Americas: Cornerstone for Building a Community of the Americas
The time for decision on the proposed Free Trade Area of the Americas (FTAA) is fast approaching. In the next few weeks, the Congress will vote on trade legislation that may determine the future of this visionary initiative. The vote on President Bush’s request for Trade Promotion Authority (TPA) to negotiate the FTAA and other trade agreements will have historic implications and consequences. It will not only determine the future of trade relations in the Western Hemisphere, but also whether a future “Pan-American Community” can be built on the foundation cornerstone represented by the FTAA.
The dream of a Pan-American Community is an old one. In 1826, Simon Bolivar, the Liberator of South America, convened a hemispheric conference to begin the process of building a sense of community among the newly independent nations of the Americas. The United States (US) was invited to the conference, but its delegation failed to arrive in time to participate in this historic meeting, primarily because the United States Congress delayed its approval of the President’s request to send a delegation to Panama. With that unfortunate experience, US-Latin American relations over the next century and a half were destined to be plagued by misunderstanding and, at times, conflict.
Franklin D. Roosevelt’s Good Neighbor Policy and John F. Kennedy’s Alliance for Progress were the first positive initiatives to reestablish the cooperation that Bolivar had envisioned for the Americas. However, it was not until the establishment of the North American Free Trade Agreement (NAFTA), under the leadership of President George H. W. Bush and President Bill Clinton, that the leaders of the hemisphere were convinced that significant mutual benefit and a genuine spirit of community could be achieved through expansion of trade relations throughout the hemisphere.
NAFTA’s spectacular success since it went into effect in 1994, has given new impetus to the creation of a Western hemisphere free trade area. Such a visionary initiative could not have been imagined before NAFTA, but now is on the brink of being realized. Once again the US Congress can decide whether or not this great opportunity for improving the economies of all the nations of the hemisphere and strengthening the political relations among them, will be realized. As of late October 2001, the Congress is engaged in a lengthy debate on whether or not to grant the President of the United States the necessary trade promotion authority to negotiate a Free Trade Area of the Americas and other international trade agreements. Let us hope that on this occasion, the Congress will act in a timely manner, and in a way that will recover the opportunity it lost for the United States in 1826.
Secretary of State James Blaine kept the Pan-American dream alive when he convened the first Inter-American Conference in 1888 to consider a hemispheric customs union. Although strong commitment to increase commercial cooperation among the Americas was agreed upon by the conferees, the follow-through by the Latin countries on this commitment was very disappointing and another opportunity to unite the Americas through trade expansion and economic cooperation was lost.
For most of the next century following Blaine’s initiative, most of the American nations, including the United States to a lesser degree, pursued protectionistic policies that greatly hampered inter-American trade and isolated countries from their neighbors. In Latin America, the concept of self-sufficiency was carried to the extreme when countries undertook to produce products at home at much higher cost and of inferior quality to those that could be purchased from other countries. They justified their protectionist policies as necessary to protect their infant industries, not fully realizing the long-term damage they were causing to the future development of those same industries. The result was economic inefficiency, restriction of commerce and lack of communication among the countries of the Western Hemisphere.
Cold War geopolitics also influenced the development of hemispheric trade policies. During the 1960s, the birth of regional trade groupings promised a freer movement of capital, goods and services among Central and South American nations. Regional economic integration was seen by US policy makers as the prescription to cure Marxist influences in a region beset with political instability and economic stagnation. The Central American Common Market, and the Latin American Free Trade Association (LAFTA) were attempts to dismantle protectionist walls. However, after initial progress, these experiments failed, partially due to the emergence of diametrically opposed governing regimes within the groupings. The fall of the Berlin Wall allowed advocates of free trade to promote new formulas for economic growth based upon the principles of NAFTA.
The creation of the North American Free Trade Agreement has done much to reverse the trend of protectionism, renew the call for hemispheric unity, and inspire the FTAA initiative. Following the negotiation and approval of NAFTA by the United States, Mexico and Canada, most of the other Latin American countries indicated their desire to be part of a hemispheric-wide initiative to expand free trade. Many of them, including Chile, which had expected to become the next member of NAFTA, were disappointed that the US Congress refused to grant an extension of President Clinton’s fast-track authority and thereby delayed any US negotiation of other bilateral and multilateral free trade agreements beyond the end of his term of office.
The current mood of bipartisanship in Congress, resulting from the tragic events of September 11, 2001, has given new life to President Bush’s request for the TPA needed to complete negotiations on the FTAA. Prior to that fateful day there was serious doubt that Congress would approve the President’s TPA request. Now the prospects are brighter that the January 2005 deadline agreed to at the Quebec Summit for completion of the FTAA negotiations and approval by the member countries can be met.
The impressive success of NAFTA—the crucial building block for the FTAA—is a persuasive reason why the United States should commit to the establishment of a hemispheric free trade area. As US Trade Representative Robert Zoellick stated, “NAFTA has helped to create a North American Community of prosperity, democracy, and hope.” Since January 1994, when NAFTA went into effect, US trade with Mexico increased from $81 billion to $247 billion in 2000. US exports to Mexico and Canada, combined, increased 104 percent during that same period, while US trade with the rest of the world increased by only half of that amount.
During that same period, employment in Mexico grew 22 percent and generated two million jobs. Simultaneously, Canada’s employment grew ten percent and generated 1.3 million jobs. In the United States, employment grew more than seven percent and generated about 13 million jobs.
NAFTA was instrumental in helping Mexico to recover from the financial crisis it suffered as a result of the peso’s devaluation during 1994-1995. Unlike the previous crisis in 1982, it took only seven months for Mexico to restore its credit worthiness in international financial markets. Mexico’s rapid recovery also helped US exporters in that country to void a long-term decline. In only seventeen months, US exports to Mexico were at the same level achieved prior to the peso crisis. NAFTA also greatly contributed to increasing Mexico’s gross domestic product (GDP) by 8.3 percent between 1993 and 1999.
NAFTA also is credited with making possible the political transformation that has made genuine democracy a reality in Mexico. In 2000, Mexico elected its first President from the opposition in more than seventy years. Moreover, the climate of openness created by NAFTA also has led to a more independent news media. At the same time, the debate about protecting the environment during the NAFTA approval process has inspired Mexico to enact legislation to improve environmental conditions that have been neglected for many decades.
Based on the solid success of NAFTA, there is considerable reason to assume that the FTAA will multiply that success in expanding trade, increasing job production, and enhancing economic and political cooperation among the American nations.
NAFTA’s success is dramatically confirmed by the fact that the US now exports more to Mexico than to Britain, France, Germany, and Italy combined; and it exports to Canada ($179 billion) almost as much as to all of Europe ($187 billion). Building on NAFTA’s success, the FTAA can not only enhance trade in the Americas, it can provide a concrete basis for inter-American cooperation on a host of critical issues, including economic development, improving access to health and education, strengthening democracy and security, combating drug trafficking and terrorism and protecting the environment. All the nations of the Western Hemisphere have a vital stake in finding solutions to these problems, which recognize no national boundaries and require unified action to resolve them successfully.
The three Summits of the Americas held in Miami (1994), Santiago (1998), and Quebec (2001) have devoted as much time to discussion of these social and political issues as they have to negotiation of the FTAA. The summits have provided forums for the hemisphere’s chief executives and their cabinet officials to discuss these issues and to formulate plans and programs to address them. The FTAA is seen as a motor force for needed economic and social reform and a formula for more harmonious relations among the nations of the hemisphere. Thus, the FTAA, as the cornerstone of this cooperation, has already engendered a new spirit of community and cooperation among nations of the Americas.
The creation of the Free Trade Area of the Americas would be a historic step towards realizing Bolivar’s dream of a Pan-American community. In the days following the tragic events of September 11, the world has come together in a spirit of community rarely witnessed. In the United States, our citizens and our government have realized the value of community at home and building an international coalition to deal with the deadly terrorist threat confronting the civilized world. These events have driven home the efficacy of interdependence among nations and mutual cooperation.
It should now be obvious to all that creating healthy economies throughout the Americas is in our nation’s best interest. This is a compelling reason for strengthening trade relations in our hemispheric neighborhood and building a strong “Community of the Americas.” Implementation of the FTAA would presage the dawn of a new era for this hemisphere, one of increased prosperity, more stable governments and a mutual trust among nations.
Simon Bolivar’s dream for building a Pan-American Community was dashed by contention and unbridled self-interest among the newly independent countries of Latin America, and a dilatory US Congress unwittingly lost a great opportunity for the United States. We should not lose this present opportunity to bring it to life.
* Editor’s Note: Ambassador Valdez presently practices international law in Washington, DC and is considered one of the architects of the North American Free Trade Agreement and the proposed Free Trade Area of the Americas.
Chief of Protocol, 1979-1981;
Assistant Administrator for Latin America, United States Agency for International Development, 1977-1979