The FTAA is Dead

Two developments this week lead me to that conclusion. First, as this story describes, the framework agreed to in Miami this week was a shadow of the original intent, since it allows individual countries to pick and choose which parts of the FTAA they want to sign on to. So, for example, Brazil can choose to adopt the portion of the FTAA that requires it to lower tariffs while opting out of the portion of the FTAA that would require it to harmonize its intellectual property rights or government procurement policies. And the US can opt out of the portion that it doesn’t like, which would require it to reduce agricultural subsidies.

In principle, I like the idea of flexibility, but it raises the question of what value is added by the FTAA agreement. If countries opt only for the portions of the agreement that they like, with no assurances that anyone else will opt for the same portions, then couldn’t they have just done those things (such as lowering tariffs) without all of the hassle of an FTAA in the first place?

The second development was the surprise announcement by the US Trade Representative, Robert Zoellick, that the US would pursue bilateral trade deals with six individual Latin American countries (Colombia, Peru, Ecuador, Bolivia, Panama, and the Dominican Republic). Some news reports have suggested that the US is doing this to apply pressure to the other Latin American countries to hurry up and agree to the FTAA.

But I have a different reading. I think that the Bush administration has decided that it is easier to do bilateral deals (which it is), and realized that in one-on-one negotiations with weak Latin American countries, the US pretty much gets to dictate the agreement. On a practical level, a web of individual bilateral deals will make any future FTAA negotiations that much more complicated (in addition to making it more complicated to do business in Latin America), since all of those individual agreements will have to be taken into account. So I think that this move signals an unspoken abandonment of the multilateral FTAA in favor of less ambitious, easier deals. That’s why I’ll be very surprised if any substantive FTAA agreement is reached in the next few years.

Is that a bad thing? Personally, I have mixed feelings about the FTAA. While I do believe that trade generally makes both trading partners better off (see numerous posts from this week), I’m not convinced that an FTAA is the way to get there. So I’m not going to lose any sleep about this effective end of the FTAA initiative. I do wonder, however, what this says about this administration’s general level of engagement with Latin America as a region. Of course, neglecting relations with Latin America has been a consistent theme of the Bush administration since it entered office, so why should they change now?