February 16, 2004
Translation: FTAA Secretariat
FTAA - TRADE NEGOTIATIONS COMMITTEE
THE TREATMENT OF SMALLER ECONOMIES AND THE DIFFERENT LEVELS OF
A FREE TRADE AGREEMENT IS NOT CREATED BY TARIFF ELIMINATION ALONE
In the negotiations for the Free Trade Area of the Americas, the issue
of the treatment of the abysmal differences in the size of economies and
of the extraordinary differences in the levels of development has still
not been satisfactorily resolved.
A project to create a free trade area that will truly be an opportunity
for all the countries must set the necessary mechanisms into motion that
will contribute specific and effective responses so as to reduce the
immense initial inequalities.
Thus far, a clear and precise mandate on the specific measures that need
to be taken to effectively contribute to a significant reduction in
those profound disparities has not yet been issued.
The steps to which the most attention has been paid focus on
strengthening countries’ technical capacity to take part in the FTAA
negations, but no decisions have yet been made on the urgent steps
needed to reduce and eliminate the profound inequalities among our
If the actions needed to improve social and production conditions are
not taken, highly unequal countries would be treated as equals and
forced to compete under the same rules, despite underdevelopment and
weaknesses of some of them. Equal treatment for unequal economies can
only favor the largest at the expense of the weakest and least developed
Only 14 months from the conclusion of the negotiations, there is an
urgent need to move forward from technical assistance measures
and the extension of deadlines for the fulfillment of FTAA
commitments and disciplines to the creation of the mechanisms and funds
required to correct the asymmetries and disparities among the countries
now negotiating the Agreement.
A failure by the FTAA Agreement to address the asymmetries and
disparities among the countries could have unforeseen consequences,
particularly considering the fact that the "General Objectives and
Principles” of the negotiations1 state that the “the rights and
obligations of the FTAA shall be shared by all the countries.” This
implies the requirement of a reciprocity principle among highly
unequal economies and economic agents.
Neither technical assistance to allow countries to adapt nor periods of
a few years address these problems. The FTAA negotiations can and should
achieve much more. Venezuela has said time and again that merely
providing technical assistance for countries to be able to take part in
the negotiations is not an adequate way of addressing the gap between
the smallest and least developed economies and the large powers of the
To move toward reducing these profound inequalities, we must face this
challenge and assume firm commitments, which will necessarily entail a
significant transfer of resources from the largest and most highly
developed countries to the smallest and least developed economies.
HOW ARE THE STRUCTURAL CONVERGENCE FUNDS TO BE FUNDED?
The real possibility of the FTAA becoming an authentic opportunity for
all is contingent not only on the liberalization of trade and
investment, but also on:
i) Investment in improving conditions in countries’ production and
ii) Strengthening of the countries’ technological and innovative
iii) Investment in human capital; and
iv) Changes in the prevailing conditions of competition in the
Hemisphere’s main markets.
A free trade area will be an opportunity for
all, if and only if the largest and most developed countries of the
Hemisphere share the political, economic, and financial costs of opening
spaces for production in the weakest countries. Solidarity is the key to
ensuring that a free trade area becomes the opportunity for all that it
is touted to be.
Hence, Structural Convergence Funds to correct the disparities in
infrastructure and services, technological and innovative capacities,
and human capital among the countries must be created in order to
prevent a free trade area from becoming a space with some winners and
many losers. Structural and technological convergence is essential to
ensure that the FTAA becomes a win-win alliance.
A possible debate on the need for Structural Convergence Funds has been
obviated by the various proposals made on the funds over the course of
the FTAA negotiations.
Now more than ever, the all-encompassing nature of the Agreement, as
well as the significance of economic relations in the Hemisphere and the
free flows of capitals, prompts us to insist on the need for funds as a
mechanism to address the asymmetries in the degrees of development and
size of the economies in the Americas.
Given these unmet needs, Venezuela has availed itself of its right as a
nation which, in accordance with its level of development and economic
size, is classified as a small, underdeveloped, least developed, or
developing economy—or in any other category devised through free
thinking—in order to propose the creation of Structural Convergence
Funds (SCF) in various FTAA negotiating forums.
Such SCFs would have two important characteristics:
1. Any classification of countries must take into account economic,
social, and financial variables that allow for an approximate
description of each country's reality. Venezuela proposes the following
a. export diversification, gauged as the five largest export products’
share of all exports2. Identification of SCF funding sources in:
b. degree of concentration in exports’ geographic destination,
c. degree of dependence on primary-product exports,
d. level of industrial development
e. poverty, real per-capita gross domestic product, Human Development
Index (excluding per-capita GDP), percentage of impoverished persons
within the population, and levels of income inequality expressed through
the GINI index,
f. any other criterion needed to broaden the necessary perspectives,
a. the forgiveness of a percentage of foreign debt,
b. withholding a percentage of outstanding foreign-debt payments,
c. a tax on speculative foreign-exchange transactions,
d. contributions from foreign investors,
e. grants from international agencies.
Fourth Ministerial Trade Meeting, op. cit., Annex 1.