Free Trade Area of the Americas - FTAA

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Trade Negotiations

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June 11, 2002

Original: Spanish
Translation: FTAA Secretariat



Name (s) JosÚ ┴ngel Tolentino and Edgar Lara
Organization (s) Fundaciˇn Nacional para el Desarrollo (FUNDE)
Country El Salvador




The comments included in this document refer to the FTAA Draft Chapter on Agriculture and, more specifically, to Sections Two and Three, which address the subjects of Market Access, Tariffs and non-Tariff Measures and Export Subsidies, respectively.

First comment:

1.1 The FTAA agriculture negotiations seem to be contingent up the decisions of the WTO. Throughout the Chapter it is evident that, overall, the negotiations are aimed at liberalizing trade in farm products; nevertheless, several of the key decisions for achieving this seem to depend on progress in the WTO negotiations. Certain questions must be raised concerning this overlap of functions and responsabilities. On the one hand, although it is recognized that market access and trade in agriculture give rise to more and more controversies at the multilateral level, the subordination of the results of the negotiations in the FTAA to the dynamics of the WTO casts doubt on the wisdom of including a chapter on agriculture in the regional agreement. On the other hand, restricting the FTAA negotiations to the less sensitive areas of regional agricultural trade would eliminate the possibility of opening a serious debate on agricultural trade policies and practices in the hemisphere, particularly in its relations with the United States, whose farm sector has remained highly protected against exports from the hemisphere and has been the ongoing cause of greater distortions of world and regional agricultural trade.

1.2 Should the agricultural draft be accepted in present circumstances, Latin America might find itself in the unacceptable situation of having to open its national markets for food and agricultural products without obtaining a reciprocal reduction in the protectionist policies of the United States, which could seek an indefinite postponement in the implementation of future resolutions to emerge from the WTO. This would leave unchanged a playing field already very uneven for those countries from which greater openness to imports is being demanded, as against others which would maintain insuperable barriers to entry into their markets.

1.3 Likewise, It might be counterproductive for the progress of negotiations on the agriculture chapter to be essentially subordinated to WTO decisions without a prior, full evaluation of the impact of the Uruguay Round agriculture agreements on hemispheric economies, especially the more vulnerable of them. This might well lead to the repetition or intensification in the FTAA of the adverse effects that the multilateral trade system has had on the food and agricultural input sectors of most developing countries. In this regard it is helpful to analyze some recent ECLAC studies, which show quite clearly the limited results achieved by these countries under these agreements. In practice, these agreements reflect the situations and interests of the industrialised countries, which, thanks to their economic influence, guided the discussions on trade in agricultural products and shaped the resulting treaty. A fair trade agreement, if it is to make an effective contribution to the development of the countries concerned, ought to aim to eradicate these practices.

Second comment:

2.1 The principles of National Treatment and Most Favored Nation are not the most conducive to a balanced agricultural agreement. The negotiations in progress in the FTAA on agriculture aim to create a typical free trade zone, based on the principles of National Treatment (Section Two, Art. 3.1) and Most Favored Nation. These two principles are the backbone of progress in the negotiations and affect, across the board, all the sections and all the agreements reached. We believe that the introduction of these principles into agricultural trade in the FTAA runs counter to the interest of countries like El Salvador, since on the one hand it would result in the complete deregulation of their agricultural market, and on the other it would make it more difficult for the state to carry forward its own national development plan. Furthermore, the introduction of these principles into the text of the negotiations would eliminate the possibility of achieving special and differential treatment based on recognition of the different levels of development of agricultural production structures in the countries or on the huge differences in size and development of their economies.

2.2 By FTAA standards, MFN treatment would mean that if one country grants an agricultural concession to another, it must grant the same concession to all other member countries. Reciprocity and equal treatment, in the face of asymmetric and unequal realities, is not synonymous with fair treatment, but rather implies exclusion of and discrimination against less developed nations. Likewise, given the marked asymmetries, granting reciprocity and equal treatment to agricultural products, investments and firms of different countries, amounts in practice to discrimination in favor of products, investments, and firms from industrialised nations. The incorporation of this principle into FTAA trade in agriculture would work in favor of the more developed agro-industries to the detriment of countries with traditional agricultural sectors, and reduce the chances of bringing about balanced and sustainable rural development in the hemisphere.

Third comment:

3.1 No sector of regional trade is more distorted than agriculture, and the FTAA offers no solutions. One of the main problems in hemispheric agricultural relations, to which no solution is discernible in the draft text used in the negotiations, is that of the distortions caused by the massive and increasing use of subsidies and the application of all kinds of barriers by the industrialised countries of the region in favor of their agricultural production and to the disadvantage of Latin American producers. On the one hand, within the GATT, the WTO and now the FTAA, pressure is being applied for countries to lift restrictions and open their agriculture and food markets to exports as quickly as possible. But on the other hand these same countries operate a complex and insuperable system of incentives, including protectionist measures of every kind (antidumping measures, export subsidies, import duties, non-tariff barriers and product standards, among others, to protect their national producers against external competition. In practice these policies result in the ruin of countless producers.

3.2 The trade barriers imposed by the United States, for example, are particularly harmful because a large part of Central American production is primary products, intended for the markets of that country; hence, this reduces the possibilities for economic growth and job creation. NAFTA (the Mexico, US, and Canada Free Trade Agreement) has shown in its seven years of existence that the adoption of this system of rules and its incorporation into agricultural trade agreements have had a highly negative effect on poverty, income and future development of countries. For example, the practice of exporting agricultural surpluses to regional markets at below production cost is one of the most pernicious aspects of the trade policies of the industrialised countries, on which very little progress is being made, even in the WTO.

3.3 Despite the complexity of these issues, nowhere in the FTAA agriculture text is any guarantee being offered that these distortions will be resolved in the course of the negotiations; on the contrary, the core parts of section three, on export subsidies, once again shift the responsibility to the WTO, where the political and economic influence of the multinational firms enables them to dictate agendas and outcomes.

Fourth comment:

4.1 Agriculture agreements should aim at Special and Differential Treatment. We consider that fair treatment for foreign agricultural firms, investors, or producers is a desirable in the relations among the states of the hemisphere. But throughout the text it becomes evident that the negotiations are guided by the principle of reciprocity among parties, thus reducing the chances of achieving special and differential treatment in keeping with the different levels of development and the social and environmental needs of the countries. A trade agreement among such asymmetrical countries will have different and unequal impacts. In the end, industrialised countries with more highly integrated production structures, access to state-of-the-art technology, and agricultural subsidies, dismantle entire strategic areas of the productive fabric of the less developed countries. The effects of the implementation of NAFTA on strategic areas of Mexican food production are eloquent testimony to the adverse results of accepting indiscriminate opening of agricultural markets in a free trade agreement.

4.2 The achievement of a balanced trade agreement by means of special and differential treatment would seem to be a more reasonable outcome of the FTAA agriculture deliberations. Such treatment would imply, inter alia, that countries with more vulnerable economies would be favored by policies to strengthen their farm production, promote food security, and help to raise the living standards of the rural population. These provisions would be designed to protect the producers in the poorer countries against the increasing quantities of subsidizsubsidized imports, and to improve the efficiency of national food and agricultural production systems. The specific instruments tend to exclude from FTAA negotiations crops intended to ensure for food security, in keeping with the specific needs of each country, and provide elbowroom for them to raise tariffs against subsidized agricultural imports harmful to domestic production. This agreement requires, in addition, not only taking into account the smaller economies, as stated in the text (Section one Art. 2c) but also making sure that the agreement includes mechanisms for Economic Complementarity and Cooperation, to enable those economies to catch up with the developed ones.

4.3 Addressing the asymmetries requires practical steps to help reduce inequalities: channelling of resources toward reorganization and modernization of the agrifoodsector; technological and entrepreneurial upgrading; substantial retraining of the work force; development of financial markets; public and private sector institutional capacity building; substantial improvements in the productive and social infrastructure of the sector, and assistance in complying with international phytosanitary and quality standards, among other steps.

4.3 Incorporation of special and differential treatment into trade negotiations would entail redefining existing FTAA negotiating rules and processes. It would mean reviving the principles and schemes of preferential, differential and non-reciprocal agreements for underdeveloped nations, as well as recognizing the right of countries to apply performance requirements and national regulations for foreign agricultural exports when the common good so requires. Adoption of these rules in the FTAA would assume the revival of other negotiating options and mechanisms recommended by international organisations such as ALADI, UNCTAD and ECLAC. It is our belief that these methods would provide a more useful and appropriate framework for governing agricultural trade relations among the countries of the hemisphere.

4.4 In conclusion it should be emphasised that the timeframe for free trade as it is being shaped in the FTAA looks like the end of the road, rather than a step on the way to economic integration or economic union. Although free trade areas are considered to be the initial phase of a process of economic integration, this is not happening in the FTAA, for no specific mechanisms for the construction of a broad, integrated and long-term agenda are to be found in the texts.

San Salvador 30 April 2002


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