The creation of the Free Trade Area of the Americas (FTAA) is not independent ofthe body of principles, norms and instruments existing in the Inter-American System on the one hand, nor of the cooperative initiatives of the Summit of the Americas process, on the other.On the contrary, unlike trade negotiations in the World Trade Organization (WTO) the FTAA should be seen, and was in fact so conceived by the Leaders of the Hemisphere, as part of a broad agenda to promote democracy, prosperity and sustainable development, and to eradicate poverty in the Hemisphere.This “Partnership for Prosperity” agreed to at the First “Summit of the Americas” in Miami in 1994 and reiterated at the Second Summit in Santiago in 1998, is a strategic alliance, a new comprehensive economic, social and political pact among the countries of the Americas.It was perceived and well received in most Latin American countries as a new post-Cold War cooperative initiative that could also reinvigorate the principles and instruments of the Inter-American System.


However, five years into the process of summitry the reality is that there are too many unanswered questions with respect to the fundamental strategic course of the incipient community of nations of the Americas. In particular, there seems to be a certain dis-articulation among some components of the strategic and integrated vision developed in Miami.It is not only that some initiatives have advanced more than others, which to some extent is to be expected in such a complex process, nor that in practice there has been a process of compartmentalization which up to a point responds to institutional divisions of labor.These are indeed important issues that merit attention.But the point here is a different and in a sense a deeper one.It is that the strategic vision that established and recognized the interdependencies and synergies in such key areas as democracy, trade, the fight against poverty, labor and environmental issues, seems to have unraveled to some degree in the political discourse and in the policy actions of governments.[2] 


The paper analyses this apparent loss of strategic vision and some of its consequences from the point of view of the trade and integration initiative. Specifically, the paper argues two main points: First that, if correct, this unraveling poses a potentially serious risk not only to the Summit process itself but also in particular to the trade initiative.Second, that progress in the Summit Initiatives and Plan of Action requires maintaining a strategic, coherent and multi-faceted program of policy dialogue and cooperation across the range of issues included in the Summit.In particular, maintaining and strengthening this strategic vision is essential to the conclusion of the FTAA negotiations by 2005 and to successful implementation after that date. 


The following section points out the unique features of the FTAA negotiations and some key differences between the FTAA and the WTO processes.Section II elaborates on four key aspects of the interdependence or linkages between the trade agenda in the Americas and the rest of the Inter-American agenda.


I.     The WTO and the FTAA Negotiations: Some Distinctions 

The multilateral trading system is one of the major achievements in the area of global governance of the 20th Century.Its performance has been quite satisfactory in its central objective of progressively liberalizing trade.Some argue that this performance has been even better than that of the world financial system,[3] and this is attributable to three basic characteristics: clear and predictable rules, binding agreements and effective mechanisms to settle disputes. 

Regional trade negotiations and agreements can complement the multilateral system in developing the global framework of rules and of binding commitments.This is precisely how the trade ministers in the Americas conceived the creation of the FTAA: fully consistent with the rules and disciplines of the WTO.

However, there are some unique features of the FTAA that distinguish it from the WTO.

First, the FTAA’s objective is to create a free trade area, which by definition means reducing most of the tariff universe to zero, and eliminating substantially all barriers to the movement of goods and services in the Hemisphere.The WTO’s objective is also to promote free trade, however, given the wide diversity and global nature of its membership progress in the WTO is necessarily more gradual and protracted than could be expected in the FTAA. 

Second, while in the WTO there is no consensus yet on the issue of how comprehensive the trade agenda of a new round should be, a comprehensive agenda has already been agreed in the FTAA.  Furthermore, the FTAA includes negotiations in new issues such as investment, government procurement and competition policy, which have not yet been fully included in the WTO.It is also unique in the way it incorporated into the institutional structure of the negotiations a mechanism for the inputs of Civil Society, collective action on business facilitation measures, and in the way it incorporated the issue of electronic commerce, by creating a Joint Government-Private Sector Committee of Experts on Electronic Commerce. 


In addition to these internal differences in objectives and scope of negotiations, there are two external characteristics of the context in which FTAA negotiations are taking place, and in which the eventual FTAA agreement will exist, that are even more relevant in giving the FTAA a unique character. 


One is the fact that the FTAA is embedded in the context of the wider vision and the Plan of Action for Inter-American cooperation defined in the Summit of the Americas process.This cooperation agenda is quite well structured in 23 specific initiatives that were launched in the Miami Summit in December, 1994.It also has specific institutional mechanisms for political conduct, management and implementation. These mechanisms include: a Presidential Summit every three years; responsible coordinator countries for each one of the 23 initiatives; a system of horizontal Ministerial cooperation/coordination in each one of the key areas; and a Summit follow up process in which both the Summit Implementation Review Group and the OAS play a central role.In addition, the Summit process has quite an elaborate structure of institutional support from a number of key Inter-American institutions such as the Organization of American States (OAS), the Inter-American Development Bank (IDB), the Economic Commission for Latin America and the Caribbean (ECLAC), the Pan-American Health Organization (PAHO), the Inter-American Institute for Agricultural Cooperation (IICA), and others depending on the specific subject area. 


The second, no less important fact, is that the prospective members of the FTAA are already part of a body of principles, norms and legal and diplomatic instruments existing in the Inter-American System, including practical and cooperative actions for theprotection, defense and promotion of democracy and of human rights.In fact, as has been explicitly mentioned in Summit Declarations, the creation of the FTAA is premised on the existence of a community of democracies in the Americas.Given the existing norms and mechanisms for collective action, this is much more than a rhetorical point.Specifically, in the Inter-American System, in the context of the OAS, the countries have adopted multilateral procedures and instruments of collective action to address the problems created when the democratic constitutional order has been interrupted.[4]These procedures include Resolution 1080 adopted in 1991, known as the “Representative Democracy” resolution, which establishes a procedure for collective, immediate, multilateral action to protect democracy in a member state in which there has been an interruption of the regular and institutional political process.They also include a new article in the OAS Charter (Article 9, effective since September, 1997), which contemplates the possibility of suspending or excluding from the activities of the Organization a government from a member state, which has not emerged from a democratic process, or that has been constituted by the use of force.It is also of interest to note that MERCOSUR contains a “democratic clause” which allows as members of the agreement only democratic regimes.Whether any specific provision for temporary suspension of benefits in case of serious and prolonged disruption of the constitutional order could be contemplated in the FTAA, or how FTAA membership will interact with other existing provisions in the Inter-American System, are open questions.The general point of interest here is that the Inter-American System already has a number of multilateral mechanisms to exert positive influence to protect, defend and promote democracy and human rights, and the creation of the FTAA can only be expected to strengthen them. 

Thus, the FTAA negotiations are not only different as a trade negotiation in some fundamental ways to the WTO process, but are advancing in a very different political context in terms of systemic interdependencies, cooperation initiatives among the eventual partners and in terms of institutional instrumentalities.They are part of the broader strategic agenda of hemispheric cooperation as well as of the broader legal architecture of the Inter-American system.The argument of this paper is that this poses opportunities for the creation of the Free Trade Area of the Americas, its rationale and for building support for it, that are not present in the WTO context.Some of these opportunities are explored next.


II. The Links between Trade and the Rest of the Inter-American Agenda

This section selects four key areas where trade and other initiatives of the Summit process intersect in strategic ways, and which require clear rationales and strategies for progress.

1.Facilitating the Integration of the Small Economies 

The first is the challenge of integrating the small and relatively less developed economies into the FTAA.This is an important and strategic area in the hemispheric dialogue.Even though in the strict terms of economic and market size more than 90% of the FTAA combined market is accounted for by the three NAFTA partners and two of the MERCOSUR members, the FTAA concept is inclusive of the other 29 countries in the hemisphere.And just as the FTAA concept will not be fully realized without a Brazil or a Mexico, it would also not come to fruition without the Caribbean, Central America or the Andean Community countries. 


This is so by the evident reason that the leaders defined it in this way, but there are fundamental reasons for it.They are related to the fact that regionalism in the Western Hemisphere is not seen just as based on an economic rationale, but also on a collective security, political and strategic rationale.Of course, just what are the economic, political and security objectives that each country attributes to the Summit Plan of Action and to each one of its components is a very interesting, but very complex, question.Not all countries, or sectors within countries, see the same rationale in the hemispheric initiatives from the point of view of their national interests and priorities (or indeed sectoral interests).In this respect, one of the main challenges of leadership in the Hemisphere is to keep explaining to the citizens at large the economic and political rationales of the regional exercise in trade negotiations and in Inter-American cooperation in which we are embarked.Of course this is not easy to do particularly when you do not have a sufficiently strong national consensus or sense of priority about this task.What is extraordinary, is the fact that 34 countries, as diverse as those in this hemisphere, found common ground in the principles, values and objectives expressed in the Summit Declarations, as well as in the many Ministerial Declarations emerging from the Summit Process. 


Now, the point is that facilitating the integration of the smaller economies is not only an economic challenge.Rather, this is a key objective in which trade and the other issues in the hemispheric cooperation agenda interact closely and in very particular ways.Successive Summit and Ministerial Declarations have recognized the challenge of integrating in a free trade area economies which are very different in terms of size and level of development.In the San Jose Ministerial Declaration it was agreed that the FTAA will be a single undertaking, that all countries will be subject to the same level of discipline, and that differential treatment will be possible, not in final obligations, however, but rather in terms of different transition periods to achieve the agreed levels of discipline.The most likely scenario is that these transition periods will be defined on a country by country, sector by sector and product by product basis, and as a result of the negotiations. 


Some small economies have repeatedly expressed concerns about the need to increase aid flows, and some countries have emphasized the need for some serious additional funding, beyond the present trade-related technical assistance efforts.While concerns about the importance of funds for development finance are legitimate, should they be part of the trade negotiation?The Trade Ministers have already agreed that the answer to this question is no and it was in these terms that the FTAA negotiating process was launched by the Leaders in Santiago. One of the reasons for this answer is precisely that the creation of a FTAA is part of the larger picture of hemispheric cooperation and that many parallel efforts are being done in areas relevant to economic integration and economic development.For instance, under the title of “Promoting Prosperity Through Economic Integration and Free Trade”, the Miami Declaration of Principles and Plan of Action contains 6 initiatives which complement the FTAA in the economic area, these are: 

• Capital Markets Development and Liberalization 
  
• Infrastructure 
  
• Energy Cooperation 
  
• Telecommunications and Information Infrastructure 
  
• Cooperation in Science and Technology, and 
  
• Tourism 

So while conceptually it is clear that development requires both trade and financial flows, as well as aid flows, and all these are components of the Summit of the Americas vision and Plan of Action, in practice the trade initiatives and the finance initiatives are organized in parallel tracks.The smaller economies accepted this approach under the understanding that there is to be significant progress in the other elements of the larger hemispheric strategic alliance. 


The key difference between trade and the other initiatives, however, is that the trade agreement will be a legally binding contract, while most of the other initiatives consist of cooperation efforts and voluntary pledges for financial and other cooperation resources.This fundamental difference serves to emphasize the importance of maintaining the political commitment to the overall strategic alliance nature of the Summit of the Americas process as regards the issues that concern the smaller economies. 


2.Environmental and Labor Concerns. 

A second set of linkages among relevant hemispheric issues is between trade and labor, and trade and environmental concerns.The relationship between these issues is particularly important for the achievement of the 2005 objectives because there is a major difference in the positions of the US and to some extent Canada on the one hand, and most of the Latin American and Caribbean (LAC) countries on the other.LAC countries believe that more trade and investment, not less, and the ensuing economic growth actually boost labor and environmental standards.And they are willing and, in fact are working on an agenda for cooperation on labor and environmental issues that complements trade negotiations, but they are generally united against linking trade and labor, and trade and environmental issues in trade negotiations and agreements. 

Now, why is this so?It is common sense and a matter of fact that close links do exist in the real world between trade and labor issues, just as there are between trade and environmental issues.Thus, a position that seemingly rejects such a linkage appears on the surface as quite unreasonable. How is it justified?This is not the occasion to attempt a comprehensive answer to this question.[5]However, one of the fundamental reasons relates to the basic asymmetry in market size and relative importance as trading partners between the US on the one hand, and LAC countries, on the other.In reality, the US is the only country that can threaten with credibility and actually produce damage, in many cases disproportionately so, by closing its market to the other trading partners.So, accepting the link between market access or trade sanctions and labor issues is, in practice, a way of institutionalizing unilateralism in a multilateral context, either in the WTO or in the FTAA.No win-win situation is perceived by LAC countries in this. 


Other concerns, shared by many in the United States, are that using the FTAA or the WTO as a forum for negotiating and enforcing labor and environmental standards distracts them from maintaining their focus on trade, endangers further trade liberalization and raises the risk that trade will be restricted in the name of apparently good causes but ultimately in the service of protectionism. 


To avoid misunderstanding it is important to stress what is not entailed in the opposition of LAC countries to linking labor or environmental issues to trade. Let us take the case of labor.

1. LAC countries are not saying that trade and labor issues are unrelated. They recognize that there are important relationships between trade and labor as well as trade and environmental issues. What they do not want is to link them in trade agreements or trade negotiations, and particularly not to link them to market access and trade sanctions. 
   
   

2. The opposition to linkage is not because LAC countries have a policy of violating workers rights, or that these countries see themselves as having a competitive strategy based on exploitative conditions.LAC countries have signed an important number of ILO conventions protecting core labor rights.Of course, there are problems of enforcement and compliance, but one thing is to find cases of violations and quite a different one to suggest that this is something promoted by governments as a matter of policy. 
   
   

3. Thirdly, opposition to linkage does not mean that countries are not prepared to cooperate. In the Inter-American system there is cooperation at two levels: regional and hemispheric. At the regional level, Central America is a good example, where Ministers of Labor, including those of Panama and the Dominican Republic, meet regularly to undertake joint actions under the auspices of the regional ILO office. The main initiative, however, is hemispheric.Ministers of Labor of the hemisphere meet every two years. At their meeting in Viña del Mar, Chile, in 1998 they agreed on a Plan of Action, and established two working groups: one on Globalization of the Economy and its Social and Labor Dimensions; and another on Modernization of the State and Labor Administration.They developed quite a comprehensive program of cooperation, including issues such as: the role of the Ministries of Labor, employment and the labor market, vocational training, labor relations and basic workers’ rights, social security, health and safety, enforcement of national labor laws and administration of justice in the labor area, and social dialogue.  They met again in Washington, D.C. in February 2000, assessed the progress in implementing these initiatives and agreed on continuing the cooperation efforts.[6]