Sunday, November 06, 2005

FTAA & Bush in South America

“Hemisphere Meeting Ends Without Trade Consensus”
By Larry Rohter and Elisabeth Bumiller, New York Times, Published November 6, 2005

“Brazil, US Look Ahead to World Trade Talks”
By Reuters, New York Times, Published November 6, 2005
“Violence flares at Anti-Bush Protests in Argentina”
By Mary Milliken and Kevin Gray, November 5, 2005

On November 4-5, 2005, President Bush attended the Summit of the Americas in Argentina, which failed to make any progress toward setting up the Free Trade Area of the Americas, or FTAA. The Free Trade of the Americas would be larger than the European Union. As the dominant economic power in the hemisphere, the United States would benefit greatly from the absence of tariffs and other barriers on American good and services.

One reason the group reached a deadlock was because the United States and some Latin American countries are awaiting the outcome of the Doha Round of the World Trade Organization. The outcome of the Doha Round would place restrictions on regional trade agreements such as the FTAA.

Opposition to the FTAA is led by Venezuelan president, Hugo Chávez. President Chávez opposes the FTAA because he believes that it will “stifle or destroy local industry, roll back social safety nets and labor protections and permanently extend American political domination of the region to the economic realm.” Chávez is in favor of free trade among the Caribbean and Latin America.

The Mercosur (Brazil, Argentina, Paraguay, and Uruguay), the world’s third largest trading bloc, is not opposed to free trade, only the current FTAA proposal. Mercosur wants the United States to discontinue the billions it currently subsidizes to American agriculture, in exchange for Latin American concession on intellectual property rights, financial regulation, and market access.

After the summit reached a deadlock and during a 15 minute break, President Bush left early for his flight to Brazil. White House officials said the President had to leave for his Sunday meeting with Brazilian president, Luiz Inácio Lula da Silva. After the President left, other leaders, including President da Silva, departed as well.

On Sunday, President da Silva and President Bush agreed to put their differences aside in favor of global trade. Brazil and the United States are the two largest countries in the Western Hemisphere. President da Silva was elected in 2003.

Bush’s visits to Argentina and Brazil were marked with protests and rioting. Several thousand protestors in Argentina who oppose the FTAA and the U.S.-Iraq War gathered in a stadium to hear Venezuelan president Chávez speak. Chávez was joined by Argentine soccer legend Diego Maradona, who waved the Cuban flag and wore a T-shirt of President Bush under the words, "War Criminal." Also present was Bolivian leader and presidential hopeful Evo Morales. Rioters burned buildings, looted stores, and battled riot police.

In Brazil, Bush was greeted with the burning of the American flag and chants of “Invader! Tyrant! Exploiter of the poor!'' Protestors also burned a small effigy of Bush while chanting ''Bush fascist, you are a terrorist” and ''Fora Bush'' -- which means ''Get out Bush.''

Who's telling the truth? - Chávez or Bush?


Anonymous said...

Too bad Chavez will probably be assasinated by the U.S. There could have been potential for some Latin American unity under his leadership.

Jay said...

I would really like to see your personal input, opinion, deductions, etc on this topic...what you have up here is what I read in the papers everyday so your personal slant would be greatly appreciated....

Janel said...

Thank you for your comment jay. Through our blog, we hope to report recent developments in the areas of international finance and development. We also hope to stimulate discussion among our readers on those issues. I would not want to inhibit that discussion by creating postings that solely express my personal views.

However, in response to your comment, I personally do not think that the FTAA will not happen as Washington proposes. There are too many heterogenous economies involved and a strong possibility that the FTAA will have a negative impact on countries with smaller economies.

For example, the subsidization of American agriculture allows American goods and services to be sold in Latin American and the Caribbean below production costs and at half its real costs. By eliminating tariffs and other barriers through the FTAA, local producers would not be able to compete in their own markets.

Some developing countries are justifiably looking out for the interests of their own citizens and businesses, and recognize that the FTAA could merely be a U.S. initiative to open up a market to its transnational companies.

One way to ensure equitable FTAA negotiations is for countries to solidify their regional trade groups first, then enter as a bloc into negotiations about the hemispheric Free trade agreement. The economies in the the regional trade blocs (i.e. Caribbean Single Market and Economy; Southern Common Market (Mercosur)) are more homogeneous. The regional trade blocs would be better able to assert their region's special problems and challenges, and advocate solutions for them.

Anonymous said...

I personally feel that Bush Sucks! Besides that he is out for his own financial gain post presidency. He is always trying to get over on the little guy American or Latin American or South American. He always places his priorities first with the countries rich close behind.

Thanks Janel for putting this on.

Helen said...

Re: Janel's comment about small countries' protective concerns with their respective industries, economic theories have explanations. To put the analyses in simple terms, generally smaller countries will gain from an increased variety of goods, and the ability to specialize in the goods that they have a comparative advantage, per David Ricardo's classic comparative advantage trade theory. While debates about free trade are still more than relevant today, more often than not, and this is my own personal opinion, protective discourse is more a matter of politics than it is a matter of economics.

Anonymous said...

Sen. Charles Schumer and economist Paul Craig Roberts' joint article in the New York Times, "Second Thoughts on Free Trade". In this article, Roberts reiterated his position that "the case for free trade" rests on the assumption that factors of production cannot move between countries (or at least, cannot move as easily as final products can).

According to Schumer and Roberts, in the modern world of multinational corporations, reduced shipping costs, and high-speed telecommunications, factors of production are quite mobile indeed. We can no longer be sure that "free trade" will work in the new environment. Rather than David Ricardo's classical law of comparative advantage (which showed that laborers in various countries will specialize in those industries in which they are relatively superior), which Roberts agrees will produce shared gains among all trading nations, in the new global economy we confront the law of absolute advantage: Capital and labor will move to those countries with the lowest costs of production, meaning some nations gain and others lose.