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The Caratagena Trade Ministerial meeting

Miguel Rodríguez Mendoza

Speech to the Heritage Foundation Washington D.C.
on April 11, 1996

will concentrate my remarks on the outcome and the main decisions of the recent Trade Ministerial meeting, which took place three weeks ago, on March 21, in Cartagena de Indias, Colombia. Before doing that, I would like to express my appreciation to the organizers of this conference, and particularly to my very good friend, Jhon Sweeny, for having invited me to be here with you today and to share with you my views on this important topic.

The Cartagena Trade Ministerial marked the third milestone on the path toward a Free Trade Area of the Americas or FTAA. The first, naturally, was Miami Summit of December 1994, when the Heads of State and Government of 34 countries in the Western Hemisphere agreed on the ultimate objective of building the FTAA.

That meeting was followed a scant six month later when the Trade Ministers met for the first time, in Denver, Colorado, with the stated goal of giving further form and direction to the objective agreed upon by the leaders.

In between this second milestone, the Denver Trade Ministerial, and the Cartagena gathering, much activity took place at the technical and senior officials level. The Denver meeting succeded in launching what has been referred to as the preparatory process of the FTAA negotiations. At that meeting, the Ministers established seven working groups to deal with areas of particuale interest to all the participating countries: market access; customs procedures and rules of origin; standards and technical barriers to trade; investment policies; antidumping and countervailing duties; sanitary and phytosanitary measures; and smaller economies.

These working groups organized their activities in such a way as to fulfill the following inter-related tasks: i) to collect and disseminate information on trade and trade-related matters; ii) to find areas of commonality and divergence in the various trade regimes; and iii) to identify the elements that could be the subject of agreement at the hemispheric level. The work carried out by the different working groups has proven importance to the FTAA process. They are helping to increase knowledge and transparency in the functioning of trade rules in all participating countries, thus building the foundation for future FTAA negotiations.

To date, a lot has been accomplished by the working groups. To cite but a few examples, the Working Gropu on Investment has succeded in moving forward towards the establishment framework by deciding to concentrate, in the near future, on the key elements that could be included in such a framework. Issues being examined by this working Group include the granting of national treatment to foreign investments, the elimination on restrictions on capital and profit remttances, and the establishment of effective dispute settlement mechanisms, including international arbitration.

A massive amount of work is also being undertaken by the working groups dealing with market access and rules of origin. With the help of the Inter-American Development Bank (IDB), they are putting together an ambitius and comprehensive data base that will include information on trade flows within the hemisphere, as well as on tariff and non-tariffs barriers. A comparable effort is being made by the Organization of American States (OAS) regarding antidumping and countervailing duties laws and regulations, technical barriers to trade and other trade-related disciplines. All this information will be nedeed before the actual negotiating process could start.

Although a lot has been accomplished, much more remains to be done. We are at the beginning of a process that no doubt is ambitious in its objectives and complex in its implementation. The negotiation of a free trade agreement among all the countries is a major undertaking. A lot of imagination will be required to deal with the variety of situations and the differences in size and level of development of the various participating countries. Much energy and political will needs to be ployed.

In this sense, the Cartagena Trade Ministerial succeded in moving the FTAA process forward. Indeed, in spite of the low expectations that had developed in the days and weeks that preceded the meeting, the Cartagena Ministerial was instrumental in giving the FTAA process a more structured form, and in keeping the preparatory work of the negotiations on track. Moreover, the meeting served to highlight the political commitment of all the participating countries to construct the FTAA by the year 2005, and to make concrete progress towards this end by the end of this decade.

The results of the Cartagena Trade Ministerial can be summarized in five main poiints. First, the Ministers decided to give early consideration to the path and timing of the FTAA negotiations. Specifically, they mandated their Vice-Ministers to discuss possible "approaches" to the construction of the FTAA, as well as the "timing and means" of launching the negotiations, and to make concrete recommendations in this regard before the next Trade Ministerial, which will be held in Belo Horizonte, Brazil, during the second quarter of 1997. This has so far remained an open question, and one that is critical to the entire FTAA process.

Although countries have commited themselves to negotiating the FTAA, they have made no decision regarding the road to be followed to achieve this goal. In fact, a diverge of views prevails among the participating countries, with some considering that the only way to move forward would be by expanding one of the existing agreements, i.e. NAFTA or Mercosur, and others promoting the progressive convergence of the different subregional agreements, presumably through intra-group negotiations.

Still another option would be to give the FTAA the form of a distinct, hemispheric-wide agreement, that would provide for the liberalization of trade in goods and services and investment, with specific rules to deal with other trade-related matters, including dispute settlement procedures. This agreement would be negotiated multilaterally by all the 34 participating countries, and could profit from the fact that nearly all of them have already accepted the disciplines of the Uruguay Round and have become members of the World Trade Organization (WTO).

These are but some of the options that the Ministers will consider at the Belo Horizonte Trade Ministerial. It is clear that any decision in this regard will have great political significance, as it will mark the beginning of the actual FTAA negotiations. In this context, much will depend, first, on the ability of the United States to clear its way to the negotiations -securing a post-election fast track authority from Congress-, and second, on the ability of all countries to agree on a constructive proposal to move the FTAA process forward.

Second, the Ministers clarified some of the issues regarding the participation of the smaller economies in the FTAA process. They agreed that all the working groups should take into account the particular situation of these countries, and seek "ways to provide opportunities to facilitate (their) integration ... and increase their level of development". The need to provide technical assistance to the smaller economies in order to ensure their full participation in the entire FTAA process was also highlighted by the Ministers. For all practical proposes, this decision implies that the problems of the small economies should be somehow reflected in all areas of the negotiations.

This should give to the small countries in the region greater confidence in the whole FTAA process. These countries -located mainly in Central America and the Caribbean- have repeatedly pointed out that their size and level of development may be an impediment for them to benefit equitably in the realization of the FTAA objectives. Indeed, to deal with this issue is one of the main challenges that all countries face, as great disparities exist in the Western Hemisphere. To give just an example, Canada -which is not the largest country in the region- is 25 times larger than Jamaica -which is not the smallest of all countries; and the FTAA process includes countries like the United Stares, which is one of the richest countries in the world, and Haiti, which is one of the poorest.

Third, the Cartagena Ministerial enlarged the mandate of the Vice-Ministers. In addition to identifyinf and examining trade-realted measures in order to prepare for the negotiations, the Vice-Ministers were requested to consider, and to approve, trade and investment measures that could be implemented immediately. In fact, the Vice-Ministers emerged from the Cartagena meeting as a major player in the whole FTAA process, as they were empowered with a policy-making role which they did not have before. This could be considered as a step forward in the "institutionalization" of the FTAA process.

Fourth, the preparatory process of the negotiations was strenghened. In addition to the existing seven working groups, five new ones were established to deal with areas of great importance to the future FTAA. Of these, four (competition policy, trade in services, intellectual property rights, and government procurement) will start functioning immediately. The fifth working group (dispute settlement mechanisms) will become operative after the next Trade Ministerial, but the OAS was asked, by the Ministers, to begin the analysis of the mechanism being used in bilateral and subregional trade agreements in the Hemisphere. It was also decided to create a study group on trade and the environment (once the issue is considered by the WTO Ministerial Meeting in Singapore), and to keep labor issues under consideration.

The widening of the FTAA process will certainly add to its complexity. Each of the new subject-areas is a challenge in its own right. These are, for the most part, new areas. In the case of trade in services, the lack of reliable data on most service transactions is well known; and negotiations in this area will be difficult as they relate to government policies and regulations. On the other hand, no international or regional agreements exist in the field of competition policy; an intellectual property rights and government procurement are two areas where the political sensibilities of several countries run very hight.

Finally, it should be underlined that the Caratgena meeting also market the beginning of a more active participation of the business community in the building of the FTAA. The Business and Commerce Forum that was held immediately before the Ministerial meeting was widely attended by company representatives and officials of business associations from most countries in the Western Hemisphere. The Forum was structured in such a way that it facilitated the discussion of a variety of issues of particular relevance to the FTAA process. The main conclusions of the private sector's deliberations were presented to the Ministers for their consideration, and this set a precedent that will surely be followed in the future.

A more participation of the private sector will greatly influence the FTAA process. At the aggregate level, general support of the FTAA by the business community could help to keep it moving, as it would create a supportive environment for trade and investment liberalization measures at both the national and hemispheric levels. More specifically, it is expected that at least some of the proposals put forward by the private sector -at the Cartagena Forum and subsequently- would contribute to the identification of those "concrete measures" which all countries have to agreed to implement before the end of the decade.

I would like to finish by stressing that we at the OAS have been playing an important supporting role in the preparatory process of tha FTAA, and will continue to do so in the future. Together with the Inter-American Bank and the UN Commission for Latin America and the Caribbean, we have instituted what is known as the Tripartite Committee which is providing technical analysis and expertise to the working groups. We believe that we are making a significant contribution to the transparency of the entire process, and some of the analysis that we have prepared for the working groups will soon be published.

We remain convinced that the FTAA process is moving forward. In our experience so far we have came to realize how important is the degree of agreement among the participating countries in the basic commitment to liberalized trade and to establishing stable and transparent trade rules. This commitment will enable all of our countries to move together toward greater trade and investment liberalization and to keep the FTAA process on track.

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