Breaking the Borders

Thought at one time to be the likely centrepiece of its foreign policy, the Bush administration's relations with Latin America are in disarray.

Argentina, once Washington's neo-liberal darling, is in the midst of an economic and social meltdown. In Venezuela, the White House is backtracking after having been caught giving its blessing to an aborted coup attempt. US military involvement in Colombia is growing. And Brazil, one of the few bright spots in Latin America, is hammering the US for its recently imposed tariffs on steel. This month, negotiations were supposed to begin on plans to create a Free Trade Area of the Americas stretching from northernmost Canada to the tip of Tierra del Fuego. On the surface, this looks like an excellent opportunity to make up for these diplomatically embarrassing developments. But to many serious Latin American observers, George W. Bush's FTAA increasingly appears to be at best a hollow exercise and at worst a one-sided deal, whereby the US demands further opening up of Latin American markets for US goods while following a protectionist course for politically sensitive US industries.

As originally envisaged by Mr Bush's father, there were two main ideas to a free trade agreement in the Americas. The first was to bring about an all-encompassing free-trade zone in the Americas by lifting all existing barriers to investment and trade. The second was to create additional incentives -- easier access to the US market -- for Latin American countries to undertake painful free-market reforms.

The current administration has continued to extol the virtues of an FTAA -- most recently in the form of comments from Mr Bush himself during a recent trip to Latin America. But its actions have increasingly belied the administration's commitment to a fair and equitable agreement.

The US decision on steel imports is one obvious example. But it is one of several. Bowing to political pressure, Washington has just passed an agriculture bill that dramatically expands subsidies for most US agricultural products. It has now signalled that it may seek exceptions for many agricultural products and textiles from a potential FTAA agreement.

These facts are a reminder of how the Bush administration has put the interests of its Republican political base -- US farmers and steel and textile producers -- above the interests of the nation and above improved economic and trade relations with Latin America. Texas, for example, employs about 40,000 agricultural workers and North Carolina has a textile workforce of more than 120,000 people. These are potentially important votes. Florida employs 90,000 people in its citrus fruit industry and traditionally Republican states such as Georgia, Mississippi and Arkansas rely heavily on cotton production. The administration also stands to gain votes in swing states such as Pennsylvania, which produces both steel and a large percentage of the US's dairy products.

Exempting textiles and certain agricultural products from FTAA would create a one-sided agreement, whereby the US would gain while Latin America and the Caribbean would suffer. How can such an agreement be championed as the key to sustained growth and political stability?

Any free trade agreement that excluded agricultural products and textiles would nullify many of the potential gains that Latin American and Caribbean economies would derive from greater access to the US market.

Those likely to lose out include Jamaica, where agricultural products account for approximately 20 per cent of total exports. In Guatemala, about 70 per cent of exports have an agricultural base. In Paraguay and Ecuador agricultural products account for more than 50 per cent and about 40 per cent of total exports, respectively.

Although most Latin American and Caribbean countries have relatively small textile industries, El Salvador and the Dominican Republic have shown interest in creating export industries to enable development, as in Costa Rica. US protectionism and severe competition from south and east Asia are serious obstacles to such plans. Even the best-positioned economies in Latin America would be hurt by such a one-sided agreement. Brazil, for example, wants to expand exports of steel, orange juice and soybeans to the US but would still face barriers after such an FTAA was in place.

If Mr Bush is truly interested in reaching an agreement that promotes development through expanded trade, he must take on the special interests in his own electoral base. An FTAA worth its name would need to reduce barriers on agricultural products, steel and textiles. It should also cover banking services and computer software.

An FTAA along these lines would make a considerable difference to development in Latin America. Mr Bush should abandon the misleading rhetoric and get serious.