International Law and Integration: The Dilemmas of Mercosur and FTAA (ALCA)

• Author: Adhemar G. Bahadian
• Position: Ambassador and Brazilian Co-Chairman of the ALCA negotiations.
• Pages: 8-37

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This article¹ is a synopsis of classes that the Center for International Law (CEDIN - Centra de Direito Internacional), at the Federal University of Minas Gerais (UFMG) invited me to teach to the students of the 1st Course on International Law, July 4-8, 2005, about the dilemmas faced by Mercosur and the ALCA. Analyzing successively the evolution of negotiations, both on the process of forming a free trade area of the Americas and on matters within the scope of Mercosur, my main purpose is to accentuate the differences in nature and goals of these two initiatives, going beyond the obvious fact that Mercosur is already a concrete reality, consolidated through almost fifteen years of integration among its four member countries, since the Asuncion Treaty of 1991, while the ALCA is, at this time, only an initiative for a free trade area. While Mercosur aims to accomplish a profound integration, transforming a customs union into a common market and strengthening all aspects related to economic integration, even through compensation funds, as approved last month in Asunción, the initiative to create the ALCA advances in very slow steps, not only due to the natural diversity of interests among the 34 countries involved in the process, but mainly due to the difficulty in achieving the fundamental and minimal essence of any free trade area, which is the willingness by all countries involved to carry out an effective market access negotiation, as I will discuss below.

Since the beginning of the ALCA negotiations, Brazil has acted to put its maximum effort into reaching a balanced agreement, aimed at promoting development. We should not assume beforehand that the ALCA initiative is, in and of itself, negative. We should certainly, as Brazil and the other Mercosur countries have been trying to do, improve the direction of the negotiation process, removingPage 9from it extraneous propositions and topics that favor only a few specific groups and governments and which, in fact, move away from achieving aims and targets in social and economic development. What inspires Brazil and its Mercosur partners is the goal of giving an eventual ALCA a focus that is clearly centered on development, with an emphasis on market access including, and especially, agricultural products obtaining access to markets in developed countries, where existing protection constitutes the greatest barrier to international trade.

It is not possible to assess what happens today in the ALCA negotiations without an analysis of the evolution of negotiations since they began, in December 1994, at the Miami Summit. I will present here an overview and an evaluation of the negotiations from the Miami Summit to the most recent developments, such as the Vice-Ministerial Meeting in Puebla, in February 2004, and the informal consultations following that meeting. Based on this evaluation of what happened throughout the whole negotiation process, I will examine the current stalemate, that is, the different focus and points of view that impeded us to reach an agreement satisfactory to all countries involved in the process. At the end, I will present my assessment of where we are today and to where we might go in the ALCA process.

There are two main theses that, implicitly or explicitly, characterize this study of what has happened and what may happen in the ALCA negotiation process.

The first is that, for the past ten years we have had a debasement of the original propositions agreed at the Summit of the Americas, in 1994, which established, among others, the goal of creating a free trade area of the Americas. We knew, by then, that the liberalization of markets would not be a panacea for all development problems of the countries in the region, hence we could also anticipate, at that time, an entire agenda that would transcend and complement the ALCA initiative. We could anticipate then the need to address such diverse and essential aspects as political and financial support for social development projects, strengthening education and health cooperation programs and the need to have financing for infrastructure projects in transportation, energy and communication. We had, one way or another, a broader and more complex view of all factors that could contribute to the development of a country and also of what should constitute a real Hemispheric integration, based on the economic and social prosperity of the countries as a whole.

What has occurred during the past ten years, since that moment when the initiative was launched, has been the virtual abandonment of the agenda items involving social progress, infrastructure and financial support that constituted a crucial part of the Declaration and Plan of Action agreed at the Miami Summit. As a result of a lack of political will and engagement by those countries that could contribute more to benefit others, that initial promise proved to be no more thanPage 10rhetoric. In reality, what has survived is a limited ALCA initiative that is isolated and disassociated from any broader conception, lacking a more comprehensive focus of how we could—and should—foster development in the Hemisphere.

The second hypothesis in this article is that the remaining initiative to create an ALCA, which in thesis could not even be conceived and survive in isolation, has been losing the attributes of its primary goals as time has passed. It has been changing itself into a proposition that is more and more unbalanced and, in many aspects, harmful not only to national development initiatives but also to its own central goal of free trade in the region. Under pressure from certain specific countries, the ALCA initiative has been outlined during previous years in a way that would exclude trade liberalization in essential sectors, such as agriculture, while also limiting the ability of governments to formulate and act in areas such as investment policies, intellectual property rights and public sector procurement. The very essence of a free trade agreement—which is trade liberalization in all sectors—has been evaded and what has been conceived is a ALCA intended to regulate aspects of economic operations that are not directly related to trade. Beyond abandoning the social aspects, financial support and infrastructure of the original initiative for hemispheric integration, as a result of straying away from the Declaration and 1994 Plan of Action, the initiative also lost the core of what should have been a genuine free trade area, that is, the main goal of dismantling customs tariffs and non - tariff barriers.

Imbalances in the ALCA Negotiations

The view that the ALCA negotiations suffer from some fundamental imbalances is now almost unanimous. Some of these imbalances arose from the very structure of the hemispheric negotiations, while others are more related to the process itself, how it developed in the past and the arrangement of topics on the agenda of negotiations.

The more structural imbalances are related to the inevitable differences in a process that involves 34 countries with immense disparities in economic, social and political development, as well as their territorial sizes and populations. As one might expect, this is reflected in very distinct interests, priorities and expectations, which are quite difficult to reconcile. We have in our Hemisphere a wide range of diversity, ranging from the small islands of Saint Kitts and Nevis to nations of almost continental size, such as Brazil and Canada; ranging from the largest economy in the world, the United States, to some of the most impoverished, such as Haiti. No other trade integration initiative in history has involved such a heterogeneous set of countries as the ALCA negotiations. This fact illustrates the real magnitude of the difficulties and challenges inherent in the process.

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Aside from this structural imbalance that we cannot avoid, since the beginning of the ALCA process there have been imbalances that have arisen more from circumstances related to the negotiating process itself. Two of those imbalances were the most significant: a) the then-existing disproportion between an agenda of very broad and paralyzed aspects and the scarceness of time to complete negotiations as previously scheduled, by January 2005; and b) the Imbalance between an agenda that was ambitious in aspects such as the preparation of hemispheric rules in areas of no interest to countries like Brazil and its Mercosur partners and an agenda that was very restrictive in the areas of most immediate interest to us, such as agriculture and antidumping,

Both the disproportion and the paralysis resulting from it can be attributed to different causes. The main cause appears to be an inappropriate attitude on the part of some of the parties involved that combined a lack of realism in evaluating the difficult framework of negotiations and an excessive maximalist approach in pursuit of results that had already proven themselves to be impracticable. Since 1994, the evolution of international trade negotiations and the domestic context in almost all countries involved in the ALCA have revealed the existence of significant national sensitivities in many of the negotiating areas. What happened, due to resistance from some parties, was that these sensitivities had not been seriously addressed in the...