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The gulf between illusions and the effects of the FTAA

The gulf between illusions and the effects of the FTAA

By Claudio Katz

The four major imbalances that the region has suffered in this period -external indebtedness, export specialization, unequal exchange and contraction of purchasing power- are not a consequence of its distancing itself from the United States. Rather, they express the effects of the narrowing of relations of subordination with this power.

The Free Trade Agreement for Latin America (FTAA) is a strategic project of the United States aimed at consolidating its dominance of the region, through new mechanisms of commercial penetration, greater investment controls and refined forms of supervision of financial flows. . But the implementation of this plan abruptly accelerated in recent months due to three temporary needs of the great power: to mitigate the effects of the imminent economic recession, to stop the European advance in the area and to strengthen military alliances in the face of the deterioration of many Latin American political regimes.

The FTAA began to be designed seven years ago, but it was frozen until 1998. The initiative took a new momentum under the Bush presidency and at the recent summits in Buenos Aires and Québec, the proposal appeared to advance the start date of the agreement to 2003 The immediate motivation of the United States is the search for external commercial relief in the face of the slowdown in its economy. Unlike Asia and Europe, the region constitutes an export niche for North American companies, which could significantly increase their exports if the dollar begins to decline in the next period [2].

The FTAA aims to stop European competition by blocking the negotiations of other free trade agreements, which Spain particularly promotes through the Ibero-American summits. Faced with this challenge, the 500 US corporations most closely linked to Latin America are pressing to accelerate the FTAA, taking as a model the legislation of the North American NAFTA, the trade clauses of the WTO and the financial discipline of the IMF. The initially secret negotiations have already become public and face strong opposition within the United States from the non-internationalized sector of the industry, which would lose positions with the agreement. His representatives managed to prevent Congress from granting Clinton (and so far Bush as well) the "fast track" that is needed to sign agreements quickly.

The weight of the political-military motivation to sign the FTAA is less visible, but more decisive. For several years, an escalation of popular, rural and urban rebellions, with a high level of organization and clear social demands, has moved many Latin American countries. These movements accentuate the erosion of different political systems, which have lost legitimacy due to their inability to satisfy popular demands. Disbelief in the current regimes precipitates the interruption of mandates (Peru), the disintegration of governments (Ecuador), the collapse of states (Colombia) and the disintegration of traditional parties (Venezuela, Mexico).

"Preserving stability" in the face of these convulsions is a priority of the US government, which identifies these crises with the weakening of its "responsibility for continental security." Through the FTAA it tries to reinforce its covert military intervention in Colombia, regional rearmament associated with the "fight against drug trafficking", Vieques-type war exercises and diplomatic pressure to align Latin American governments in sanctions against the countries demonized by the Department. State (Cuba, Iraq, Libya, North Korea). The United States succeeded in deactivating the independent nuclear development of Brazil and Argentina and now intends to generalize these examples of discipline internationally, in order to advance with the arms project of the anti-missile shield.

The old arguments of neoliberalism

No one currently questions that the FTAA is a hegemonic project of the United States. But after a decade of neoliberal ideological prominence there are some voices that idealize this domination. If traditionally the supremacy of a great power was the object of immediate criticism and accusations of imperialism and colonialism, nowadays arguments are heard that vindicate the convenience of this domination. Anthropological, geographical or racial justifications are used by those who affirm that the FTAA will serve to counteract "the lack of entrepreneurial spirit of Latin Americans." They portend that if the region loses the opportunity to join the ranks behind North American leadership, it will not be able to escape its destiny of poverty and decadence [3].

But it is very difficult to show that Latin America was ever dissociated from this patronage and especially during the last decade of economic and social regression.

The four major imbalances that the region has suffered in this period -external indebtedness, export specialization, unequal exchange and contraction of purchasing power- are not a consequence of its distancing itself from the United States. The economic crises suffered by the region are not due to endemic defects of Latin Americans, but rather to the increasingly dependent insertion of the area in the world market [4].

Other analysts argue that "domestic markets are no longer enough to get out of underdevelopment" and point out that the FTAA will contribute to perfecting "our export competition" and will favor the region's entry into "the largest market in the world" [5]. But what are the symptoms of exhaustion in domestic markets? The opulence of the purchasing power and the consumption levels of the population? And how will Latin American products penetrate the most competitive and demanding market in the world? How will they reverse the abysmal productivity differences that so far frustrated this income? Any of these questions questions naive beliefs in a sustained regional take-off in the FTAA. But the "opinion formers" do not contrast their illusions with the real course of events, but simply reiterate their confidence in the increase in exports and the influx of investment.

Many promoters of the FTAA are also in favor of dollarization, although they do not provide evidence of its convenience for the Central American economies that adopted this exchange rate policy (Guatemala, El Salvador). Nor do they record that in Ecuador this course was implemented as an emergency resource in the face of financial collapse. The only country that has experienced its validity for a prolonged period (Panama) cannot be presented as a model for the eradication of poverty and unemployment. In recent decades, this nation had to submit - like any other regional debtor - to 17 IMF stabilization programs [6].

There is no doubt that dollarization is associated with the FTAA project, but it is not its condition, since there are strong differences in the US government regarding the usefulness of this alternative. For this reason, until now the Latin American nations that renounce the seigniorage of their currency have not obtained, in exchange, any commitment from the Federal Reserve to act as a lender of last resort in the face of banking crises. If the impact of this asymmetry can be tolerable in the small economies commercially integrated with the United States, for Argentina or Mexico such inequality would have devastating consequences. At the moment, US interest in the FTAA is primarily commercial and is not subject to an advance in dollarization.

Like any business initiative, the launch of the FTAA was surrounded by a great marketing operation. Through this sales campaign an attempt is made to renew the fantasies that accompanied the privatization plans in the 90s. But as always happens with neoliberalism, the well-being that is predicted constitutes a promise for the future, while the sacrifices required for its implementation are immediate demands.

Nine areas of concessions without compensation
As the negotiation progresses, fewer allegations are heard in favor of the "brotherhood" and the "integration" of Americans and more claims of American corporations in different areas of the economy.

At the service level, US corporations intend to enter the pension, education, and health businesses. They are particularly lucrative activities because the region's upper middle class tends to resort to private provision in the face of the debacle of public services. In the investment field, legislation is being debated that will grant foreign companies the right to appeal to international courts with greater powers than national legal systems. These regimes are already in force in NAFTA and have validated compensation in favor of several companies that litigated against the states of Canada and Mexico [7].

In the field of public sector purchases, it is being discussed to eliminate the mechanisms for the preferential acquisition of goods among local suppliers. Especially in the construction field, the North American consortia will be able to sweep away any competitor that does not have comparable access to international credit [8].

On the customs front, US negotiators aim to achieve the total opening of the Latin American economies without accepting a greater flow of imports in return. The para-tariff barriers of the United States cover 34% of the nomenclator and operate through a discriminatory system of complaints of dumping. With this regime, Argentine honey exports were recently penalized, for example, with a 60% tax.

Agriculture is the key area of ​​the agreement, because while they advance in the destruction of the protective regulations of the small Latin American peasant, the "agro-business" corporations obstruct any hint of free competition on their own land. Commerce Secretary D. Evans has already declared that the subsidies to agriculture for 97,000 million dollars a year in force in the United States "will not enter the discussion of the FTAA" [9]. This decision does not depend, moreover, on negotiations with Latin America, but on negotiations with the European Community to reduce equivalent subsidies. If this struggle remains unresolved, all the expectations of Argentine exporters in the FTAA will be frustrated. Some estimates already anticipate that the final balance of this agreement for Argentina would be an increase of 30-35% of imports and a reduction of 4% of exports [10] The FTAA will definitively establish patent rights, which provided so many benefits to the North American "high tech" sectors after the extinction of local computer development in Argentina and Brazil. Now the profitable income from the pharmaceutical business is in dispute, especially due to the discomfort that the Brazilian program to fight AIDS produces among corporations. This plan saves lives and heals the sick, but it does not satisfy the profit demands of international laboratories.

Finally, the FTAA will authorize the United States to continue violating environmental protection agreements. NAFTA turned several border areas of Mexico into toxic sewers and it is estimated that 40% of the forests in the state of Guerrero were destroyed as a result of the advance of contamination [11]. The FTAA will also promote greater wage flexibility, following the model implemented in Mexican maquilas.

If the effects of the agreement are observed globally in all areas, there is no doubt that the FTAA will strengthen the dependence of the regional economic cycle on the evolution of the North American GDP, accentuating the vulnerability of the zonal productive activity. THE FAILURE OF MERCOSUR.

In the way that the FTAA is currently planned, it implies the disappearance of Mercosur, because the sub-regional customs union cannot subsist within a general free trade zone. For North American corporations, Mercosur constitutes a field of dispute with European rivals and an already obsolete framework for the protection of their activities with national or regional tariffs and subsidies.

The US intention to fracture the South American association is clearly expressed in the proposals for bilateral agreements with Chile, which were recently extended to Argentina. But the situation in both countries is very different, because Chile has a narrow manufacturing base and has developed complementary trade with the United States through mining, fruit and timber sales. On the other hand, Argentina still has a certain industrial development of its own, which would suffer a coup de grace with the FTAA [12].

But there is no doubt that all the artillery in the United States is directed against Brazil, which holds the most desirable market and the most autonomous industrial conglomerate of North American corporations. Unlike other nations, Brazil cannot accommodate itself to the FTAA without renouncing the positions it has conquered in all markets. That is why his government refuses to advance the start of the agreement and seeks a strategic ally in Venezuela.

These solvent pressures accentuate Mercosur's internal disintegration tendency.

On its tenth anniversary the deterioration of this association is recognized by all its promoters. It could not advance in the formation of a common currency, nor in the creation of regional political and legal institutions. Nor were the customs agreements strengthened because the common tariff was never implemented, an arbitration body for the conflicts was not forged and the differences regarding subsidies and government purchasing systems were not resolved [13].

But these differences deepened with each country's reaction to its debt crisis. While Brazil chose to devalue the real and raise tariffs, Argentina opted for convertibility and openness. The whole range of economists and politicians [14] who continue to propose "to enter the FTAA from Mercosur," cannot explain how this joint negotiation could be articulated, if after a decade much more elementary agreements were not reached.

Proposals for the "other possible world"

Unlike the European Community, the FTAA does not create homogeneous zones, because no lagging country tends to approximate the driving economy of the agreement. Budgetary transfers from north to south are not planned and the gaps in the standard of living that separate any Latin American country from the United States will remain. The cause of the differences between the European Community and the FTAA are obvious: the first association is projected as a dominant bloc that challenges the United States, while the second is a piece of North American domination to face this battle. That is why it is very appropriate to characterize this initiative as an imperialist and recolonizing project in Latin America. If this process is consummated, the character of the regional bourgeoisie will completely change and the current theoretical discussion about its dependent or transnational nature will be settled [15].

What is in sight is the inability of the Latin American ruling class to face its own integrating project. The Andean and Central American pacts experienced the same failure that Mercosur is now leading. If throughout the 20th century the regional bourgeoisies could not develop the Bolivarian program, at present they have lost interest in this objective because their level of association with the metropolitan capital is substantially higher.

The ten years of Mercosur were also marked by unprecedented violations of the living conditions of the workers. Instead of common labor regulations and protection measures for wage earners, in the countries involved, job insecurity and unemployment increased. This experience allows us to conclude that a project of genuine integration of the peoples must start from other principles.

In the first place, it must be based on the satisfaction of basic demands such as an increase in the minimum wage, unemployment insurance and free education and health. Coordinating policies to achieve these objectives implies supporting solidarity and not competitiveness, encouraging job stability and not capital mobility, promoting improved living standards and not business efficiency.

Secondly, there is no genuine integration without removing the obstacle posed by the external debt for sustained development, as demonstrated by the Mexican crises of 1995, the Brazilian crisis of 1998 and Argentina of 2000-2001. The default destroys any effort at regional progress and the endless adjustments of the IMF prevent a complementary reconstruction of the deteriorating Latin American economies.

Finally, integration must be conceived in perspective as part of a socialist transformation process, because capitalism constitutes an insurmountable obstacle to overcoming the peripheral condition of the countries of the region. There is a direct link between the old dream of Latin American unity and the establishment of new forms of collective ownership and management of the economy.

The debate on these proposals is inserted in the new international political climate created by the protests against globalization. FTAA negotiators have already directly experienced this street hostility in Buenos Aires and Quebec. What is new is that many protesters no longer limit themselves to proclaiming that "another world is possible", but they define what this desirable universe is and how it can be achieved.

[2] See Bilbao Luis. "Walled Democracy". Le Monde Diplo, May 2001, Buenos Aires.
[3] See Oppenheimer Andres. "What is expected for Latin America" ​​(La Nación, January 2, 2001, Buenos Aires), "The possible partition of the Americas" (La Nación, August 6, 2000), "Geography and culture: factors of progress? " (La Nación, August 1, 2000).
[4] We develop this theme in Katz Claudio. "The new turbulence in the Latin American economy". Periferias Magazine n 8, 2nd semester of 2000, Buenos Aires.
[5] Grondona Mariano. "Latin America: Will it be saved with the FTAA?" La Nación, April 12, 2001.
[6] Edwards Sebastian. "The dollar is not the magic cure" (Clarín, May 13, 2001).
[7] Barlow Maude. "Free trade area and the threat to social programs" The Council of Canadians, www.canadians.org, April 2001.
[8] IDEP. "The only citizen capitals of the FTAA". We-ATE, March 2001, Buenos Aires.
[9] D. Evans. Page 12, April 10, 2001.
[10] Lucita Eduardo. FTAA a hegemonic project. Economic Reality 178, February-March 2001.
[11] Document of the "Argentine Committee against the FTAA", March 2001, Buenos Aires.
[12] What will be the final position of Argentina is a mystery, because the country is on the verge of default and an eventual deflationary collapse. Until this chaos emerges, the government's indefiniteness in favor of Mercosur or the FTAA will endure. In the current crisis, measures are adopted that seem to underpin one option or another, but in reality they are improvised measures that do not pursue any clear objective.
[13] See: Bouzas Roberto "The block can disappear". Page 12 April 2001.
[14] Bordenave Marcela. "Mercosur or FTAA". Page 12, April 10, 2001 and Guadagni Alieto. "The FTAA from Mercosur". La Nación, March 29, 2001.
[15] James Petras suggests that this change has already occurred. Rebellion March 17, 2001 and Página 12, May 13, 2001.

* Claudio Katz is an economist, researcher and teacher at the University of Buenos Aires and Conicet.
-Article Published in Realidad Económica Magazine


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