Wherever the globalization caravan stops - Seattle, Quebec City, Cancun - the teargas billows. This week expect billowing in Miami, as trade ministers from the 34 American countries that aren't Cuba meet to try to nail down progress toward a Free Trade Area of the Americas (FTAA).
In a sense, the FTAA is our doing. We took the first big step toward hemispheric free trade when we negotiated an FT-single-A (the Canada-U.S. Free Trade Area) in 1988 and greatly improved our access to the US market.
The result? A doubling of trade as a share of our GDP - more than even the FTA's biggest boosters predicted. True, we didn't get foolproof access. We still have trouble getting our softwood lumber in and the U.S. retains the right, as we do, to put tariffs back up whenever they think we're subsidizing exports or our firms are selling at below costs. But for the vast majority of goods for most of the time, tariffs are gone and that has been a great boon to trade.
Envious of our preferential access to the world's biggest, richest market, Mexico asked the Americans for an FTA of their own.
When Washington said yes we suggested it become a three-way deal. Why? Because if the U.S. has free-trade deals with both Canada and Mexico, that makes it a hub and us a spoke. Invest in the U.S. hub and you also get tariff-free access to Mexico and Canada. Invest in Mexico or Canada and all you get is tariff-free access to the US. Where would investors go? To the U.S.
We and the Mexicans could have countered by negotiating our own free trade deal but decided instead to try for one big deal - NAFTA - so trade rules would be the same across North America.
You might think the FTAA started the same way, with countries from Central America southward envying Mexico and Canada's preferential access to the U.S. market. In fact, it began as a gleam in Ronald Reagan's eye. (For a supposedly dim bulb he had several high-voltage visions.)
George Bush père pushed it. Bill Clinton presided over the 1994 Miami meeting that formally kicked off negotiations. And now George Bush fils is trying to close the deal.
At the moment the chances don't look good. Brazil won't liberalize rules for intellectual property or services trade unless the U.S. cuts agricultural tariffs and subsidies. But the U.S. wants to save these chips for hard bargaining with Europe in the current WTO trade round.
If the FTAA does crash, who gets hurt? This week's teargas-breathing protesters would say "no one": The hemisphere's poor people dodge a bullet. If, as they claim, an FTAA would strip governments of all sorts of powers, they might be right. But we're nearing 15 years of the Canada-U.S. FTA and our governments show no signs of shutting down. Our federal government just got a new leader with all sorts of activist ambitions.
The U.S. has said that if the FTAA fails, it will negotiate FT-single-As with all comers, and lots of countries are lined up to get one. If that happens, it's hub-and-spoke all over again. Investing in the U.S. will bring free access to most markets in the hemisphere, investing in any U.S. partner will give access only to the partner and the U.S. The economic result? Advantage U.S.
We'd be hurt, too, if the FTAA fails. Hub-and-spoke doesn't help us. But the real victims would be countries with less access to the U.S. market.
Most of the hemisphere's countries are democracies now. If they decide they don't need an FTAA, more power to them. But most of the hemisphere's countries are also poor.
These days countries grow fast mainly by exporting. Passing up tariff-free access to the biggest, richest market in the world might do wonders for feelings of independence. But it's an awful risk for growth.
William Watson teaches economics at McGill University.
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