OTTAWA — Talks to create a free-trade zone of the Americas from Canada to Argentina resume in Miami this week amid rising fears that negotiators may have to dilute, or scale back, the deal in order to salvage it.
Trade watchers suggest the United States, as the host of the Miami meeting, is trying to save face by retreating to a less ambitious agreement because the political will for a sweeping deal akin to the North American free-trade agreement is unravelling.
"To succeed in these objectives the United States has had to agree to dilute ambition [but] has been reluctant so far to admit just how much water is in their wine," veteran Ottawa trade consultant Peter Clark said yesterday.
Sources told The Globe and Mail yesterday that a draft copy of what's purportedly a secret Nov. 14 deal between the United States and Latin American heavyweight Brazil suggests Washington has already retreated from a full Free Trade Area of the Americas deal to a smaller arrangement that will only cut tariffs for non-agricultural products.
In the draft statement, the United States and Brazil agree the talks will focus on a small "core agreement" but leave controversial issues -- such as foreign investor protection and intellectual property safeguards -- to be negotiated only between countries that are willing.
Such a minimalist deal would fall grievously short of the grand and comprehensive "NAFTA on steroids" target envisaged in 1994 when preparatory FTAA negotiations first began between 34 countries in the western hemisphere.
This reversal of fortune is worrying Ottawa because an "FTAA lite" deal would be a major setback for Canadian trade goals in the region. As a middleweight player, Canada relies on regional and global trade deals to get the kind of comprehensive access to new markets for business that it can't get on its own.
Canadian Trade Minister Pierre Pettigrew publicly slammed this development, warning countries can't take a "buffet-like approach [to the FTAA] where you take a little bit of this and a little bit of that."
Coming on the heels of the September failure of World Trade Organization talks in Cancun, the scaling back of FTAA talks would deliver another blow to a decade of effort to establish a single level playing field in international trade.
The risk remains that the Miami negotiations could collapse altogether, but the stakes for U.S. President George Bush may be too high to let them fail as global free-trade negotiations did this past September in Cancun, Mexico -- and in Seattle in 1999.
Separately, anti-globalization protesters are threatening to disrupt Miami talks in numbers that haven't been seen since rioting sunk WTO talks in Seattle four years ago. Organizers are predicting between 25,000 to 100,000 demonstrators and Miami shopkeepers are boarding up their stores, and in some cases sleeping in them, to safeguard goods from rioting.
The biggest battle at the talks is a clash over the scope of the deal between the United States, the original driver of FTAA negotiations, and South American powerhouse Brazil: a fight that mirrors the battle that scuttled WTO talks in Cancun.
Brazil, Latin America's self-styled leader whose population is now the sixth largest in the world, has been increasingly flexing its muscles on the international trade stage since left-of-centre President Luiz Inacio Lula da Silva took power in January.
Brasilia is lobbying hard for countries in FTAA talks to be allowed to opt out of key areas of a deal, such as protections for foreign investors and intellectual property rights as well as the burgeoning services trade.
Brazilian officials have suggested that Washington has agreed to their demand but Richard Mills, spokesman for U.S. Trade Representative Robert Zoellick, denies any deal has been cut, saying the goal is still "to have a comprehensive agreement."
The Brazilian opt-out proposal, floated at a Nov. 8 meeting designed to salvage Miami talks, has particularly worried Canadian officials, who warn a step backward from a comprehensive FTAA deal could unravel everything.
It could also kill a deal if Washington insists that countries who skip commitments on certain FTAA subjects also get less market access in return -- an idea Brazil has rejected as a non starter.
If the FTAA stumbles, Canada could be left by the wayside as Latin American countries focus their energies instead on signing one-on-one deals, or mini-regional deals, with the United States and European Union. "We will lose some of our place in the world," Mr. Pettigrew warned.
Bill Dymond, executive director of the Centre for Trade Policy and Law in Ottawa, said a simple tariff elimination FTAA deal would be a blow to Canada if that's all that transpires. "The problem for Canada is the government, going back over many years, has invested a great deal of foreign policy capital in this thing," Mr. Dymond said.
The United States is already negotiating a separate trade pact with five Central American countries and planning to move forward with one-on-one, or bilateral, talks with the Dominican Republic and as many as three more nations in the region: Colombia, Peru and Panama. These deals are expected to go beyond an FTAA-lite approach.
"These new [U.S.] bilaterals would dilute Canada's preferential [NAFTA] access to the U.S. market with nothing in return [for Canada]," Mr. Clark said.
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