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The next stage for free trade

When the heads of state the nations of the hemisphere gather in mid-April in Santiago, Chile, one item on nearly everyone's agenda will be the probable launching of negotiations for the Free Trade Area of the Americas (FTAA).

One of the most ambitious economic initiatives ever, the FTAA process aims at nothing less than reaching an agreement by the year 2005 for the removal of barriers to trade among 34 countries in the hemisphere.

Public attention on the FTAA has recently been focused on the headline-grabbing political tug-of-war in the United States over "fast track" legislation. And clearly, if the U.S. administration were to get that trade negotiating authority before the Santiago summit, it would give the FTAA negotiations a running start.

However, even if "fast track" is delayed, governments can use the groundwork laid during the past three years to make significant progress.

Much of this preparatory work has been spearheaded by 12 inter-governmental working groups with the technical support of a Tripartite Committee made up of the IDB, the Organization of American States and the Economic Commission for Latin America and the Caribbean. These working groups have assembled a series of unprecedented trade-related data bases, studies and inventories, and have built a framework for the coming negotiations.

This preliminary stage has been remarkably successful to date, and indeed represents the most advanced component of the hemispheric agenda originally set in the 1994 Miami Summit of Heads of State. What explains this success?

The first reason is that the FTAA is being built on a convergence of interests. In a word, the nations of Latin America and the Caribbean are now almost uniformly committed to free trade and regionalism as a powerful instrument of development.

Second, the FTAA process has a clear goal--an agreement by 2005--as well as commitments at the highest political level. Further, it has a detailed plan of action with precise terms of reference, performance benchmarks and pre-programmed meetings of technicians, vice ministers and ministers.

Finally, the decision to use the OAS/IDB/ECLAC Tripartite Committee as a source of technical support in lieu of a more formal and costly institutional structure proved to be a wise one.

It is important to keep in mind as we enter the next stage that effective and lasting agreements must be founded on good negotiations. For this, the region's governments must have access to financing for technical assistance from development agencies to further strengthen their trade-related agencies and other government institutions. Unfortunately, the demand for nonreimbursable technical assistance is outstripping supplies. Therefore, governments might want to consider making more use of reimbursable funding to support comprehensive and integrated institutional development in the area of trade. After all, the returns on this kind of investment are considerable, given the impact of trade negotiations on the private sector and the national economy.

Other factors will have a great deal to do with the sustainability of an FTAA agreement. One is improved communication between governments and the business and labor sectors. Another is national and hemispheric education campaigns on the benefits of free trade as well as realistic assessments of costs and ways to deal with them. The FTAA negotiation process must also take into account developments in subregional integration schemes which often have more extensive and deeper objectives; these can legitimately be the first priority of member countries.

Last but not least, the extent to which countries maximize the benefits of the FTAA and minimize its costs will depend on their ability to consolidate their first round of economic reforms and vigorously pursue second generation reforms, especially in the social area.

* The authors are, respectively, chief of the IDB's Integration, Trade and Hemispheric Issues Division; and the division's FTAA technical support coordinator.

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