Trade Negotiating Committee (TNC) FTAA Meeting Report (1)

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February 2, 2004
Puebla, México Introduction As agreed to in Miami, the objective of the Puebla TNC meeting is to define the negotiating content for the proposed two-tiered FTAA and to provide a clear mandate to the 9 negotiating groups. Moreover, it was agreed to keep to the timelines. 1. Agenda and Transparency The official TNC meeting will begin Tuesday February 3. They will begin by approving the agenda. The first agenda item is a discussion of the so-called ¨first tier¨, which is the minimum level of obligations and rights that all FTAA countries will sign on to. The second agenda item will be a discussion on the so- called ¨second tier,¨ which is the plurilateral level of negotiations, with additional obligations, in which only those countries that want to will participate. The third agenda item will be an intervention by Venezuela regarding their vision of integration. This will be confirmed tomorrow as the proposal was originally placed at the bottom of the agenda under ¨other themes,¨ or AOB. Finally, they will discuss the negotiating calendar for the next year. The negotiating process is not as transparent as it has been in the last few official meetings. Usually the chief negotiator of each delegation participates with the entire delegation and they meet in plenary sessions. In this meeting, the co-presidents proposed that each country delegation only bring the chief negotiator plus four more (they even thought of reducing this to three). Moreover, they reduced the plenary sessions to a few hours at the end of each day (discussing each theme for an hour), while other themes are discussed in informal sessions. In reality, this practice began today with a variety of bilateral meetings. When the United States approached Mercosur for a bilateral meeting, they did so with the condition that each country in Mercosur only send 1 head of delegation plus 4 additional delegates. Moreover, the US objected to the fact that the Brazil delegation contained civil society observers. Mercosur indicated that it is their decision who they choose as their delegates, though they did accept the 1 plus 4 criteria. 2. Main Proposals There are two main proposals that are being discussed in the meeting, one presented by the recently self baptized G5 (Canada, United States, Costa Rica, Chile, and Mexico) and a second from Mercosur. According to their draft texts, both proposals essentially speak to two central questions: the content of the first common tier and the process for negotiating the second tier (plurilaterals). Tier 1. Generally the two proposals appear similar: they contain proposals for all 9 chapters, and the formulation of the proposals seems to be restricted to transparency norms and implementation rules related to the WTO and its thematic agreements. But there are substantial differences between the two written proposals. For example, the Mercosur proposal for market access is more ambitious, while other components are quite narrow; the G5's position is the opposite. Some of the other differences between the proposals include: - Mercosur proposes eliminating tariffs for the entire tariff universe of non-agricultural products, while the G5 proposes eliminating tariffs on ¨substantially¨ all trade, meaning not all products. - In agriculture the proposals are totally contrary. Mercosur is asking for the elimination of export subsidies and internal support while the G5 only wants to discuss export subsidies and wants to create special agricultural safeguards. Regarding antidumping, Mercosur goes beyond transparency to include common procedural norms and non-binding consultative mechanisms, while the G5 proposal is limited to transparency. - In government procurement, the G5 goes beyond transparency to call for ¨rules about procedures,¨ that could open the road to subsequent stronger disciplines. In competition policy, the G5 includes disciplines on state enterprises and monopolies. - The proposals on intellectual property rights are similar in that they call for the implementation of TRIPs, but Mercosur also includes the declaration on public health and the Doha Agenda decision on the application of TRIPs paragraph 6. - In services, both groups propose positive lists following GATS rules, but the G5 proposes additional commitments in specific sectors, like telecommunications and finances. - In dispute settlement, both groups propose state- to-state dispute settlement, but Mercosur proposes adding the ¨negative consensus¨ principle. - The Mercosur proposal would send investment to bilateral negotiations using the positive list method, and would only include the national treatment discipline. In addition, all negotiations would have to conform to national laws and norms. On this issue the G5 only discusses transparency. Tier 2. Here the differences are greater. Mercosur and G5 both maintain the idea that after Tier 1 there will be plurilateral negotiations in which the countries that want to negotiate can inform the FTAA secretariat of their intent to begin a dialogue, while those that don't want to participate can be observers. Mercosur proposes that observers be given the right to intervene when the plurilateral negotiations negatively affect their rights, but the G5 proposal doesn't permit this type of intervention. In the Mercosur proposal, all countries are entitled to Most Favored Nation Treatment relating to market access, independent of whether or not they participate in the second Tier. That is to say that market access cannot be conditioned on participation in Tier 2. To the contrary, the G5 proposal includes participation in Tier 2 as a condition for full market access. That is to say that those countries that participate in Tier 2 will gain additional market access. 3. Reactions and interpretations of the proposals Reactions - CARICOM is satisfied with Tier 1 because of the reduced content. They are uncomfortable with the G5 proposal and more comfortable with the Mercosur proposal. Tomorrow (Wednesday), they will present their own proposal. CARICOM is preoccupied with what will happen to the small economies. Moreover, if they are concerned about their lack of capacity to negotiate several bilateral or plurilateral deals. - The Andean Community except Venezuela and Bolivia are ready to sign Tier 1 and participate in Tier 2. - Venezuela will not sign up for Tier 2. They continue to maintain a position close to the Mercosur proposal with some specifications. They don't agree with Mercosur's market access proposal that demands the eventual removal of all tariffs, especially when it comes to agriculture. For agriculture, they plan to make a stand on food sovereignty. In intellectual property, they propose a formula similar to Mercosur but it includes traditional knowledge and genetic diversity. Finally, regarding dispute settlement, they disagree with the negative consensus concept. They will also present a detailed proposal regarding small economies recognizing different levels of development. - Bolivia will not sign onto Tier 2 and insists that compensatory funds be given to small economies. In addition, they noted that greater market access is useless given their low productive capacity. Analysis: Two scenarios -- ¨a new impasse¨ or ¨ALCA extralite¨ There are two possible scenarios. We might see a polarization of the differences outlined here that would bring the FTAA negotiations to an impasse. On the other hand, we could have a situation in which the G5 and Mercosur dedicate energy to advancing the negotiations in order to reach an agreement on Tier 1 that empties each chapter of the most conflictive issues, without specifying how to resolve the problems with Tier 2. Everyone will make an effort to eliminate tensions, or rather, to remove all conflict from the agreement. The logic is to take these items out now in order to get an agreement, and to look for solutions at a later date. The idea is to move the train along so that the boxcars can get filled up later; they will maintain the thematic boxes even though they are empty. Elections in Brazil, Canada, and the US demand that these countries demonstrate positive results that don't harm national interests. Therefore none of the major players wants be known as the one responsible for the impasse. Today they are trying to resolve the differences between the competing proposals. The differences between countries have brought them to their limits, making it difficult to think about a possible solution. This reaffirms the idea that you can't sign onto a Common Tier unless the content is empty. Both blocs are under strong internal pressure. On the part of the AgriBusiness sector, there is the pressure on Mercosur to demonstrate flexibility in its proposals, for example in its agriculture proposal. There will be a lot of pressure from specific sectors within Mercosur to open up more in the sectors that the US is asking for in order to gain maximum access to the US market. According to Marcos Jank (one of the agrobusiness analysts) "we have just finished burying FTAA.¨ If everybody asks for the impossible, the negotiations will end at an impasse. The US is trying to balance the desires of its business sector (which still wants a comprehensive FTAA) with the reality of Mercosur's resistance. In the process, the US negotiators are sacrificing the interests of the American people and ignoring instructions from the US Congress. The clearest example of this is the way the US has changed its position regarding labour and the environment. Despite the fact that the US has proposed the inclusion of labour and environmental norms within the FTAA, as is required by Fast Track, and despite the fact that their original proposal for Tier 1 included these issues, now that have abandoned these two points in the common G5 agenda. The objectives of an ambitious FTAA were stopped by the positioning of a group of countries who were not willing to assume all of the commitments required by the comprehensive FTAA . Therefore the G5 strategy has been to separate willing countries from the unwilling, giving up a lot in the minimalist Tier 1, while in Tier 2 everything is up for sale. The G5 will call a high level political meeting to launch plurilateral negotiations. These negotiations will create an FTAA II that will also be signed in 2005. Among its hopes will be the possibility of incorporating this countries with hostile governments once those governments fall out of power (Lula, Chávez, Kirchner). This proposal, made explicit in various bilateral meetings in the past couple days, shows the fundamental desire of the U.S. to isolate Mercosur through a network of bilateral agreements or through a new version of the FTAA signed only by those countries that are looking for more ambitious agreements.
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