Summit of the Americas
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MARGARET WARNER: To analyze and debate this free trade area proposal, we turn to Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers. Stephen Clarkson, professor of international economics at the University of Toronto, and a fellow at the Woodrow Wilson International Center. Miguel Diaz, director of the South America Project at the Center for Strategic and International Studies, and director of the U.S./Argentine Caucus, a private business promotion group. And Maria Luisa Mendonca, director of the Global Justice Center, a human rights advocacy group based in Rio de Janeiro, Brazil. She joins us from Quebec.
Welcome to you all.
Mr. Vargo, your organization supports this idea. Explain, how would it work? What would free trade throughout the hemisphere mean?
FRANK VARGO: What it means is getting rid of the trade barriers that really have been holding back economic growth in the whole hemisphere. Now, for America’s manufacturers, this is our top trade priority, and I’ll tell you why. Right now, South America and Central America — not counting Mexico — account for about $60 billion of our exports a year. That’s four times as large as China, so it’s pretty big right now. But if we could get rid of these trade barriers and have the FTAA created successfully, our forecast is that within a decade, that $60 billion of exports will grow to $200 billion.
That means a lot of exports, it means a lot of jobs. The playing field is not level right now. America has only 2 percent tariffs on average, but in South America, they average 15 percent, and they go up to 20 percent and 30 percent. That’s been holding back our exports and holding back their growth, so this is going to benefit everybody in the whole hemisphere.
MARGARET WARNER: So Professor Clarkson, based on the experience of U.S., Canada and Mexico with NAFTA, would you say that’s a fair description of what a free trade area is — elimination of all barriers, all tariffs?
STEPHEN CLARKSON: Well, it would be if it was only about trade, but these agreements are much more. They’re really investment agreements that give transnational corporations much greater rights investing in other countries. And in the Canadian experience, it’s true that our trade has increased a lot, but it’s not because of the trade agreement; it’s really because our dollar has been devalued. So there has been a lot of trade expansion, but the public — and the reason people are demonstrating in Quebec City — the public is really concerned that we have in effect a new constitution which prevents our governments doing the kind of environmental, social, public health, education policies that it used to do. So we’ve really transformed our state as a result of signing the WTO and the NAFTA, and now this will presumably deepen and strengthen those constraints on our government.
MARGARET WARNER: All right, Mr. Diaz, from where you sit, what impact do you think this kind of agreement would have on the Latin American economy?
MIGUEL DIAZ: Well, I think it would have a great impact. The Latins have been waiting for a long time — the Chileans in particular — for this kind of access to the U.S. They feel that they need access to the U.S. Market to grow. They also, as Professor Clarkson just mentioned, they think it’s important in terms of attracting investment to the region. The region is going through a lot of difficult times at the moment, and access to the U.S. Market in particular — which is a $1.2 billion market last year — is very important to them. They also see this as critical in terms of being able to compete on a global basis. They see with good reason the principle competition being the Europeans and Asians who have already gone through an integration process, and they hope that…
MARGARET WARNER: You’re talking about the EU?
MIGUEL DIAZ: That’s right, the EU — and they believe that in partnering with the U.S., they could compete on a worldwide basis with us. Politically, the Latins for a long time have had this view that regional political integration is to their benefit as well. Politically, the region could use a little push right now, and by partnering up with the U.S., They feel it is to their benefit.
MARGARET WARNER: All right, Ms. Mendonca, I know you’re opposed to this. Why? What impact do you think it would have, particularly in Latin America?
MARIA LUISA MENDONCA: Well, the idea that South Americans or Latin Americans will benefit from it is actually a myth. This will not allow us to protect our national industries and actually it will be an unfair agreement, since we will have to give up our subsidies, our local subsidies, and the U.S. companies are not willing to give up their own internal subsidies and their anti-dumping rules. And in terms of human rights, a real agreement should allow people to circulate freely, the same way that investments, speculative capital in multinational corporations will be able to move freely throughout the continent. In the European Union, people and workers are allowed to circulate freely, and that’s not the case at the FTAA.
MARGARET WARNER: Mr. Vargo, let’s take the criticisms maybe one at a time, first on the economic side — namely that the idea this is going to create a level playing field. It hasn’t really turned out that way, and that, in fact, Latin American economies and businesses have a reason to fear American businesses being able to come in without them being able to get equal access here.
FRANK VARGO: Oh, I don’t think so. I think our access is very open. Again, our tariffs average less than 2 percent. Two-thirds of all American imports come in duty free right now, but the best evidence that free trade works is Chile. Chile’s the only country in South America that has already lowered its tariffs and has become an open market, and Chile’s economic growth for the last decade has been twice the rate of South America as a whole. And the same kind of benefits, we’re convinced, will accrue all over South America.
You know, we know that trade supports democracy. We know that opening of trade, removing barriers, brings about faster economic growth. It’s the faster economic growth that brings about the wealth that allows governments to actually do something about pollution in their countries and creates higher labor standards, so we see this totally as a win-win. It’s been a winner for Europe when they’ve done it. Asia is looking at free trade areas, and in our view, South America just won’t have a competitive future unless we have the FTAA.
STEPHEN CLARKSON: But Europe did it on a much more equal basis, a more level playing field than NAFTA has done it, and presumably the FTAA. The U.S. won’t give up its antidumping and countervail duty actions against its partners, so we don’t really…
MARGARET WARNER: In what areas? Give an example.
STEPHEN CLARKSON: Well, take steel. Canadian steel happens to be very efficient and competitive. There’s so many antidumping actions launched against Canadian steel that Canadian companies — steel companies — are now having to invest in the United States if they want to sell there. So it’s maybe better for the United States because it gets new investment, but we don’t get the investment in Canada, and that means that we lose jobs in that particular sector, for instance. So it’s an unlevel playing field also when it comes to intellectual property rights, which are really monopoly rights for high-tech information companies like drug companies. And that means that the rest of the hemisphere…
MARGARET WARNER: I’m sorry. But explain what you mean by that.
STEPHEN CLARKSON: Well, intellectual property rights give drug companies exclusive control over the use of their patents for drugs. And that means that they can charge very high prices for drugs that cost very little to produce. As we’ve just seen in South Africa — well, that’s being resolved now, but for the rest of Latin America, presumably — we’re all going… the Western hemisphere, including Canada, we’re all going to have to pay much higher prices for our drugs than we need to pay. So it’s terrific for American drug companies, but it’s not terrific for the health system in the other countries.
MARGARET WARNER: Mr. Diaz, what’s your view on this debate about whether it really does create a level playing field?
MIGUEL DIAZ: Well, I think the case of Mexico has shown that it has created a level playing field. There is no doubt in my mind that NAFTA has been a win-win case for all the participating countries, and the hope is that the FTAA could do the same thing for the rest of the region. Sure, there’s a humongous divide between Haiti and the U.S., but it really is a start. It’s not the end-all of it.
MARGARET WARNER: But, now, some Latin American countries really do have concerns about this, do they not? I mean, Brazil, for instance, has some of the same concerns that Professor Clarkson just raised — that the U.S. retains certain protections?
MIGUEL DIAZ: That’s right, and I think they’re making a valid claim in saying that the U.S. is not putting everything on the table. I think in terms of agriculture, we have been a little reticent in terms of negotiating on that, and I think it’s important to the Latins especially because of the fact that their commodity exporters, agricultural exporters, that agriculture be also put on the table.
MARGARET WARNER: All right, Ms. Mendonca, I’d like you now to address this issue about whether free trade and open trade ultimately promotes democracy and human rights just a little more and respond to some of the points that Mr. Vargo made.
MARIA LUISA MENDONCA: Actually, the FTAA is in direct contradiction to human rights. First of all, one concrete example is the ability for Brazil to produce generic drugs for AIDS treatment. Under this agreement, we will have even more strict rules than what we have now under the WTO agreement, so that will create a great health problem in Brazil in particular. Another big issue is food security, because the big corporations like Monsanto will control our markets, and that will affect the ability of our farmers to produce seeds, so the food security in the region will suffer a lot.
So I think that using Mexico as an example is actually a good example. If you just go to Tijuana, look how the conditions are there, how the workers are there, what the environmental situation is. What we see, for instance, in Tijuana, which is the land of maquilladores, is constant abuses in terms of labor rights, environmental rights. So I think that isn’t U.S. workers will lose with this, because all the standards, all the human rights standards and labor standards will be lower, and multinational corporations will have more power to rule as they wish.
MARGARET WARNER: Does she have a point, Mr. Diaz?
MIGUEL DIAZ: Well, I’ve actually been to Mexico many times. I’ve been in Mexico ten, 15 years ago. In fact, I studied in Mexico, and I’ve seen the workplaces where Mexicans work, and compared, and no doubt in my mind that Mexican workers are much better treated under the present circumstances under NAFTA than they were 15, 20 years ago.
MARGARET WARNER: All right. Finally, before we go — I’ll start with you, Mr. Vargo — can a meeting like this, this meeting this weekend create enough momentum, the kind of momentum that President Bush is seeking behind this, just to reenergize this process?
FRANK VARGO: Oh, absolutely, and that’s the whole point to this meeting, and I think President Bush will do that. But just as a final note, there seems to be criticism of this agreement that intellectual property, that patents are bad, that lowering trade barriers are bad and this harms people, and that’s just not so. You know, the patent system has given all these miracle drugs that save lives and make much better medical care available, and when American companies, for example, go to Brazil or other places, they bring high environmental standards with them. And that’s going to spread. The experience of Mexico — Mexico has a long way to go, but they really have improved. The experience of Chile — that’s the gift that free trade is going to give to the whole Americas.
MARGARET WARNER: Professor Clarkson, what would you say on this momentum question? In other words, where do you think this is going?
STEPHEN CLARKSON: Well, I don’t think it will go very far, because Mr. Bush doesn’t come to Quebec with fast track authorization. That means that he’s already a kind of lame duck. Unless he has Congress agreeing in advance to either vote for or against what he negotiates, nobody will negotiate, because we’ve had too many experiences where we negotiate with the American administration a treaty, and we’re all ready to sign. Then the American administration takes it to Congress, which says, oh, we want to change this and change that, and we end up having to negotiate twice. So unless he gets the fast track, nobody’s going to really take it very seriously.
MARGARET WARNER: Ms. Mendonca, how do you see this question of momentum? Do you see this train leaving the station, or do you think you can derail it?
MARIA LUISA MENDONCA: Well, I think that first of all, this is not a democratic process. Our governmental leaders are meeting now behind closed doors. Nobody knows what’s going on there. Even our national congresses are not knowing what’s going on there, nobody’s aware of these negotiations, so we don’t consider this a democratic process, and a civil society will keep organizing and educating people about this. And just to go back to Mexico, 50 percent of the Mexican population lives below the poverty line, so I think when we look at economic measures, we need to look at really how people are living on a daily basis. This is not good, and this is not a democratic process.
MARGARET WARNER: Mr. Diaz, what do you see as the prospects?
MIGUEL DIAZ: It would have been ideal for Bush to have gone to Quebec with fast track authority in hand. I do think, though, that he will find a sympathetic audience in Quebec, given that a lot of Latin leaders also have to fight an uphill battle in terms of getting popular support for FTAA. I hope that he comes back from Quebec with a renewed sense of commitment and re-energized and focused, and give this the priority that it deserves.
MARGARET WARNER: All right. Well, thank you Ms. Mendonca, gentlemen. Thanks very much.