Looking To The North, Looking To The South
...T&T caught between FTAA and ALBA
August 17, 2005
By Raffique Shah
TRINIDAD and Tobago is caught in a maelstrom of trade and economic re-alignments that is sweeping through the Western Hemisphere. The upheavals, triggered by growing anti-American trade sentiments mainly in South America, come at a time when the region "exceeded even the most optimistic forecasts", according to the Economic Commission for Latin America and the Caribbean (ECLAC), posting a 5.5 per cent growth in most economies in 2004. The prognosis for 2005 is a four per cent growth. This country was relying heavily on the FTAA coming on stream, with Port of Spain hosting its headquarters. But even its most vocal advocate, Trade Minister Kenneth Valley, admitted that "the FTAA seems to be on the back burner".
Two weeks ago, the US Congress agreed to support President George Bush's CAFTA trade agreement by the slimmest of majorities-two votes. CAFTA encompasses five Central American countries and the Dominican Republic. These countries, as well as most of South America, were originally part of the proposed FTAA. In the meantime, coming on the heels of the Petrocaribe deal that is yet to be assented to by this country and Barbados, Venezuelan President Hugo Chavez is vigorously promoting ALBA-The Bolivarian Alternative for the Americas.
According to Valley, who has been at the forefront of the campaign to have Port of Spain named as the headquarters of the FTAA, this country has not even considered ALBA. "We remain committed to the FTAA," he told Express Business. "But we also recognise that things are moving very quickly, what with CAFTA due to come on stream soon, and a number of bi-lateral agreements being signed by other countries, it appears that the FTAA is on the back burner.
"In the meantime, through Caricom, we are pressing ahead with a number of trade initiatives. Recently, for example, that body signed an agreement with Costa Rica, which is rich in agriculture. We are now looking at Panama to have a similar agreement. Then, there is the CSME, on which we are working very hard."
He did not want to comment on possible fallouts within Caricom on the Petrocaribe deal, although he hinted that it's still open to negotiations. "In fact, Caricom has mandated Prime Minister (Patrick) Manning to head a committee that is examining the Petrocaribe. We still hope we can make it workable that Trinidad won't lose our niche market for petro-products in the Caribbean."
Asked if the Government was concerned about the implications of CAFTA and ALBA, Valley said there were some fears, but there are also "opportunities cropping up for us". "The more prosperous countries in the Americas and Caribbean become, the better our markets for manufactured goods. Bear in mind that in the region we are a leader in the manufacturing sector. And whatever happens with Petrocaribe, there will always be ready markets for our oil, gas and downstream products. So Trinidad and Tobago will hardly lose out, whatever trading blocks come into being," said Valley.
But while Valley remains optimistic about "our commitment to the FTAA", its critics point to the rough passage in the House of CAFTA and the possible fate of similar agreements-the FTAA included-being ratified by America. Ten years ago, when NAFTA (the USA, Canada and Mexico) came into being, it was passed by a margin of 34 votes.
The main problem the US Government faces in getting members of the House and Senate to approve these trade pacts is fear of the loss of jobs, especially from the districts they represent, to cheap labour. It happened when NAFTA came into existence and several large companies moved parts of their operations to Mexico. Already, US companies (Chiquita, Grace Kennedy) have extensive investments in Central America. In fact, some 80 per cent of imports from CAFTA countries already enter the US without tariffs, and worse, their collective gross domestic product is less than one per cent of US national output. CAFTA is therefore not seen as a major concession by the US to its poorer neighbours.
South America, however, is a completely different proposition. It is of strategic importance to US dominance of the Hemisphere, and by extension, the world. Now, with President Chavez of oil rich Venezuela taking the lead, forging closer economic ties with other countries on the continent, and here in the Caribbean, the US State Department sees a real threat to its supremacy.
Secretary of State Condoleeza Rice recently fired a broadside at Chavez and her office has set up a heavily-funded desk to "return Venezuela to democracy". Political tensions between the two countries have increased over the past year to the point where Chavez has accused the US of plotting to invade his country. He also accused DEA agents stationed in Venezuela of spying for the CIA.
South America already has several trading "blocks", among them MERCOSUR, the Andean Community of Nations (CAN), and more recently the South American Community of Nations. The aim of the latter is the creation "of a great political and economic block in the next 15 to 20 years". The ECLAC report states that in 2004, except for Haiti, every country under its purview posted positive growth. "This is the second time in the past 20 years that the region's six largest economies (Argentina, Brazil, Chile, Colombia, Mexico and Venezuela) will all grow more than three per cent."
It pointed out that some economies are "experiencing intense recoveries after facing profound crises". Venezuela is expected to post an 18 per cent growth in 2005, Uruguay 12 per cent, Argentina 8.2 per cent, Chile 5.8 per cent, Ecuador 6.3 per cent and Panama five per cent.
There are other distinctive features of this growth. ECLAC said it was the second year running that GDP growth has come with a surplus in the balance of payments current account, and both have grown. "In the past, growth episodes typically came with a steady deterioration in current account, with trade deficits. A second feature is that the rise in output is occurring in a context of capital outflows, which saw net capital flows into the region plunge over the previous year. Never before has a drop of this magnitude been associated with a rise in growth rate." The region's trade also performed very well. Exports rose by 22.4 per cent (10.8 per cent by volume and 10.5 per cent by price) and imports grew 19.8 per cent (14.4 per cent by growth and 4.7 per cent by price). Also, for the third year running the region's balance of goods posted a surplus, which has risen by almost US$20 billion a year since 2002, to reach US$61.875 billion in 2004.
In the face of such phenomenal growth comes Chavez and his initiatives to foster a massive economic and trading block that encompasses South and Central America as well as the Caribbean. In a summary produced by the Banco de Comercio Exterior (Bancoex), Teresa Arreaza writes: "Alba appeals to the egalitarian principles of justice and equality that are innate in human beings, the well-being of the most dispossessed sectors of the society, and a reinvigorated sense of solidarity toward the underdeveloped countries of the western hemisphere, so that with the required assistance, they can enter into trade negotiations on more favourable terms than has been the case under the dictates of developed countries."
ALBA is seen as a counterweight to the policies and goals of the FTAA. Its cornerstone is the proposal for a "Compensatory Fund for Structural Convergence" which would manage and distribute financial aid to the most economically vulnerable countries. Under ALBA, "agriculture would prioritise the food self-sufficiency of every country before focusing on profit-making processes. Arreaza writes: "The agricultural sector cannot be deliberately subjected to market liberalisation, while developed countries maintain policies based on multi-million-dollar subsidies and high import tariffs to protect their own internal production, thus flagrantly contravening the principles of free trade."
The FTAA, in its Declaration of Principles (Consultative Group On Smaller Economies-CGSE), Item 19, recognises: "The countries that make up the 'smaller economies' need support not only in the form of material capital but also, and simultaneously, in the form of moral and scientific intellectual capital and it is therefore appropriate to suggest a 'fourth way', the Workers' Sociocracy which is neither communist, fascist, nazi nor democratic. In fact, it is a transition stage leading to democracy." But in proposing measures to enhance such economies, in which small enterprises thrive, its first recommendation reads: Small enterprise, big business? No. Small enterprise, big problems-great waste. It adds: "What we should have are large, private enterprises, private oligopolies whose objectives are the rational use of raw materials, which are becoming scarce worldwide."
The FTAA also supports "parastate monopolies". But these will: "Hold strategic wealth, would be the owners of the natural deposits that produce strategic raw materials such as oil. These enterprises should sign agreements to guarantee supply, at market price and with contingency clauses, to all international consumers through their multinationals."
Valley, a member of the CGSE, "unequivocally stated at the outset of this meeting that the FTAA negotiations are not only technical, but also carry increasingly political and social implications which, if not properly managed, will inevitably exacerbate the expressions of protest towards the FTAA. Resistance to the FTAA is on the rise in an increasing number of political and social sectors in each and every one of our countries, in response to a negotiation process about which they know little or nothing at all."
Meanwhile, "down south", in promoting ALBA, Chavez said of the FTAA: "Integration is not possible under neoliberalism; neoliberalism is disintegration. South America cannot be integrated as outlined in the FTAA. Signing the FTAA is like signing a death certificate; it would be sending our countries to Dante's Fifth Hell, about which it said: 'Abandon all hope, you who enter here." And: "The FTAA does not provide anything for those without a roof, without land, without a school, without work. If the FTAA takes effect, we will be opening the way for more terrible inequalities that would fill our societies with violence." At the time, he was addressing representatives from 12 countries-Argentina, Bolivia, Brazil, Colombia, Cuba, Chile, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela.
In promoting ALBA, he said it would bring into being "zones free of illiteracy, infant malnutrition, homelessness, and environmental destruction". He recalled a quote from assassinated US president John Kennedy, who, in promoting the Alliance for Progress, said: "There is a revolution in the South-listen to it; see it the cause is not communism, the cause is poverty those who stop peaceful revolution will be opening the way for violent revolution."
Already, Chavez has signed preferential oil agreements with most Caricom countries, Argentina and Brazil. Last week, Ecuador's Foreign Minister Antonio Parra defended deepening ties with Venezuela as part of a larger effort to forge relations with other South American nations. "Latin American integration is not just about Venezuela," he said. "Negotiating with Venezuela, or with Brazil, does not indicate opposition to the United States or the European Union or China." In recent weeks Venezuela has announced plans to finance Ecuador's public debt and help process Ecuadorean crude oil to help supply domestic demand.
Trinidad and Tobago, sitting a few miles away from South America, is caught between maintaining good trade relations with the USA on the one hand, and seeking to benefit from the huge economic giant that's emerging to the south. Like other Caricom and Central American countries, it may be able to balance its act skillfully, deriving benefits from both. The US remains the biggest market for our oil, gas and other downstream energy products. We also buy much of our food and manufactured goods from the superpower.
But with a growing and more united political and trading block at our doorstep, the Government will have to make some hard choices and soon. ALBA seems to be moving forward and Petrocaribe has penetrated Caricom. The FTAA is at a standstill. Shall we continue to look the North, or focus on the South? It's Hobson's choice or better still, Patrick Manning's choice.