Update on Puebla FTAA TNC meetings #1 and #2

Dear Friends,

Please find attached the latest news from the FTAA negotiations this
week in Puebla, Mexico. As you all may recall, many of the key decisions
about the structure and content of the FTAA were kicked up to this meeting
after the ministerial in Miami last November.

Needless to say, it's a key moment in our struggle to stop the FTAA and a
great time to call our Members of Congress and urge them to take a strong
stance against the FTAA. (You may even want to share with them the reports,
especially if you have a supportive Congressperson.)

One key point to raise with your representative is the fact that USTR has
completely dropped the labor and environmental chapters they put in the text
( in brackets) in Miami.

Stay tuned for more updates,
--
Deborah James, Global Economy Director
Global Exchange
415.575.5537 direct line
415.255.7296 x245
415.255.7498 fax
2017 Mission Street #303, San Francisco, CA 94110
http://www.globalexchange.org

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---

Continental Campaign Against the FTAA
Hemispheric Social Alliance

Trade Negotiating Committee (TNC) FTAA Meeting Report
February 2, 2004 Puebla, Mexico

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, Ch*vez, 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 t
hose countries that are looking for
more ambitious agreements.

============================

Continental Campaign Against the FTAA
Hemispheric Social Alliance

Update #2 from TNC meeting in Puebla, Mexico
February 3, 2004 Puebla, Mexico


In today’s discussions, disagreements were exposed for all to see

The voices of dissent were heard today as Caricom and Bolivia presented
very strong proposals. At the same time, Mercosur directly confronted
the group of countries led by the United States. Tensions between
countries remained high. While trying to reach consensus, conflicts
became even clearer and countries became even more polarized. In
addition, while civil society representatives were excluded from
today’s discussions, Bolivia was one of the few countries that
raised the issue of participation in the discussions, and pushed for the
promotion of social dialogue, greater civil society participation, and
greater transparency.

This morning, each of the countries or groups of countries hat had
submitted proposals on Tier 1 of the FTAA (minimum commitments) had the
opportunity to present their proposals to the entire group. Mercosur,
Venezuela, Caricom, the Group of 14, and finally Bolivia presented
proposals. The new so-called Group of 14 is yesterday’s Group of 5 –
US, Mexico, Chile, Costa Rica, and Canada – with the addition of
Colombia, the Dominican Republic, Ecuador, El Salvador, Guatemala,
Honduras, Nicaragua, Panama, and Peru. In the afternoon, discussion on
each of the nine negotiating issues began. The second Tier of the FTAA
(comprehensive commitments) will be discussed during the week, but the
agenda could still change and the issue could be put off.

Deep Differences Remain

1. Agriculture
Neither the G14 nor Mercosur have made any movement on agriculture in
their proposals. The G14, like the G5 before it, continues to ignore
internal supports and measures equivalent to subsidies in its proposal,
while these issues remain in the core of Mercosur’s agriculture
proposal. The agricultural safeguard generated substantial debate in
today’s discussions. Mercosur totally rejected any type of safeguard,
and, for their part, Bolivia, Venezuela and Caricom demanded that any
safeguard be used only by developing countries and only for the
protection of small farmers. This vision is totally contrary to that of
the G14, which believes that all countries should have the right to use
the safeguard, for any agricultural sector, as long as there is a flood
of low-priced imports.

2. Market Access
The Mercosur and G14 proposals remain far apart on the issue of market
access. The Mercosur proposal envisions the elimination of tariffs on
the entire universe of goods, while the G14 proposal only calls for the
elimination of tariffs on substantially all goods. The G14’s
position would allow the United States to keep its market closed to
certain exports from those countries that only participate in Tier 1
negotiations, creating an incentive for countries to enter into Tier 2
negotiations in order to gain full access to the U.S. market for their
exports.

This fundamental difference is also reflected in the positions of the
two groups on Most Favored Nation (MFN) treatment. While Mercosur
proposes that all countries – including countries that only
participate in Tier 1 – be entitled to MFN treatment for their goods,
the G14 would only accord MFN treatment taking into account the
commitments and obligations of each individual country. In effect,
the G14 proposal would allow the U.S. (and other countries) to
discriminate against exports from countries that refuse to participate
in Tier 2.

The proposals of CARICOM and Venezuela offer no resolution to this
fundamental disagreement. Neither CARICOM nor Venezuela addresses the
relationship between market access concessions and participation in the
second Tier.

Both CARICOM and Venezuela call for the exclusion of some goods from
tariff elimination, directly contradicting Mercosur’s position
For
Caricom and Venezuela these exclusions would have to bear some relation
to differences in levels of development and differences in the size of
economies. Venezuela in particular calls for right to exclude sensitive
agricultural products from tariff elimination.

In the same manner, Caricom and Venezuela emphasized that reciprocity
in market access between developed and developing countries should not
be required, citing Article 40 of the Charter of the Organization of
American States.

3. Special and Differential Treatment
* As explained above, Caricom and Venezuela emphasized the
importance of implementing Special and Differential Treatment (SDT) in
market access rules.

* Caricom also calls for implementation of SDT in rules governing
services, government procurement, antidumping, and dispute settlement.
Venezuela also has a detailed proposal on compensation funds.

* For its part, Bolivia proposes implementing the principle of STD
in a transversal manner to the entire FTAA agreement including the
additional commitments.

* Mercosur calls for the creation of specific measures on
SDT in each area of negotiation, but does not include such measures in
its outline of the first Tier. In addition, Mercosur’s strong
insistence on MFN may prevent the creation of effective SDT measures
over the long term. Mercosur does, however, call for the creation of
compensation funds.

* The G14 proposal, instead of calling for specific rules to
implement SDT in the negotiations, calls for the use of technical
assistance, cooperation, and capacity building measures to address
different levels of development and small economies. The G14’s
refusal to implement SDT in a concrete way brought strong resistance
from the other countries. Caricom, Venezuela, Bolivia and Nicaragua
made strong statements on the need to address structural problems
relating to differences among economies. Nicaragua, even though it is a
member of the G14, took a position that any agreement must take into
account different levels of development, a principle that is not
recognized in the G14 proposal.

4. Competition Policies
This title does not refer to measures to control private monopolies,
but to the obligation of nation-states and public enterprises to behave
according only to commercial criteria. The inclusion of this issue in
the “minimal” Tier 1 shows that this is not such a minimal FTAA
after all. The issue has still not been discussed officially, but it
will definitely be a controversial issue. The G14 has proposed
including three points on competition policy in Tier 1 which could have
huge impacts: a) general principles for competition legislation and
policies; b) measures to prohibit anticompetitive behavior; and c)
disciplines on state enterprises and monopolies. The proposals of
Mercosur and Caricom don’t accept the inclusion of any of these
obligations in Tier 1. This would be a very difficult point for any
country to make concessions on.