December, 2003: Cover Story

By Greg Rushford

Published in the Rushford Report

MIAMI  — They said it was a “success.” As they preened for reporters early on the evening of November 20 in the crowded briefing room set up in Miami’s luxurious InterContinental Hotel, the trade ministers from 34 nations — every nation in the hemisphere save Fidel Castro’s ostracized Cuba — were full of smiles, handshakes, and pats on the back. The diplomats congratulated themselves for pressing ahead with a vision of a Free Trade Area of the America . When concluded near the end of next year, they said, the FTAA will take a significant step towards unifying 800 million people in a $14 trillion market that would extend from Alaska to Antarctica.

            “We‘re aiming for a comprehensive result” in 2004, declared U.S. Trade Representative Robert Zoelick. “We’re moving from general concepts and people talking past one another to positive realities and opportunities.” We really had “good chemistry” here, added Zoellick’s newest close friend, Foreign Minister Celso Amorim of Brazil. “I’m leaving Miami very satisfied with the results that we have reached.”

            Some success. There are no substantive results to report. The story of what happened in Miami during the Free Trade Area of the Americas meetings from Nov 16-20, 2003 begins with considerable doubt that anything more important than political spin happened — and then keeps going south. If this were an article that purported to detail all the ways that U.S. leadership on trade was manifested in Miami, it would have to end about here. The only accomplishment was in the back-tracking, the purposeful blurring of a once-clear free-trade vision. 

            According to multiple, credible sources, the Bush White House had dispatched Zoellick to Miami with instructions to agree to any face-saving device that would avoid another embarrassment like the acrimonious September collapse of the World Trade Organization’s ministerial meetings in  Cancun. The spin, therefore, became more important than substance.

            At the end of the day, President George W. Bush looked at the vision of an FTAA that would require the United States to lower its high tariffs on orange juice, to open its markets to Latin American sugar, to force U.S. cattle ranchers to try to compete with lower-cost producers like Argentina and Brazil, and to reform U.S. antidumping laws so domestic steel petitioners would have a more difficult time obtaining high tariffs against their foreign competitors — and looked away. These things were simply not worth going to the mat over, not with an election year looming, the president decided.

            Likewise, in Sao Paulo, President Luiz Inacio Lula da Silva — a former steelworker who brings to Brazil’s trade policy roughly what Richard Gephardt would bring to America if he were to become president — decided that if the Yankees were not going to give market access, he wouldn’t either. Lula catered to the lowest common denominator of protectionists who do not want to dismantle Brazil’s assorted trade barriers. In Miami, Lula and Foreign Minister Amorim basically ignored the views of progressive elements of  Brazil’s business community who would lower tariffs that average 12 percent and otherwise open their country to investment and competition.            Others in the hemisphere — notably the trade ministers from Canada and Chile — didn’t like the watered-down vision of an FTAA, but decided to go along with it. Brazil and the United States, it seems, were considered too big to buck. Likewise, the disappointed American business community — the U.S. Chamber of Commerce, the National Association of Manufacturers — grumbled that next year they would not support a deal that wasn’t worth doing, but typically didn’t make a big stink this year. The American corporate types met behind closed doors at the Hyatt Regency to discuss the FTAA amongst themselves, making minimal effort to explain the virtues of free markets to the public. Wittingly or not — it is never clear how much this crowd understands or cares about public relations — the business community ceded the field to the legions of anti-corporate activists who came to Miami to trash the FTAA, and who made themselves easily accessible to reporters. When I asked businessmen here why they were ignoring the vital business of trade education, I mostly got blank stares and mumbling.

            Lori Wallach — the PR-savvy anti-globalist head of Public Citizen’s Global Trade Watch who is not always celebrated for her rhetorical restraint — certainly got it right this time: “All that was agreed was to scale back the FTAA’s scope and punt all of the hard decisions to an undefined future venue so as to not make Miami the Waterloo of the FTAA.” Wallach told the Miami Herald.

            There not only was no Waterloo in Miami, there was no battle. The confident vision of a comprehensive free-trade deal that was last proclaimed in April, 2001 when the hemisphere’s presidents met at the   Summit of the Americas in Quebec, is no longer operative. The ministerial declaration of Nov. 20, 2003 revised that vision in three short paragraphs. Instead of a comprehensive FTAA, the ministers called for “a comprehensive and balanced” FTAA. They recognized the need for “flexibility.” And they said that they “recognize that countries may assume different levels of commitments.”

            The spin didn’t much fool journalists, who at least know the English language.  Neil King reported in the Wall Street Journal that the FTAA had been “watered down.”  Miami Herald reporter Jane Bussey rightly observed that the fuzzy language about “flexibility” meant that participating countries could “opt-in” to parts of an FTAA that they liked, and “opt out” of the parts they didn’t. In an editorial, The New York Times likened the new FTAA to a meal: “Call it free trade, à la carte.” Other reporters quipped that if this new FTAA were a meal, it would be very low in calories.  

            There sure was a lot of bold-but-empty talk last month here. “Florida strongly supports free trade — both in principle and as envisioned in the FTAA,” Fla. Gov. Jeb Bush declared to an audience of business leaders on November 17. “We believe in the power of free markets to drive economic growth, both here and abroad.”

            Although nobody was so impolite as to point it out, Gov. Bush’s belief in the power of free markets doesn’t extend to eliminating Florida’s outrageously high tariffs of more than 50% on concentrated orange juice — tariffs that effectively keep Brazil’s share of the $3 billion U.S. market to less than 15%. Free trade in orange juice, Gov. Bush has declared, would be unacceptably “devastating.” Nor is the governor (or his brother in Washington) eager to advocate any trade action that would disappoint Florida’s Fanjul family, famous for their sugar that pollutes the Everglades as well as for their financial generosity to politicians like the Bushes. The governor sincerely wants an FTAA secretariat to be headquartered a Miami that is truly the free-trade gateway to Latin America — but not that much.

            Meanwhile, the Latin Americans seemed less than enthusiastic about an FTAA. Argentina’s trade secretary told Argentine reporters that he preferred “a bilateral stance,” and that the FTAA wasn’t at the top of his priority list. “We are negotiating seven trade agreements right now, and the FTAA is not the most important one,” Martin Redrado acknowledged.

            Although they were mostly quiet about their discontent in public, the small, fragile economies of Caribbean nations would love to see the FTAA go away. The so-called CARICOM countries have genuine reasons to fear being smothered by unfettered free trade with their giant neighbors. After the FTAA had been watered down in Miami, the island trade ministers seemed to feel like they had dodged the FTAA bullet.

            “The best thing you could do for us would be to kill the FTAA,” Leslie Miller, the minister of trade and industry from the Bahamas, bluntly told me as we walked next to each other leaving the InterContinental final press conference on Nov. 20. I didn’t just happen to catch Mr. Miller in an unguarded moment; he later told reporter Vanessa Rolle of the Nassau Guardian that the United States was bordering on “criminality” in asking Caribbean countries to open their markets, while the U.S. insisted on protecting its own.

            Anyone who wants to appreciate why the FTAA has now gone on political life support is advised to study a 6-page submission on the proposed reforms of the U.S. antidumping laws that a high-calorie FTAA would serve up. The submission was prepared by lawyers at Stewart and Stewart for the International Steel Group,  America’s number two integrated steel producer (which stands second to none in its enthusiasm for the U.S. antidumping regime). 

            “When Congress granted trade promotion authority to the President in 2002, it directed the United States Trade Representative to ‘preserve the ability of the United States to enforce rigorously its trade laws, including the antidumping, countervailing duty and safeguard laws, and avoid agreements that lessen the effectiveness of domestic and international disciplines on unfair trade, especially dumping and subsidies,” the ISG document notes. That’s true.

            Then the ISG document ticks off the list of proposed technical modifications to U.S.antidumping practices that a strong FTAA might require. The issues are highly technical and best understood only by trade practitioners: how officials should calculate “below cost” sales, “constructed value” and “profit,” how to value the “export price” and “material injury” findings, how to use methodologies known as “zeroing” and “cumulation,” and so forth.

            Now, from a free-trade vantage point, there is nothing wrong with the suggested reforms, all of which would clearly be in the overall U.S. national economic interest. But such reforms would be anathema to Congress, as they would make it harder for U.S. petitioners to obtain high antidumping margins. It is impossible to imagine U.S. Secretary of Commerce Don Evans, whose department administers the antidumping laws, going to Capitol Hill in the middle of next year’s election campaign to fight for such reforms. They would never get out of the Senate Finance Committee.

            I asked Evans directly in Miami if he was willing to entertain the notion of any antidumping reforms in the FTAA. “No,” he replied, without a moment’s hesitation. “This is business that should be addressed in the WTO context.”

            The catch is that in the context of the World Trade Organization’s Doha Round negotiations, Evans has been opposing many of the same reforms. In fact, he has recently been considering tightening the screws of his antidumping regime, making it easier for domestic petitioners to win high tariffs (see the Players column at page TK).

            Still, Don Evans did not blush when he told an audience of corporate executives on Nov. 19 how much he and President Bush believed in free trade. “The great economic lesson of the Twentieth Century is that free trade and open markets are the most powerful force to spread opportunity and raise living standards in both advanced and developing economies,” Evans declared. “President Bush believes that free trade offers hope, opportunity, and expanded freedom to people in the grip of poverty.”

            As the secretary spoke, I watched the audience. There were secret smirks, knowing side-glances, and, in the back of the room, even some corporate eyes rolling in disbelief.

            So, where are we? The WTO’s Doha Round is at a standstill. The FTAA has been watered down beyond the point where it is worth doing. And the essence of President Bush’s once-bold trade policy has been reduced to efforts to cut special trade deals with small countries of little economic consequence. In Miamilast month, Zoellick announced that he was launching bilateral “free trade” talks with the Dominican Republic, Panama, Bolivia, Colombia,   Ecuador  and Peru . Zoellick also hopes to wrap up a regional trade agreement with five Central American countries: El Salvador, Costa Rica,  Guatemala, Honduras, and Nicaragua .

            U.S. trade policy is now basically about putting together an economic coalition of the willing — small countries that are willing to become U.S. Satellites. It is far from clear that any of these little deals— many of these countries, like  Brazil , would like to sell the United States more sugar — would get through the U.S. Congress next year.

            Like its predecessor Clinton administration, the Bush administration asks other countries to take politically difficult steps to liberalize their trade, while refusing to reciprocate. For President Bush, this double standard didn’t work any better in Miami and Cancun in 2003 than it did in 1999 for President Clinton in Seattle.

            With the Congress more protectionist than ever in recent memory, with voters in key industrial state battlegrounds frightened to death at the thought of competing with the likes of Mexico and China, with the U.S. business community’s continuing refusal to get serious about genuine trade education, is difficult to imagine things getting much better for quite some time.

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