INTRODUCTION

Only a very tiny minority of 800 million people in the Americas ... have heard and understand the whole process and the concept behind the FTAA. We need to have the time, the space, and the resources ... so that an informed public can help government actually shape what is best for all our societies. [Eleanor Douglas, 27:1640]

In the advent of the Canada-United States Free Trade Agreement and Congressional approval to pursue bilateral free trade with Mexico, which would eventually culminate in the North American Free Trade Agreement, former U.S. President George Bush proposed his Enterprise for the Americas Initiative (1990). This initiative, which proposed to extend free trade from Alaska to Tierra del Fuego, was favourably received throughout Latin America, but it would take another four years before the Western Hemisphere would act upon it. At the first modern day Summit of the Americas, held in Miami, U.S. in 1994, the Heads of State and Government of 34 countries of the Western Hemisphere met to pursue their mutual interest in the advancement of economic prosperity, democracy and security of the Americas. The Summit's Declarations would, among other things, include free trade, rebaptising the initiative the Free Trade Area of the Americas (FTAA). In 1998, at the second Summit of the Americas, held in Santiago, Chile, the leaders of the Americas launched the negotiations and soon after the Government of Canada charged this Committee with the task of reporting to it on the positions that Canada should take in them.

This is the third Report on international trade and investment that the Committee has produced on behalf of Parliament and its citizens for the Minister of International Trade's consideration in the past three years. In completing these reports, the Committee was asked to discharge one overriding duty. In light of the revolutionary technological developments in telecommunications and the adoption of market liberalization policies across the world, both of which favour increasing global market integration, Canada faces the ever-present challenge of balancing three legitimate political-economic objectives: (1) guarding our national sovereignty; (2) maintaining public management of the domestic economy; and (3) achieving greater international economic integration.

The pursuit of these three objectives is not mutually exclusive. The Committee has come to realize that improvements in any two of these objectives, whichever favoured, can be obtained only at the cost of sacrificing some measure of the third. Experts in the international relations field have since coined this social choice problem as the "economic integration trilemma." Accordingly, if one favours national sovereignty and a discretionary macroeconomic stabilization policy, as do ultra-nationalists and some protectionists, one could advance both these objectives at the price of foregoing the wealth arising from further international economic integration. If, instead, one favours international economic integration and national sovereignty, as do many conservative political-economists, they can be obtained if prepared to sacrifice some traditional economic levers in the conduct of discretionary macroeconomic policy. Finally, if one favours unfettered international economic integration and discretionary macroeconomic management of the economy, as do ultra-internationalists, one could further these objectives if willing to do away with some measure of direct political accountability.

The Committee, in fact, encountered Canadians who would fit well into one of these three camps, as well as many situated somewhere in the middle of this political-economic terrain. From the Committee's perspective, the balance to be struck did not get any easier this time. As with its previous two reports dealing with international trade and investment, the Committee advocates a modest move towards greater international economic integration, but this time at the regional level of the Western Hemisphere, while maintaining public management of domestic economic activity. Any loss in national sovereignty arising from this choice, the Committee believes, will be marginal. Alternative political-economic instruments that do not violate national treatment and most-favoured nation (MFN) principle commitments of international treaties, although likely to be somewhat less effective than the ones they replace, can mitigate such losses. Given our relatively small domestic market, which does not always permit our nationally based companies to fully exploit extant economies of scale in production, we believe this course best manages the political-economic opportunities and challenges placed before Canada and its citizens. The Committee, therefore, favours the negotiation of an agreement that would create a Free Trade Area of the Americas (FTAA), given the satisfactory fulfilment of the conditions set out in its 29 recommendations.

The Plan

This Report on an FTAA is divided into three parts: Canada and the Americas; The Social Dimensions of Free Trade in the Americas; and The Negotiating Issues, Priorities and Strategies. They are followed by the Committee's conclusions which have been drawn on all three facets of the economic integration contemplated. The Report also contains eight appendices: two dealing with the contentious issues of reconciling the forces of globalization and regionalism and Latin American and Caribbean readiness for free trade; two providing background information on the Declaration of Principles of the Summit of the Americas and a procedural road map to the FTAA; and, finally, four providing the standard report documentation - that is, the lists of acronyms and glossary, witnesses appearing before the Sub-Committee and the Standing Committee, and submissions received by, the Committee. For those readers who have not kept abreast of economic developments in Latin America and the Caribbean or the Summit of the Americas and FTAA initiatives, it is suggested that these appendices should be reviewed before attempting to go through this Report.

Canada and the Americas

Part I of this Report provides background information on the Americas, highlighting the economic integration taken so far by the people and national governments of the hemisphere. Beginning with a very brief review of Canadian relations with the Americas dating back to our colonial days, Chapter 1 takes us up to the present while providing a detailed snapshot of current trade and investment levels between Canada and the Americas, most notably with Latin America and the Caribbean. Chapter 2 profiles the economies of the Americas in terms of their relative sizes and social diversity, while focusing on the various sub-regional trade pacts. This perspective culminates in a discussion of the economic benefit than an FTAA agreement would bring to the Western Hemisphere.

The Social Dimensions of Free Trade in the Americas

Part II of the Report addresses the social dimensions of free trade. Beginning with a review of the role of the FTAA in the context of the Summit of the Americas process, Chapter 3 evaluates the efforts and progress made on two of the three non-prosperity objectives of the hemisphere - eradicating poverty and fostering democratic values (deferring the third, promoting sustainable development, to a later chapter) - as well as defining the role and extent of civil society and provincial involvement in the trade discussions. Chapter 4 presents the opportunities and challenges of an FTAA for Canada and the Americas as a whole, most notably tackling contentious business facilitation or customs administration issues, the lack of U.S. Congressional fast-track negotiating authority and apparent Brazilian intrasigence to an FTAA, the disparity in economic size and development of the countries comprising the Americas, and the potential for a financial crisis to strike between now and the FTAA implementation period. Chapter 5 broaches the unique feature of an FTAA, that being the extraordinary circumstances of small economies of the Americas that already benefit from preferential access to North American markets while, at the same time, being relatively dependent on tariffs for government revenue and on just a few export commodities to afford their import needs. Chapters 6 and 7, in turn, deal with concerns relating to the impact of the FTAA on jobs and labour conditions in the first instance, and sustainable development and the environment in the second. Chapter 8 focuses on the controversial issue of culture and cultural diversity within the hemisphere and addresses how best to preserve this aspect of the Americas from a Canadian perspective. Committee recommendations on the social issues of an FTAA are largely found in this part of the Report.

The Negotiating Issues, Priorities and Strategies

Part III advances the negotiating issues, priorities and strategies of the FTAA from a Canadian perspective. Chapter 9 tackles the pivotal market access issues, which include tariffs, anti-dumping, subsidies and countervail, technical barriers to trade and safeguards. As a preferential trade deal, tariffs will eventually be zero for all signatory members of the FTAA. However, modest improvements in commitments regarding non-tariff barriers are advocated. Chapter 10 deals with the ever-controversial agricultural sector, including the recent trend to use sanitary and phytosanitary measures as trade barriers. While treading slowly at the World Trade Organization (WTO) is the dominant strategy advocated by industry organizations, the FTAA clearly provides selective opportunities for freer trade in agricultural goods that should not be passed up. Chapters 11 and 12 review the current status of commercial services and government procurement policies, respectively, in terms of existing trade commitments, suggesting room for broader coverage and greater integration into the trade agenda. Chapters 13 through 15 consider the new trade issues as they have been called: investment, intellectual property rights and competition policy. The incorporation of these economic factors into the trade deal is suggested. Drawing on experiences with the North American Free Trade Agreement (NAFTA) and the WTO, Chapter 16 offers guidance on important issues in the design of an effective dispute settlement process for the FTAA. Committee recommendations on the more technical negotiating issues of an FTAA are found in this part of the Report.

Conclusion

The conclusion addresses the negotiations of an FTAA in terms of the objectives, timing and structure, and Canada's interests, priorities and strategies. Generally speaking, Canada should target its priorities.