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Summary, Overview & Development Report 2.4

Free Trade Unlimited: Mercosur, SADC, AGOA & New Zealand

Summary, Overview & Development Report 2.4
The Case for Regional Trade: August 2001
By Emmanuel.K.Bensah, ICDA Secretariat

Four issues occupied pride of place in August's WTOIL on Regional Trade: MERCOSUR, SADC, the politico-diplomatic and cultural relationship between Australia and New Zealand, and the less scrutinised Africa Growth and Opportunity Act (AGOA), mooted by former US President Bill Clinton in May 2000.

The summer month of August saw UK Prime Minister Tony Blair down in Argentina, one of the economies of the regional grouping of MERCOSUR, which is equally suffering from an 18% unemployment rate (according to a BBC news report); as well as facing the possibility of defaulting on its 128bn dollar debt. Blair was actually on a six-day tour of central and Latin America "to brand protesters who disrupted the Gothenburg and Genoa summits as both misguided and wrong."(WTOIL 2 August, Blair Takes Free Trade Crusade to Argentina). Michael White, author of the article in question, explains that the motivation for Blair's crusade is purely economic: "Mr.Blair wants to enlist emerging economic powers such as Argentina, Brazil and Mexico to help make his case."

It emerges from this article that Blair's economic appetite transcends his crusade of enlistment, for he is also interested in forming an "informal alliance with leading Latin American states to promote globalisation". Especially important is this for him as it would help serve "to counter protectionist instincts within the EU" - or at least, this is what Downing Street has claimed.

Blair was actually also in Brazil, where he met President Fernando Henrique Cardoso, before he jetted off to Argentina to meet President de la Rua for what was dubbed a "symbolic" meeting. Both decided to put aside their former woes - read: the Falklands War in 1982 - and work on improving bilateral relations on "economic and political issues, including fishing and oil exploration off the Falklands."

In fact, Brazil was featured once again in August's WTOIL - Mercosur and Alternative World Orders - not so much as a potential heavyweight as Blair would like it to be in the context of globalisation, but more of a potential hegemon. Rub those eyes again; you read right.

According to the article above featured in WTOIL 9 August, this academic essay questions the extent to which the USA, the EU, and MERCOSUR can be considered a hegemon. The article maintains that the US lacks somewhat the characteristics of the quintessential hegemon - internal factors that may support an imperial project; existence of international conditions that do not hinder the launching of an imperial project; and the availability of sufficient operative conditions to launch a suchlike imperial project compatible with internal and international conditions - arguing rather, that the only true empire was that of the Romans.

More specifically to MERCOSUR, the essay also attempts to clarify the role of MERCOSUR vis--vis the European Union - both in terms of its common security policy as well as its economic security. It maintains that MERCOSUR "does not just provide its members with a wider market", but it is equally a "fundamental foreign policy tool." Its international importance, as clarified by Helio Jaguaribe (the author of the said article), is predicated on two things: "the extent to which it will succeed in formulating and implementing a common foreign policy"; and secondly, "the world order that will prevail". While this may remain an abstract area far removed from trade policy, you only need to read on to see what he says about the EU when juxtaposed to the regional grouping.

Jaguaribe maintains that "a closer co-ordination between MERCOSUR and the EU could produce additional benefits." Though he fails to list these benefits, he contends "the average competitiveness level of Europe" is not dissimilar to that of MERCOSUR; consequently, one finds that "the advantages enjoyed by some of MERCOSUR's productive sectors balance those enjoyed by Europeans in other sectors." Productive though economic co-operation between the EU and MERCOSUR could be, the thorn in the side of MERCOSUR translates into the Free Trade Area of the Americas, scheduled for 2005, and very much a source of considerable angst for the members of this grouping that face potential sleepy nights over the future of MERCOSUR.

Jaguarbe argues that "given that the FTAA will result in the exclusion of MERCOSUR, the latter's member countries must concern themselves with the issue itself, rather than just attempt to delay the signing" - as they have done earlier. It is indeed a bitter pill for MERCOSUR to swallow, especially since the FTAA runs the risk of "encompassing all the continents' countries." thus, inevitably divesting MERCOSUR of its considerable economic clout.

That this was neither broached nor foreseen earlier speaks volumes, Jaguarbe believes, of the US's inveterate belief in any criteria or parameters conducive to profit maximisation - and how better to do this than by the promulgation of the classic neo-liberal doctrine of a wide, open international market?

Given this philosophy knows no bounds, small wonder, then, that even the comparatively less prosperous grouping of the South African Development Community (SADC), led by South Africa as Nigeria spearheads ECOWAS, was the cynosure in August's WTOIL of the "forces of globalisation", principally led by the Quad, comprising Canada; the EU; Japan and the United States. With globalisation's sidekicks - the World Bank and the IMF - such groupings, especially in Africa, face few positive prospects. The article Unequal "Free Trade" Threatens Food Security in WTOIL 30 August, is a case in point.

In this article, Madakufamba contends that food security is the "biggest casualty of a flawed trading system". He contends that under Structural Adjustment Programs, adopted by six of SADC's member states, "governments have been pressured to remove subsidies on agriculture" so as to "encourage free competition and increase inefficiency."

The author attempts to expose the hypocrisy of the European Union that feels free to heavily protect its agricultural sectors through the Common Agricultural Policy, whilst forcing - prising open even - economies in the South. So dire has the situation become that a workshop was organised in August, in Maputo to discuss the deteriorating SADC food security. The author contends that in this context of badly regulated food security, the South wants current arrangements "revisited and possibly corrected, while the rich nations demand even further liberalisation of new sectors."

As if that were not enough, positive FDI inflows in SADC notwithstanding, the $5.3billion in 1999 fell to $3.9 billion in 2000. One of the main reasons for this has to do with a 50% drop in inflows to the continent's main recipients of FDI - Angola, Morocco; South Africa - drop inevitably becomes tantamount to a reduction in FDI.

According to SADC Facing Free Trade Challenge (WTOIL, 2 August), SADC has signed a number of protocols preparing it for a free trade regime, obstacles notwithstanding. Daunting though this challenge may be, SADC mining sector Chairman and Zambian minister of mines and mineral development Chitala Sampa, admonished three problems: the importance of member countries' sovereignty; taking into account development and competitive levels enabling the region to harmonise; and finally, that there are different economies with varied levels of development.

Who's Afraid of AGOA ?
The Africa Growth and Opportunity Act is emerging to be as problematic as Lamy's EBA initiative. In essence, according to the article featured in 23 August's WTOIL (McDermott's AGOA Will Drive Out Countries to Debt), Petros and Davis, as the authors, argue that though AGOA "was presented as uncontroversial, uncontested good" for Africa, it is actually none of these things, despite its claim to "put Africa on the trade policy map." In fact, the only reason why this has been so promulgated is because in so doing, the map is going fairly and squarely into the hands of MNCs, especially since AGOA "requires participating African countries to restructure their government spending around IMF dictates in exchange for reduced US tariffs on [Africa's] exports". Instead of directing FDI towards services most needed by debtor nations, however, IMF rules are doing the proverbial - seriously damaging those far weaker economies more than they already are. Perhaps, the article -- Will Africa Benefit from the AGOA - puts it most aptly - AGOA, or "NAFTA for Africa", undermines African interests in sovereign equitable development in order to promote US corporate control of African economics and natural resources."

Finally, August's WTOIL had one special issue discussing the relationship between Australia and New Zealand.

In the article of WTOIL 16 August, Shared Roots and Globalisation, Max Bradford MP, Opposition Spokesperson of the Australian Government on Foreign Affairs and Defence, discussed in a speech the extent to which the two countries are either drifting further apart, or coming together in what some one would like to think is a rapprochement. The article states that there are "shared roots" between the two countries, but due to a brain drain, where many New Zealanders move to Australia, this effectively adversely affect New Zealanders.

With respect to the WTO, Bradford argues that the organisation is "struggling with 'managing' free trade to the point where bilateral FTA's and CEP (Closer Economic Partnerships), as well as trading blocs, are replacing the essence of the WTO's being - promoting multilateral free trade." However, when it comes to how globalisation affects the Australia-New Zealand relationship, he maintains that these two countries' survival very much depends on how they both react to globalisation "as two small countries far removed from huge developed markets such as the US and the EU."

It must be stressed, however, that unlike MERCOSUR, NAFTA, ECOWAS, or any of the other regional groupings, Australia and New Zealand, despite their proximity, do not have a bilateral trade agreement per se; instead, they enjoy what they call the Closer Economic Relationship agreement, or CER. Bradford maintains that CER "was born out of increasing frustration with the pre-1983 NAFTA agreement, which sought to free up trade between New Zealand and Australia." How successful CER has been remains a moot point, but as Bradford contends, "it has been a major success for both countries." As we write this, New Zealand Foreign Affairs, Trade and Defence Select Committee (FATDSC) "is presently conducting an inquiry into the state of the CER."

The CER also guarantees that Australian businesses and New Zealand ones have some degree of parity, particularly since Australian businesses, Bradford argues, "protect their own more" than New Zealand ones. Despite this, the relationship between these two countries is not always as easy. Perhaps this is one of the reasons why a common currency was suggested. Bradford, however, dislikes the idea as in his view it is not likely to go far, especially if Australia has to give up some of its sovereign rights to New Zealand, which would inevitably require that New Zealand has a seat on the ANZ central bank board.

Barring all these issues, Bradford maintains that Australia and New Zealand will both experience the adverse affects of globalisation, as well as face the emerging trade blocs in the Asia-Pacific region "with as much impotency to influence the outcome as New Zealand has." But speaking of globalisation, no better exponent of this could better explain it than Mike Moore, whose interview graces the WTOIL of 16 August under the title Moore or Less Riotous Reign.

For Moore, "the word globalisation has become a slogan and a rallying call for everyone who thinks there's something wrong with the world." The interviewer contends that "his passion for free trade" as the ultimate panacea "has not faltered. If anything, he says, it has increased." Moore believes categorically that trade "is more valuable to developing countries than aid money, [ODA, FDI] yet his detractors from the left cannot see that arguing for access to world markets for these countries is akin to the international solidarity that underpins labour rights."

As for regional trade agreements, Moore believes that though they can be good, "there is a real danger of regional trading blocs becoming inward-looking and that they become a substitute for multilateral negotiations." There will certainly be more of this debate in future WTOILs!

Developments

LATIN AMERICA will play host to a New Zealand Trade delegation headed by PM Helen Clark, and other government officials and reps from the countries' main industries. They intend to visit MERCOSUR members, with a view to getting Mexico especially on board.

A New New Zealand Embassy opened its doors for business in Brazil in August

In late August, two influential US Senators called for initiation of a Free Trade agreement between the US and New Zealand, which was very much welcomed by NZ Trade Negotiations Minister Jim Sutton.

In AFRICA, the Convergence Council for the West African Monetary Zone (WAMZ) has asked the Gambia, Ghana, Guinea, Nigeria and Sierra Leone (five countries under the zone) to ensure stricter compliance with convergence criteria that would enable zone to take off by January 2003.

In AUSTRALIA, former PM Paul Keating has called for New Zealand to embrace economic integration with Australia, without giving up its political sovereignty. Keating believes this is far more important than FTAs with Singapore, Hong Kong or Chile.

WTO Director-General elect Dr.Supachai visited New Zealand from September 21 to 26 as Guest of the Government.

[ENDS]

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