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Regional Trade Blocs: Building Bridges to FTAA

 
Comments to Council of the Americas - Washington Conference
by David Kilgour, Secretary of State (Latin America & Africa)
May 11, 1998

Are regional trade blocs a bridge or barrier to the goal of a larger Free Trade Area of the Americas?

Canada is firmly on the side of those who believe regional trade blocs are an important bridge – not only to an FTAA, but to improved hemispheric relations in general, and to a better global trading environment. The objective we must always keep in mind is freer trade in the Americas.

Canada has pursued regional trading arrangements and bilateral agreements at the same time as we have pushed forward in hemispheric and global arenas. We advocate the "co-existence" of the FTAA with regional and sub-regional agreements because they are stepping stones to regional integration and a more open global multilateral system. The different tracks of our policy are by no means mutually exclusive. They are complementary.

Our first bridge we built was to the United States – the planet’s largest economy, and already by far our largest trading partner, a longstanding friend and ally. There are very few secrets in Washington. Today let me share with you one of Washington’s best kept secrets – the NAFTA is working. Trade between Canada and the U.S. has more than doubled in the ten years since we implemented our bilateral FTA. Our two-way trade is now more than one billion dollars a day. The increase alone in U.S. exports to Canada in 1997 over 1996 was greater than U.S. exports to countries like China, France or Italy.

Our next bridge, NAFTA in 1994, added Mexico to the relationship, and was an expression of Canadian desire to reach out to Latin America. With NAFTA we faced and are meeting the challenge of reconciling the interests of nations with vastly different economies. Again, this experience has provided many lessons that will serve us in the next seven years as we move toward the FTAA.

For our next bridge, Canada hoped to include Chile in NAFTA. We refused to be held back when the U.S. Congress declined to give the Administration fast-track authority to negotiate a wider agreement. Instead, Canada concluded by itself a bilateral free trade agreement with Chile, largely based on the NAFTA model. Our bridge to Chile gives us a significant link with South America, which is a major market for us.

We have intensified discussions with MERCOSUR aimed at reaching a Trade and Investment Cooperation agreement with it. Recently Canada signed a memorandum of understanding on trade and investment with Central America, and we have begun a dialogue with the Andean Community. Of equal importance is our historical relationship with the CARICOM countries, ties that we continue to build.

Canada’s experiences with regional trade arrangements have been overwhelmingly positive, and we support them as long as they are consistent with a future FTAA. My Brazilian colleague, Under-Secretary Graça Lima, will no doubt agree, given the success of the MERCOSUR arrangement. So not only are sub-regional agreements proliferating throughout the Americas, but more importantly bridges are being built between the different regional trading blocs.

Why – one could ask – go through the extra steps of building regional trade blocs? Why not bring the countries of the Americas together and hammer out a single agreement with the same rules for everyone? And how do we arrive at an FTAA anyway? These are good questions, because the ultimate goal is to bring all countries of the hemisphere into a common agreement. But we must not confuse the goal with how we get there. A page of history trumps a volume of logic.

Regional trade blocs are a learning process for all. Canada has gained many valuable experiences from the FTA and NAFTA. I point to the dispute settlement mechanism that Canada negotiated with the United States in the FTA of 1988. It has worked, and it is one of the major reasons why our bilateral relationship has been so successful even though Canada’s relationship is with an economy ten times our size.

That brings us to another key reason why regional trade blocs are a desirable – some might say necessary – bridge to a hemispheric FTAA. The 34 nations involved in the FTAA process are of varying sizes of economies. How does Trinidad, for example, with 1 million people trade freely with Brazil with 160 million, or the United States with more than 260 million? Regional trading blocs have provided a means for smaller and less developed economies to open up and face the competition of international markets in stages and within larger entities.

Canada has long been a champion of the smaller economy countries and we understand their concerns about their ability to participate in the FTAA negotiating process. As chair of the Trade Negotiations Committee, Canada will work closely with the Consultative Group on Smaller Economies and will listen attentively to its views. We are also providing technical assistance to improve the negotiating capacity of smaller economy countries in the hemisphere. We know that the FTAA is a large undertaking for these countries and it will require special provisions in the implementation phase. Canada is prepared to consider, on a case-by-case basis, the special needs of smaller economies. At the end of the day, however, all countries must have the same rights and obligations.

How then do we see the road ahead? What challenges do we still need to face? One of the major ones is the lack of fast-track authority for the U.S. Administration to negotiate the FTAA. Another is persuading our respective civil societies that freer trade is a winning proposition. I say this knowing that many of you, especially from the business community, strongly support the FTAA and are applying all the pressure you can to obtain fast-track authority as soon as possible. The present lack of fast-track authority must not stop us from moving forward in a seven-year process. It is an obstacle, but not an insurmountable one. Americans though must ask themselves why an entire hemisphere would engage in the complex negotiations of the FTAA when the commitment of the largest economy is in doubt. Canada, and probably every other country in the Americas, wants to see fast-track approved early in the talks. No one wants to negotiate twice.

Canada is proud to chair the Trade Negotiations Committee over the next 18 months. As chair, Canada is developing a "Chairman’s Paper" which will be distributed within days to governments throughout the hemisphere. It will outline our proposed work plan for the coming 18 months and will be the focus of our discussions at the first trade negotiations committee meeting in Buenos Aires on June 17th and 18th of this year.

As chair in the first critical months, one of our major goals will be to get the message out. We must ensure that the private sector is kept informed on the issues and progress achieved. It is essential that public opinion be brought with us. Canada has taken a proactive approach in engaging our own civil society in the FTAA process, and we have consulted with many groups. We have found that, in the end, we have the same goal – a strong, vibrant economy and good jobs for our people. As chair, Canada will do whatever it can to ensure that the Committee on Civil Society – which we welcome – is successful in its mandate to engage constructively our own civil society on FTAA issues. This includes business, labour, environmental and academic groups. In the months leading up to Santiago, our government undertook a number of forums and public consultations across the country with civil society. This spirit of consultation must continue.

Our efforts are about more than trade. At Santiago and in other discussions, we have committed to address improving education and training, eradicating poverty and building democratic institutions.

The FTAA process has already borne fruit. It has brought about cooperation in the hemisphere to an extent that didn’t exist previously. Since the talks began, there has been an unprecedented exchange of information and data on trade regulations, regimes, and market access. Trade talks are breaking out everywhere. The FTAA process has spurred regional trade talks and vice versa. Do not the different discussions build on and reinforce one another?

Regional trade blocs build stronger and more vibrant economies in the region. The development of trade blocs is preparing a hemisphere of trade-savvy professionals to negotiate the wider agreement. They help to educate professionals of smaller economy countries for the negotiations that lie ahead with the FTAA and WTO.

Canada is excited about its future as a member of the hemispheric family. The next trade ministers meeting, hosted by Canada, will be pivotal in the success of the FTAA process.

Prime Minister Chrétien summed up our evolving relationship with the hemisphere in his remarks at the closing of last month’s Summit of the Americas in Santiago. "It is clear," he said, "that we are becoming something more than amigos. We are becoming una gran familia."

 
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