Free Trade Area Of The Americas:

Negotiators Move Toward Agreement That Will Have Benefits, Costs to U.S. Economy

GAO-01-1027: Published: Sep 7, 2001. Publicly Released: Sep 26, 2001.

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The 34 democratic countries of the Western Hemisphere pledged in December 1994 to form Free Trade Area of the Americas (FTAA) no later than 2005. The FTAA agreement would eliminate tariffs and create common trade and investment rules among the 34 democratic nations of the Western Hemisphere. When completed, the FTAA agreement will cover about 800 million people, more than $11 trillion in production, and $3.4 trillion in world trade. The five FTAA negotiating groups pursuing liberalization of trade and investment--market access, agriculture, investment, services, and government procurement--have submitted initial proposals and agreed on a date to begin market access negotiations, but the groups face short-term and long-term issues. In the short-term, these groups must resolve several practical issues in order to begin negotiations on market access schedules no later than May 15, 2002, and to narrow differences and prepare revised trade rule chapters by August 2002. Over the long-term, these market-opening groups face fundamental questions about how much and how fast to liberalize. Narrowing outstanding differences may be difficult for the four other negotiating groups, which have made initial proposals on rules governing intellectual property; subsidies, antidumping, and countervailing duties; competition policy; and dispute settlement. Some groups face fundamental differences. Other negotiating groups have reached agreement on basic principles but disagree on key details. Two of the three crosscutting themes--smaller economies and civil society--have proven controversial. Because the FTAA's smaller economies are concerned about their capacity to implement such a vast agreement and its potential economic effects on their countries, they have been seeking assurances of technical assistance and other special treatment. The FTAA process has been viewed as not sufficiently open to the public, and past efforts to include nongovernmental interests, such as business, labor, the environment, and academia, have been widely seen as ineffective. Some steps have been taken to address these concerns, and other steps are being considered. As a comprehensive agreement, the FTAA could have wide-ranging effects on U.S. trade and investment with other Western Hemisphere countries. The elimination of tariff and nontariff barriers would improve U.S. market access; put U.S. exporters on an equal footing with competitors in FTAA markets; and expand trade, particularly in highly protected sectors such as agriculture. On the other hand, some protected U.S. sectors, including textiles, apparel, and agriculture, may face increased import competition and declining production if barriers were lowered.

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