The promoters of free trade have long asserted that increased market access will inevitably lead to increased growth and prosperity for the participating countries. In the final declaration of the Miami Summit of the Americas, the heads of state asserted that, "[A] key to prosperity is trade without barriers...Eliminating impediments to market access for goods and services among our countries will foster our economic growth. " The reality is that the issue of market access is much more complex than that simple formula. The Mexican experience under NAFTA clearly demonstrates that trade liberalization can have devastating impacts on local producers. The fact that Mexican exports increased at the same time that wages fell and poverty increased also calls into question the assertion that increased market access will automatically translate into increased prosperity for any of the parties involved. The goal of the recent wave of free trade agreements has been the reciprocal lifting of trade barriers among nations, regardless of the countries' level of development or particular national interests. The dominant principle of these deals has been the concept of "national treatment," which means that governments should be required to treat foreign investors, investments, and products the same as their national counterparts. While expanded trade can contribute to economic growth, trade liberalization should not be an end in itself for which everything else must be sacrificed. Instead, market access for foreign products and investments should be evaluated and defined within the framework of national development plans.
The complex process of reconciling national development plans with international trade rules should take the following matters into account:
Special, differential or preferential treatment for developing countries is vital to address the inequalities between countries in our hemisphere. Unfortunately, these issues appear to have been excluded from discussion of market access rules in the FTAA process. This is in spite of the fact that governments have supported this concept in numerous multilateral forums. For example, the GATT has allowed some degree of special and differential treatment since 1964 and heads of state at the IX Iberoamerican Summit committed to promote these criteria. Recently, the Declaration and Action Plan for the tenth session of UNCTAD, held February 12-19, 2000 in Bangkok, Thailand, dedicated an entire section to special and differential treatment. Paragraph 60 of the Bangkok Action Plan states:
"The basic principles of special and differential treatment (SDT) for developing countries are fully established and recognized in the various decisions of the United Nations General Assembly, UNCTAD and the WTO. Modernization and operationalization of special and differential treatment, in particular in terms of maintaining and expanding export opportunities for developing countries, may be needed to adapt it to changing international trading conditions and to make special and differential treatment a better instrument for development...Developing countries should be enabled to make full use of the SDT provisions."
The Bangkok Action Plan also calls for the provision of technical assistance and development financing to ensure that developing countries can take advantage of new trading opportunities created by improved market access.
National treatment is justified as a guarantee of non-discriminatory treatment. However, in a situation of economic relations among unequal parties, where equality is the exception, it is unfair to speak of discrimination. In reality, this approach imposes severe restrictions on industrial policies and economic development measures. NAFTA made these constraints more severe by extending national treatment obligations beyond trade in goods to also cover services, investment and intellectual property rights.
A better approach would be to establish criteria to ensure equivalent access and special, differential and preferential treatment in order to address inequalities. Therefore, we must support the demands of developing countries to adopt a rational strategy that leads to stable access to Northern markets considered key to Southern countries' development. This is especially urgent given the persistent lack of will to apply special and differential treatment and the intent to ignore the issues and sectors of interest to developing countries. Priority should be given to reducing trade barriers that irrationally differentiate between goods in their primary form and those that have been transformed.
There should be concrete proposals that would lead to changes in local structures, to stimulate access to essential goods or to establish measures to encourage trade in goods of special interest to developing countries. Trade agreements should express the commitment of industrialized countries to push their businesses and institutions to grant incentives designed to promote technology transfer to less advanced countries so that they can establish a solid and viable technological base, as well as offering appropriate flexibility that allows developing countries to open fewer sectors, liberate fewer kinds of transactions, and progressively increase access to their markets according to their particular level of development.
Fair treatment should not be provided solely among nations: it should also be given within each country. Preferential treatment should be directed to support micro, small and medium-scale businesses, particularly social and community businesses, as well as small-scale agricultural production. Beyond the privileges and profits that some transnational corporations and investors might obtain, it is unfair to submit productive and business sectors, above all micro, small and medium-scale businesses, to raw competition that will undoubtedly cause enormous destruction to all of those who lack, as a result of structural adjustment policies, any kind of minimal support. Consequently, we believe that:
a) Producers and society in general should agree on a transparent and participatory process for establishing a timetable and choosing products to be subject to lower duties and the degree of protection of domestic production necessary to support social interests.
b) Internal timetables for trade liberalization and tariff reduction, when deemed appropriate for sovereign national interests, should be accompanied by coordinated programs to ensure that national industries become competitive during the transition. These programs should include access to consultants and training, technological research and development and long-term credit. Sectoral programs should be accompanied by a national development plan including commitments from the state to create the macroeconomic conditions that enhance competitiveness. For developing countries, trade liberalization without an industrial policy is suicidal.
c) An even-handed tariff policy must be implemented to ensure linkage between productive sectors so that no sector is disadvantaged. This could occur if tariffs on an end product were eliminated without a corresponding reduction of duties on imports of its intermediate inputs.
d) The right to impose clear, transparent and agreed-upon performance requirements in conjunction with programs of tariff reduction must be preserved.
a) Non-tariff barriers increasingly take the form of standards of various kinds: quality standards, processing standards, fulfillment of phyto-sanitary specifications (relating to the absence of agents of infection or disease in plants), certificates of origin, organic product standards (e.g. certification of production without toxics or chemical fertilizers), environmental standards, and labor standards, including minimum wage, prohibition of child and forced labor.
These standards, necessary to ensure that such matters as quality, health and environmental protection and workers' rights are taken into account, have also been used as hidden obstacles to the free flow of trade from developing to developed countries. They are imposed unilaterally, and may reflect the interests of corporations and their lobbyists to pressure governments to impose protectionist sanctions on foreign goods and/or services. The challenge then is to eliminate bias and arbitrariness from the imposition of such standards to ensure they reflect legitimate interests and are not hidden protectionist measures to benefit specific companies.
b) Laws, regulations, guidelines and standards for guaranteeing the quality of goods and services for consumer and environmental protection should be arrived at through broad public consultation. They should take into account the range of conditions prevailing in different countries and include realistic timetables. They should be written into wideranging agreements on scientific and technical cooperation and industrial development. These agreements, reinforced by adequate resources and specific sectoral accords, should raise standards by international consensus, especially for developing countries and for socially owned enterprises (such as cooperatives) and micro, small, and medium enterprises.
These provisions should require multinational corporations to meet the highest standards to prevent the sale of products banned in that company's own country in countries with lower standards or lax enforcement. Only through broad and democratic processes of consultation and negotiation can consumer interests for high standards health and environmental protections be met and unilateral, illegal and covert protectionist measures avoided.
a) Customs procedures should be harmonized while they are modernized to reduce bureaucracy and simplify procedures. Assistance should be given to the social sector and micro, small and medium producers and entrepreneurs who engage in foreign trade.
b) Customs valuation procedures should be linked to and integrated with those used for evaluating dumping and subsidy cases, the suppression of fraud, information gathering systems and dispute resolution mechanisms.
Rules of Origin
Rules of origin are the criteria by which products come to be considered to be originating in a given place, which then affects their treatment in cross-border exchange under free trade agreements. The trend in such agreements is to establish regional rules of origin specifying a percentage of components or inputs to be included in order to qualify for designation of origin. While we do not exclude additional regional or sub-regional content requirements within the hemisphere, our view is that countries should be able to establish national content rules if the country feels that national economic development requires such designation. This demand or principle complements other proposals in the chapter on investment regarding the requirement for foreign companies to source a percentage of inputs in the country of production.
Countries may deem that, without national content rules, trade liberalization only benefits intra-firm integration and leads to the disintegration of national productive linkages. Lacking incentives to purchase production inputs within the country of production, large export companies revert to imports, which eliminates spin-off economic growth, despite increasing production. The neo-liberal model assumes that the export sector is the engine of economic growth. In practice, this "engine" becomes disconnected from the rest of the train. Rules of origin that only require regional content transform the productive apparatus of many Southern countries into maquiladoras or export processing zones.