Bleak outlook for pan-American free trade

Finally, they are working towards a free trade agreement with the EU. Otherwise, the USA has also gained ground by extending southwards the influence of the North American Free Trade Agreement NAFTA (USA, Canada and Mexico) through treaties with the central American countries Costa Rica, El Salvador, Honduras, Guatemala, Nicaragua and the Dominican Republic. Latin-America expert Susanne Gratius of Stiftung Wissenschaft und Technik – German Institute for International and Security Affairs – explains the complex relationships.

Mrs. Gratius, what is the connection between the USA’s continental free trade plans and the regional ambitions of the South American countries?
The FTAA project dominated by the USA is a vision, whereas Mercosur is already a reality. NAFTA is only a free trade agreement, but Mercosur is an integration alliance. After a period of decline in the aftermath of the Argentine crisis, Mercosur has recently made important steps forwards. A commission of permanent representatives has been established, the hitherto administrative Secretariat has been upgraded to a technical Secretariat and an appeals court has been introduced. The new Buenos Aires-Brazil axis made this possible. Unlike the FTAA, Mercosur advances not only economic interests but also pursues a political dimension, based on the model of the European Union.

What role is played by the Central American Free Trade Agreement (CAFTA)?
The USA is using CAFTA to extend NAFTA’s scope to the south. If you consider the countries involved, you will see the asymmetric nature of their economic relations. The majority of the exports from central-American countries go to the north but conversely the countries on the isthmus are of secondary economic importance to the USA. Even in Mexico, only the north has benefited from NAFTA so far, because of its economic proximity to the USA.

What do you think of the free trade agreement announced between Mercosur and the Andean Community?
The Andean Community and Mercosur have been having talks for a long time. The fact that they have now reached a real agreement is down to the commitment of Brazil. The market of Mercosur alone is too small for its expanding economy, so Brazil is taking steps to create a south-American market. Since there has been little trade integration until now, Brazil is funding many joint infrastructure plans to create the physical conditions needed for trade.

What importance do the trade talks with the EU have? Are they helping the countries in the region to escape the overwhelming grip of Big Brother in the north?
The negotiations for a free trade agreement with the EU are of considerable importance for Mercosur. It is the only Latin-American economic area, where trade with Europe is more important than commerce with the USA. The EU is the most important investor and trading partner for both Brazil and Mercosur. 25 per cent of exports go to Europe and the USA is in second place. Conversely, only about 1.5 per cent of European exports go to Mercosur. Unlike the FTAA, the EU and Mercosur are trying to establish an equal partnership between two political integration projects. The EU will at best be able to act as a counter-balance to the USA in Mercosur.

Mrs. Gratius was interviewed by Norbert Glaser.