Breaking The Baton

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latin.jpgA universally acknowledged fact about the US, and also a source of much of the respect that it garners from the world, is its dogged approach and great fortitude towards many matters pertaining to its own interests, be it trade, oil or outspoken, bristling dictators. Therefore, it is a tad mystifying, and also a bit amusing, for us sadists to see the mighty superpower flailing about in a potent mix of anger and forced patience upon encountering an entity which is even more tenacious in what the US is commonly thought to do best – dictate terms.

This is the tragedy which has struck the US in its passionate attempts towards making a huge, unified trade family out of the 34 countries of the Americas. Imagine the mortification of the Americans upon the realization of their exclusion from the family portrait they themselves had so lovingly envisaged.

Free trade area is a favorite economic term of the US. It basically refers to a group of countries which have, through a free trade agreement amongst them, agreed to remove most, if not all of the tariffs, quotas and other trade barriers between them. This enables unrestricted flow of goods between these economies and, thus, is a form of ‘economic integration’. Simplistically, it is this kind of integration which, on a large scale, is globalization, although globalization does not always mean complete removal of trade barriers, and includes cultural and technological integration going beyond just trade. Thus, FTAs are basically an instrument which the US (and other developed countries) uses to accelerate globalization in the world.

Although many of globalization’s benefits are acknowledged and applauded, it is also conceded that it tilts the balance slightly in favor of the developed countries. This said, the response it elicits from different countries depends, to a large extent, on the political colors prevalent in that country. Today, the largest communist or communist leaning region are the South American countries comprising of Brazil, Venezuela, Bolivia, Argentina etc, which, uncomfortably for the US, are succeeding in pushing out America from the regional integration they are currently pursuing. They are the ones which are a little resistant to the overtures of the developed world towards integration of the less developed countries into the mainstream of the economic world What hurts even more, is the fact that the downfall of US interests in South America began, ironically, with another free trade agreement that the US had signed in 1994, the North American Free Trade Agreement (NAFTA).

NAFTA is a free trade agreement which removed trade barriers amongst the American, Canadian and Mexican economies post 1994. By opening up of two major, but comparatively weaker, economies to its high-quality saleable goods, including farm produce, and extending patent laws and other intellectual property protection legislations so dear to the US, it served, and still serves, US economic interests in the North American continent. Yet, it also laid the foundations for the undermining of American interests in South America as a whole. This was done by giving birth to various small socialist movements which opposed the heavily subsidized agricultural produce from the US inflicted on Mexican farmers by swamping the local markets, as also the sale of ‘ejidos’ or ancestral communal lands to large MNCs. A string of these movements, starting with the Zapatista National Liberation Army in Mexico in 1994, rapidly spread throughout Latin and South America, challenging the broader neoliberal world order being promoted by the signatories in general and the US in particular. Some of these movements got embroiled in politics, as the landless laborers’ movement (Brazil), the community media movement (Venezuela) etc. This in turn caused the emergence of a number of leaders opposed to neoliberal orthodoxy to various degrees, including Hugo Chavez of Venezuela, Evo Morales of Bolivia, Lula da Silva in Brazil and Nestor Kirchner of Argentina.

Following the successful implementation of NAFTA, the US embarked on another more ambitious agreement proposing to create a unified trade area extending over the whole of the 34 countries (excluding Cuba) of the Americas. This was called the Free Trade Agreement of the Americas (FTAA). Received with enthusiasm at first by the South American leaders, it went through a range of negotiations at various summits at various places, but started losing support amongst those same countries with the advent of those same socialist movements in the respective countries. Finally, the deadline for implementation i.e. January 1, 2005 came and passed without any consensus being reached between the US and the South American bloc, headed by Brazil. The political dynamics behind the failure of the FTAA were, however, not that simple. It was a heady mix of leftist leanings and personal agendas which finally lent the fatal blow to the proposed FTAA.

Brazil rejected the FTAA on the grounds that the US was playing the bully and was not ready to cut its huge subsidies on agricultural produce. It was also unwilling to compromise on its unbending insistence on complete implementation of intellectual property rights which, if implemented, would ‘make South American economies overly dependent on the US for essential commodities including drugs and pharmaceuticals and technology for production purposes’. It is, however, believed that Brazil consciously wants to keep US out of South America amid fears that an American presence in the region would grossly undermine Brazil’s leading role as the largest economy in the same. It would also dilute the importance of Mercosur, a customs union (a modified form of free trade area consisting of Brazil, Argentina, Paraguay, Uruguay and Venezuela), which, again is against Brazil’s interests. This, combined with the leftist-leaning of President Lula da Silva, dissolved the fate of the FTAA as regards Brazil.

Then arises the matter of Venezuela, which, with its stridently anti-US, anti-capitalisation, strongly rhetorical President Chavez, joined the Mercosur with the sole aim to be able to command enough clout in South America so as to be able to scuttle the US’ plans to enter and ‘colonize’ the South American market. Terming the FTAA as just another tool of the US to suppress developing economies, Chavez rejected the FTAA and urged others in the continent to do the same. Venezuela’s position as not only a member of the Mercosur and the Andean bloc but also as the largest oil producer in the region made sure that it was responsible, along with Brazil, for FTAA’s demise in South America. What further angered the Americans was Chavez’s call to other countries to team up with Venezuela and form a parallel integration movement, which would leave the US out and serve to unite South American economies. This took the form of the Bolivarian Alternative to the Americas (ALBA), comprising US-hated Cuba, leftist Morales’ Bolivia, and Venezuela itself. And it merits attention that in order to insulate himself from America’s wrath, Chavez keeps threatening a huge cut in Venezuelan oil supply to the US. On hindsight, it looks greatly paradoxical that these leaders – Chavez, Lula, Morales., are all the by-products of NAFTA, and they are the ones who have jeopardized the future of NAFTA’s big brother, the FTAA.

What has the US been doing all this while – just running around trying to get the FTAA passed? From what we know of the US, it is much cleverer than that. Thus, along with putting pressure on the reluctant countries for the implementation of the FTAA, it has also been trodding a parallel path – that of signing bilateral FTAs with the other neutral or pro-US economies in South America. By doing so, it hopes to ultimately isolate countries like Venezuela, Bolivia and Cuba (which are, according to the US, in any case obsessed with ALBA), and force others like Brazil and Argentina, which have so far been resistant to FTAA, into giving in. Pursuing this strategy, the US has signed FTAs with Chile, Peru and Columbia, while Ecuador is on the verge of signing. Uruguay, with its moderate and comparatively liberal foreign policy, wants to sign as well, but has not because of the threats of being thrown out of the Mercosur by the other cantankerous members (read Venezuela). In fact, the US’s close ties with the Andean Community (consisting of Venezuela, Bolivia, Colombia, Peru and Ecuador) have caused sufficient alarm for Morales and Chavez for the former to literally plead with the rest of the countries not to sign any FTA with the US. Further, he has accused them of ‘abandoning’ the basic principles of the Community, which is to strengthen the regional economy and market, and instead pandering to US’ ‘shallow’ interests.

Therefore it is sufficiently clear that a range of mutually opposing forces are at work as regards US’ complex trade relationship with the South American continent. On the one hand, certain leftist and leftist leaning countries in South America unanimously oppose US’ entry into the regional market, deeming it too loaded in US’s favor and seeking to keep the US out for a variety of other, less transparent reasons as well. These may include Brazil’s desire, as already mentioned, to maintain an economic hegemony in South America through its leadership of Mercosur (and continuously expanding it, for ‘South American integration’ of course, to further its influence in the region) as also Chavez’s policy of keeping the US on tenterhooks and thus being able to command greater say in world politics. On the other hand, we have other South American countries like Colombia and Chile, Peru and Ecuador, which are not averse to building trade relationships with the US but are constantly criticized by the anti-US bloc and which fear being left out of the model of South American integration being propagated by the Mercosur countries. Finally, we have the US, which is following a remarkably clever dual strategy – pressurizing the reluctant ones through FTAs with the non Mercosur countries and, at the same time, isolating economically the completely antagonistic ones.

What all this would eventually lead to can only be guessed. Will the US, with its relentlessness, be finally able to enter the South American market in a big way, or will the Mercosur bloc succeed at onerous task of assimilating the whole continent into one huge trade bloc and effectively defy the US? It is an open-ended question, and the paths to the answer follow a maze, of political futures and economic events, of tactical strategies and, at times, insinuating rhetoric.

Arjun Upmanyu

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