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John VanSickle Summary The Free Trade Area of the Americas (FTAA) is the next hurdle in trade negotiations that the administration is seeking. The IV Business Forum of the Americas held in San Jose, Costa Rica provided a forum for business leaders, public officials and other interested parties to discuss issues of concern in developing a FTAA. The Florida delegation attending those meetings was the third largest delegation behind the Brazilian and U.S. delegations. The Florida delegation was successful in having Miami named as home to the Secretariat of the FTAA for the next three years, making it the administrative headquarters for FTAA. In general, the Florida delegation was supportive of FTAA, recognizing the benefits Florida will derive as the center for business and trade in the western hemisphere when FTAA is finalized. The Florida tomato industry needs to be involved in negotiations for FTAA and develop an agenda that will allow it to benefit from the process. While many in the agricultural community may point to the recent agenda toward free trade within a global economy as something new, the truth of the matter is that free trade has been an issue of debate for centuries. Our country was founded on the principles of free trade and economic security. Protectionism was practiced through the use of tariffs, which served as the largest source of revenue for our government in its early period. After the Civil War and up until the Great Depression, the United States operated in a more open international economy with little weight given to domestic producers and workers. The Cold War period marked a return to more protectionist policies with trade being used to promote foreign policy objectives, particularly stability and prosperity in Japan and Western Europe and economic opportunities for developing nations (Eckes, 1995). The post-Cold War period has seen a return to promoting free trade and economic efficiency. Economic efficiency is achieved through free trade by allowing countries to capitalize on the natural resources they own and to specialize and gain from efficiencies created in the global market. The General Agreement on Tariffs and Trade (GATT) is the international agreement under which many of the rules for international trade are established. GATT was created in 1948 and has been through 8 rounds of negotiation with 122 nations signing onto the agreement in May 1994. GATT 1994 created the World Trade Organization and the ‘rules of the game’ to accompany lower tariffs and market access in the global community. It serves as the larger body to which regional trade agreements must conform. There were 98 regional agreements notified under GATT 1994 about GATT dispute settlement provisions. There are currently 10 regional agreements in place in the Americas and 15 bilateral agreements. The North American Free Trade Agreement (NAFTA) has had the largest impact on Florida agriculture. NAFTA was created to lower barriers to trade between the U.S., Mexico and Canada. Sensitive industries like fresh tomatoes were given special considerations with extended phase out periods for the removal of tariffs, but those considerations were not enough to stem the increase in fresh tomato imports from Mexico. The devaluation of the peso in the first quarter of 1995 resulted in large increases in imports from Mexico. The Florida industry followed that by filing petitions with the U.S. International Trade Commission and U.S. Department of Commerce seeking relief from the increased imports. The industry was able to eventually receive relief in the form of the suspension agreement that Mexican growers signed, agreeing not to dump fresh market tomatoes on U.S. markets and also to not sell fresh market tomatoes for less than the floor price of 20.68 cents per pound. The experiences following NAFTA have led to several reservations within the agricultural community for expanding NAFTA to other countries. NAFTA has been looked to as a model in discussions about the Free Trade Area of the Americas, partly because it is one of the few agreements that is not restricted in members that could be added to the agreement. NAFTA has no geographic boundaries within the agreement that restricts other nations from being added. The ascension of Chili to NAFTA has been proposed and discussions have been held. That discussion, however, has taken a back seat to negotiations of the Free Trade Area of the Americas (FTAA). The FTAA is an important policy issue that faces the Florida agricultural industry. The IV Business Forum of the Americas was held in San Jose, Costa Rica from March 16 through March 20, 1998. Those meetings provided a forum for business, government and other interested parties to develop an agenda to move discussions of FTAA forward. Specific objectives of the Forum were: 1) laying out the objectives of the negotiations as they unfold; 2) developing a set of principles which provide the fundamental rules under which negotiations are to take place; 3) ranking the major issues which must be resolved according to their relevance to the discussions and 4) identifying an agenda for progress by the year 2000 that will support trade liberalization in the region. The IV Business Forum was organized around 10 major issues. These issues ranged from market access, rules of origin and customs procedures to private sector involvement in the negotiations. Position papers were submitted to organizers of the IV Business Forum prior to the meetings in order to be included in the agenda for discussions held at the meetings. The Summit of the Americas Center at Florida International University submitted a paper (Summit of the Americas Center, 1998) that was organized in partnership with Enterprise Florida, Inc., and Florida Partnership of the Americas, Inc. Enterprise Florida is a not-for-profit government/business partnership established by the Governor of Florida to guide the development of Florida’s economy. Florida Partnership of the Americas is a not-for-profit corporation dedicated to furthering hemispheric economic integration. The paper submitted by the Summit of the Americas Center was forwarded as Florida’s position paper on the FTAA. Its proposed purpose was to identify and expand awareness of the commercial and business implications for Florida of the movement toward creation of a FTAA and to deepen the understanding of key issues in FTAA that will affect Florida’s business and public affairs communities. The paper endorsed the granting of fast-track authority to the U.S. administration in order to accelerate the FTAA process. Fast-track gives authority to the U.S. administration to negotiate trade agreements, with Congress having the opportunity only to approve or vote down the agreement. Congress may not amend trade agreements negotiated with fast-track authority. The paper submitted by the Summit of the Americas Center focused on general issues in the key areas around which the IV Business Forum was organized. Even though Florida agriculture is an important economic sector in the Florida economy, little attention was given to the issues Florida agriculture should be concerned about in negotiating a FTAA. The Center did post a paper on their Internet site (VanSickle, 1998b) focussing on issues important to Florida agriculture. IV Business Forum Experiences Enterprise Florida and the Florida Partnership of the Americas coordinated the participation of Florida delegates (Team Florida) that attended the IV Business Forum meetings. Team Florida was the largest delegation outside of Brazil and the U.S. delegation. Team Florida composed roughly 40% of the U.S. presence in Costa Rica. Of the 85 participants from Florida who pre-registered for the IV Business Forum meetings, only 6 held formal affiliations with the agricultural community. The remaining participants represented various sectors of the Florida economy, ranging from the public sector (headed by Governor Lawton Chiles) to the tourist, banking and service sectors. One of the key initiatives that the Florida delegation pursued was the naming of Miami as the Secretariat of the FTAA. The Secretariat will serve as the formal headquarters of the FTAA, i.e., the administrative home of the FTAA. Team Florida organized the Florida delegation with a message that Miami is the natural location for placing the Secretariat. Miami is a largely bilingual community which serves as a primary business and tourist destination for many individuals throughout the hemisphere. Team Florida publicized Florida’s role as the "Business Center of the Americas" in Latin America. Trade ministers from the participating countries met following the IV Business Forum. The purpose of their meeting was to promote the development of the FTAA process and to select a home for the Secretariat. In addition to Miami, Rio de Janeiro and Mexico City made strong bids to be named home to the Secretariat. The Trade Ministers decided to name Miami as a temporary home for the Secretariat, for a period of 3 years and to then revisit the issue. Participants from other countries brought up the issue of the administration’s inability to obtain fast-track authority as a deterrent to formal negotiations of FTAA. Most participants from the U.S. delegation agreed that fast-track authority is significant for achieving an agreement that could be ratified in the U.S., but pointed to the lack of fast-track authority in the most recent GATT negotiations until the end of the process approached as evidence that it should not slow negotiations for FTAA. Members of the U.S. administration that attended the conference expressed confidence that fast-track authority would be achieved. Several members of the Florida delegation in Costa Rica expressed confidence that Florida’s congressional delegation would support fast-track authority. Most of the Florida delegation attending the IV Business Forum was supportive of forwarding negotiations for a FTAA. As you look to economic activity within the western hemisphere, Florida stands to benefit in providing services needed to facilitate the increase in hemispheric trade expected following implementation of FTAA. Florida agriculture, however, has reason to be concerned about how it will be affected by FTAA. The subtropical environment in Florida is much like that of several countries within the FTAA that will compete in a hemispheric market. Many of Florida’s products, especially horticulture, are directly competitive with products grown in other FTAA countries. Florida agriculture should be a participant in negotiations of FTAA to assure that a fair agreement is reached. A package of initiatives could be developed that would benefit Florida agriculture and allow it to favorably compete in a FTAA. The banning of methyl bromide use in the U.S. scheduled for January 1, 2001 will have devastating consequences for the Florida tomato industry unless an economically viable alternative is developed over the next two years. Development of alternatives before that date that will allow our producers to compete appears to have slim chances at best. Most recent estimates of the impact that next best alternatives will have on Florida tomato growers are in the 10 to 20 percent range for reduction in yield. An impact of that magnitude will move a significant share of the Florida tomato industry to Mexico where pest pressures are not as intense and where there is more land to allow crop rotation practices to minimize pest pressures. The Montreal Protocol is the international agreement between member nations to control the production and use of ozone depleting substances. The international community faces a ban on methyl bromide use in 2005 in developed countries and 2015 in developing countries under rules of the Montreal Protocol. An increase in research expenditures in Florida to find better alternatives and an extension of the phase out date to 2005 are issues the Florida tomato industry should put on the negotiating table when FTAA fast-track authority is introduced again in Congress. Other issues the Florida industry has identified as important (VanSickle, 1998a) include country of origin labeling, a child labor law to restrict imports from countries employing child labor in producing items sold in the U.S., reform of the Perishable Agricultural Commodity Act (PACA), broadening of the suspension agreement to other commodities, and increases in research and development to keep the Florida industry competitive. Conclusions Florida agriculture must prepare itself to be included as the FTAA negotiations move forward. The long sustained growth in economic activity within the U.S. has been credited by many to the growth in international trade throughout the world. The North American Free Trade Agreement (NAFTA) passed because of the benefits it was to provide our society. Few analysts foresaw the problems that surfaced in the winter produce industry. Florida was a lonely force in the landscape of doubters about the impact NAFTA would have on our producers. Those fears were realized when Mexico increased exports of fresh market tomatoes 53.7% in 1995. They have continued to ship large volumes of fresh market tomatoes to the U.S., exceeding the Tariff Rate Quotas included in NAFTA as safeguard measures for our producers. Florida agriculture may become an even more lonely voice in expressing concerns about FTAA. The Florida economy will benefit from FTAA if it becomes the center of economic activity for the western hemisphere as many believe it will. That point alone makes participation in the negotiation process even more important for Florida fresh tomato growers. It also makes it important to develop as much information as possible on potential impacts FTAA may have on different commodity groups. The FTAA can be of benefit to all of the countries in the FTAA. Agriculture is important in the process of developing the FTAA and should be given a pivotal role in its development. There are special concerns that should be given to agriculture in both the large and smaller economies of the FTAA. The private sector deserves a voice in this process as it stands to be either the winner or loser, depending on the commodity and country from which it originates. Literature Cited Eckes, Jr., Alfred. 1995. Opening America’s Market: U.S. Foreign Trade Policy Since 1776. The University of North Carolina Press. Chapel Hill, NC. Summit of the Americas Center. 1998. "Florida and the FTAA: A Position Paper for Hemispheric Trade Negotiations." Florida International University. VanSickle, John J. 1998a. "Developing Opportunities for Florida Vegetable Growers." University of Florida Food & Resource Economics Department working paper. VanSickle, John J. 1998b. "The Free Trade Area of the Americas: Considerations Important to Agriculture." University of Florida Food & Resource Economics Department working paper. |
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