[Congressional Record Volume 140, Number 147 (Tuesday, November 29, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: November 29, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
              FREE TRADE FOR THE AMERICAS: THE NEXT STEPS

                                 ______


                          HON. BILL RICHARDSON

                             of new mexico

                    in the house of representatives

                       Tuesday, November 29, 1994

  Mr. RICHARDSON. Mr. Speaker, today, on the eve of the historic 
``Summit of the Americas'' and 1 year after NAFTA's passage, I think it 
is vital that we consider future steps toward strengthening hemispheric 
democracies and economies. I urge my colleagues to read the following 
speech by Ambassador Abelardo Valdez titled ``Free Trade for the 
Americas: The Next Steps'' which was delivered at Baylor University on 
November 11, 1994.

              Free Trade for the Americas: The Next Steps

                   (By Ambassador Abelardo L. Valdez)

       Ladies and gentlemen and distinguished guests: It is a 
     great pleasure to return to Baylor University and join you at 
     this conference to discuss the potential and prospects of 
     free trade for the Americas.
       Twenty-seven years ago, a few months before I began my law 
     studies at Baylor, I was fortunate to accompany President 
     Lyndon B. Johnson to the first summit of the Presidents of 
     the Americas at Punta del Este, Uruguay, as a young military 
     aide. The primary goal of that first summit was to support 
     the beginning of trade liberalization among the Latin 
     American countries. Next month the second summit of the 
     Americas will be held in Miami, with the primary goals of 
     expanding free trade, strengthening democracy, and advancing 
     economic and social development throughout the Western 
     Hemisphere.
       In the 27 years between these two historic events, our 
     hemispheric neighborhood and the world have changed 
     dramatically, and the small seed planted at Punta del Este is 
     in the process of blossoming into a hemispheric free trade 
     area, and, I predict, into a future Common Market of the 
     Americas. The North American Free Trade Agreement (``NAFTA'') 
     has set the stage for achieving free trade throughout the 
     Americas and strengthening the economic and political 
     relations between the United States, Canada, Latin America 
     and the Caribbean. I have had the good fortune to witness at 
     close range and participate intensely in this process during 
     the past quarter of a century. For this reason, I am 
     especially pleased to join you at this event.
       As we meet tonight, preparations for the Miami summit are 
     reaching the critical point for decision. The United States, 
     Canadian, and Latin Governments realize that this summit is 
     not only a historic event, but a watershed event that could 
     give impetus and momentum to the expansion of free trade 
     throughout the hemisphere. The agenda for the summit is being 
     finalized, the critical issues are being defined and the 
     position papers are being developed. This, therefore, is a 
     timely conference to analyze the issues from a U.S., Canadian 
     and Latin perspective, to examine the pros and cons of 
     expanding free trade throughout the Western Hemisphere, 
     and to suggest some ways and means to achieve this goal.
       The principal question before the Summit Conference is how 
     to achieve the goal of free trade throughout the Americas and 
     how to build on the trade liberalization efforts of the past 
     quarter century in Latin America. Related issues include the 
     following: Should NAFTA be the foundation for this effort? If 
     so, how can Central and South America and the Caribbean 
     accede to NAFTA and what could be the standards or conditions 
     for accession? Would it be feasible or desirable for groups 
     of countries to jointly negotiate for accession with the 
     NAFTA member countries. Or, should countries seek membership 
     on an individual basis? How can democracy be strengthened and 
     the environment protected in the hemisphere? What regulatory 
     and dispute settlement mechanisms should be put in place. 
     There is also the question of how to integrate countries of 
     greatly varying economic development, size and 
     competitiveness in a common free trade area.
       These are questions which are being addressed by this 
     Conference, and which will be the focus of the Summit 
     Conference in Miami next month.
       While there seems to be a general consensus of opinion 
     throughout the hemisphere on the goal of free trade, there is 
     no clear consensus on how to achieve it. Moreover, the role 
     of the United States will be pivotal and the U.S. Congress is 
     clearly divided on whether to grant the President the 
     indispensable ``fast track'' negotiating authority to 
     commence free trade negotiations.


     I. Why A Western Hemisphere Free Trade Area Should be Created

       Although most summit participants are assuming that a 
     Western Hemisphere Free Trade Area (``WHFTA'') is a goal to 
     be achieved and not one to be debated, we in the U.S. appear 
     somewhat reticent and Congress is very divided on the issue.
       It behooves us then to answer the question why should the 
     United States, in partnership with Canada and Latin America, 
     pursue this ambitious goal of creating a Western Hemisphere 
     Free Trade Area within the next decade. The experience in 
     achieving the NAFTA teaches us to never take for granted that 
     a good idea will automatically be approved by Congress or 
     that people beyond the Capital Beltway are properly informed 
     about the issue.
       So, first let us examine both the potential benefit of a 
     hemisphere-wide free trade area to the United States and why 
     a trade partnership with Latin America is feasible at this 
     time.
       It is important to understand that Latin America is 
     undergoing a dramatic transformation in its economic 
     policies. The positive results of that change have moved the 
     International Monetary Fund to predict that the region will 
     experience a higher rate of economic growth than any other 
     region of the World over the next decade--approximately six 
     percent per year. These changes have included privatizing 
     their economies and opening their markets to foreign trade 
     and investment and have been ongoing for several years. Latin 
     leaders are eager to finish the job and maximize economic 
     benefits through the creation of a Western Hemisphere Free 
     Trade Area. They see significant economic and social 
     progress being achieved through increased trade and 
     investment among the nations of this hemisphere and are 
     eager to increase their economic competitiveness and 
     efficiency through free trade.
       Moreover, Latin American countries have made great gains in 
     expanding democracy over this same period. Latin leaders 
     perceive that increased economic growth and opportunity for 
     their people is the best catalyst for social progress and the 
     best way to strengthen democracy in the region.
       In view of these dramatic reforms and progress, I believe 
     that the United States and Latin America would benefit 
     substantially from a WHFTA.
       A recent report issued by Institute for International 
     Economics concluded that U.S. exports to Latin America would 
     increase by $36 billion by year 2000 or 51 percent over 
     current efforts because of such an arrangement. It also 
     estimated that Latin American exports to the U.S. would 
     increase by $87 billion by 2000 as a result of the WHFTA. As 
     a result, the U.S. trade balance would improve with a gain of 
     60,000 net U.S. jobs being created by that date. The report 
     also indicated that direct foreign investment in Latin 
     American would increase by $60 billion by the year 2000.
       The Western Hemisphere is expected to account for close to 
     $200 billion in U.S. exports--considerably more than the 
     United States sells to all of Europe plus Russia and more 
     than it exports to eastern and southern Asia combined. 
     Already, 37 percent of U.S. exports go to Western Hemisphere 
     nations. To put it in perspective, let me point out that we 
     sell as much to Brazil as to China; more to Venezuela than to 
     Russia, and more to Ecuador than Hungary and Poland combined. 
     Our exports to Latin America are growing at three times the 
     global rate. If current trends continue, exports to Latin 
     America will exceed those to the European Union as a whole.
       One reason that our trade with Latin America is on the rise 
     is that, between 1989 and 1992, the average effective tariff 
     of Latin American and Caribbean countries was cut from 20 
     percent to 13 percent. This was done on a unilateral basis.
       By next year, the Andean Pact countries--are expected to 
     set a common external tariff no greater than 20 percent. As a 
     result, they will become one of our twelve largest markets, 
     accounting for $10 billion in U.S. exports. The U.S. sells 
     more to the pact's 95 million people than to China's 1.2 
     billion.
       MERCOSUR, the common market established by Brazil, 
     Argentina, Paraguay and Uruguay, have agreed to eliminate all 
     non-tariff barriers affection regional trade. When completed, 
     MERCOSUR could represent about half of the South American 
     gross product. The United States exported over $10 billion to 
     those countries in 1993, an 11 percent increase over 1992.
       Today, the United States accounts for approximately 60 
     percent of the goods imported by Latin America and the 
     Caribbean, a region with a growing population of 460 million. 
     Total trade between the United States and Latin America was 
     worth $141 billion in 1993.
       If these trends continue, by the year 2000, United States 
     exports to Latin America could well exceed U.S. sales to 
     Western Europe--and could add one million new jobs for U.S. 
     workers. United States exports could grow even faster if 
     barriers to trade continue to come down.
       NAFTA in its first six months of existence has already 
     proven that free trade produces strong positive benefits. 
     U.S. exports to Mexico have expanded by more than 17 percent 
     and Mexico's exports to the U.S. grew by 20 percent during 
     this period. If this trend continues, Mexico will displace 
     Japan as our second largest market in the world by the end of 
     this year.
       Yet, despite this potential for great benefits to the U.S. 
     economy to flow from a WHFTA, there is strong reluctance in 
     Congress to move on this initiative. Labor leaders and 
     environmentalists are voicing strong opposition, as they did 
     with NAFTA. Unions fear that with free trade, low-wage 
     workers in Latin America could siphon off American jobs and 
     undermine U.S. wage standards. Environmentalists are 
     concerned about lax environmental standards in most Latin 
     countries. On the other hand, the business community and most 
     of the Republican members of Congress are concerned that 
     imposing stringent environmental and labor standards will 
     cancel out the benefits of future trade agreements.
       The big winners in a WHFTA would be business firms and 
     consumers. However, these two groups have yet to demonstrate 
     the ability of sustaining a strong lobbying effort to turn 
     the tide at this time. It is this lack of clear-cut support 
     in Congress and among the public that has caused a dampening 
     of enthusiasm and prospects for the Presidential summit in 
     Miami.
       This was also the reason that the Clinton Administration 
     was forced to withdraw fast-track negotiating authority from 
     the GATT bill that is pending before the Congress, in order 
     to preserve the possibility of passing the GATT bill this 
     year. While the Administration has promised to reintroduce 
     the ``fast-track'' measure early next year, there is no 
     guarantee that it will pass, especially since it appears that 
     President Clinton will have less support as a result of the 
     Congressional elections held this past Tuesday.
       So here we go again. It is another replay of the NAFTA 
     experience, where only last-minute, feverish activity by the 
     Administration saved NAFTA from the jaws of defeat. The 
     bottom line is that those who are for a WHTA--the 
     Administration, the business community, and consumers, etc.--
     have better start a strong effort now to insure that Congress 
     passes fast-track and gets behind the WHFTA initiative. As I 
     said before, one cannot assume that a good idea will 
     necessarily be approved by a Congress left to its own 
     devices, especially in the contentious climate that is 
     expected in the next session of Congress.


        II. How to Achieve a Western Hemisphere Free Trade Area

       Nevertheless, I still believe that a Western Hemisphere 
     Free Trade Area is an idea whose time has come and am 
     confident that it will prevail. Assuming that fast-track is 
     passed next year, the next question will be how to achieve 
     the goal of a WHFTA.
       Basically there are two strategies that are circulating at 
     this time. One would expand NAFTA through the accession of 
     individual countries or group of countries, in accordance 
     with certain procedures and standards to be determined by the 
     NAFTA member countries. The other strategy would deepen and 
     enlarge the existing subregional free trade groups in the 
     hemisphere such as NAFTA, MERCOSUR, the Andean Pact, the 
     Central American Common market, and the Caribbean Community, 
     and attempt to harmonize trade standards towards achieving a 
     common free trade area. Of these two strategies, I think the 
     first one is more feasible and simpler to pursue, although 
     the two approaches are not necessarily exclusive.
       NAFTA represents the most advanced free trade agreement in 
     existence at this time. It would be much more expeditious to 
     have it serve as the basis for achieving a WHFTA.
       NAFTA is a multilateral accord that includes the principal 
     economic partner and foreign investor for a large number of 
     Latin and Caribbean countries. The Agreement's common set of 
     rules already regulates three quarters of intra-hemispheric 
     exports. Moreover, it is consistent with GATT, and its 
     accession clause is an expression of open regionalism.
       Nevertheless, to achieve a hemispheric free trade area 
     through the expansion of NAFTA membership, the procedures for 
     accession and the standards for application to the agreement 
     still need to be defined. In view of the varying levels of 
     development in the region, an inclusive hemispheric process 
     would probably require flexible transitional arrangements and 
     less uncertainty in areas that are sensitive to developing 
     countries, such as labor and environmental standards. 
     Expansion of NAFTA through accession would also require 
     committed leadership, especially from the United States--and 
     I have already mentioned the concerns about the division of 
     American public and official opinion.
       The second strategy of converging and widening the existing 
     subregional agreements can strengthen and complement the 
     overall process to achieve a WHFTA through a firm commitment 
     to shared principles and participation in a common 
     negotiating framework. This strategy would multilateralize 
     free trade benefits among the existing subregional accords 
     within a mutually agreed-upon period of time, while at the 
     same time generating a hemispheric consensus on common 
     minimum standards for sensitive trade-related issues such as 
     investment, intellectual property, labor and the environment. 
     This process could be facilitated by placing it in a 
     hemispheric forum such as the Organization of American States 
     Special Committee on Trade. While this strategy, like the 
     expansion of NAFTA through accession has its own set of 
     complexities, it does have the advantages of building on the 
     progress achieved over the last quarter of a century 
     in subregional integration and advancing the hemispheric 
     trade process on the basis of inclusion and consensus.
       In my judgment, a hybrid combination of these two 
     strategies may produce the optimum results from creating a 
     WHFTA within the next decade. Accession to NAFTA by 
     individual countries or groups of countries would be the most 
     efficient way to accomplish this goal. Those countries like 
     Chile, Argentina, Trinidad, Colombia and Venezuela that are 
     prepared to meet the standards to accede to NAFTA on an 
     individual basis with some modest adjustments to their trade 
     and economic policies would do so in the first phase of the 
     process. Those countries that are less developed could 
     prepare for eventual accession to NAFTA as individual 
     countries or members of subregional groups which would 
     harmonize their trade and trade-related standards within 
     their subregional group before joining NAFTA. Thus free trade 
     negotiations could be accomplished according to a 
     predetermined schedule and set of properties, taking into 
     account the needs of each country or group of countries.
       This hybrid strategy would build on the trade 
     liberalization achieved through subregional groups. It would 
     respect the reality that some countries are less prepared to 
     begin immediate negotiations to accede to NAFTA but that all 
     countries wish to have an opportunity to be part of a 
     hemisphere-wide free trade area. It would also have the 
     potential to expedite the process by allowing groups of 
     countries with commonalities in levels of development and 
     trade policies to prepare together for access to NAFTA as a 
     group.
       This hybrid strategy should establish and respect these 
     following fundamental principles:
       First, it should commit to the GATT principles for the 
     formation of regional trading arrangements. These include not 
     raising protections above levels prevailing prior to the 
     formation of a Free Trade Area or Customs Union; eliminating 
     trade barriers within a trading zone across substantially all 
     sectors within an agreement rather than having sectoral or 
     topic-by-topic coverage; and assuring that trade agreements 
     have a precise interim plan and schedule for the staged 
     introduction of benefits and disciplines.
       Secondly, it should provide for equal treatment for 
     existing and new members to the regional trade arrangement, 
     although allowing flexible transition periods among the 
     parties.
       Thirdly, there should be established explicit rules of 
     entry, including clearly-defined procedures and technical 
     conditions for application and negotiation of accession.
       Fourthly, it is fundamentally important that this hybrid 
     strategy adhere to basic standards of transparency regarding 
     key trading rules, such as rules of origin, investment rules, 
     and staged phase-in periods for different member countries in 
     accordance with their level of development.
       Fifthly, it should establish an efficient and effective 
     dispute settlement mechanism for resolving trade and 
     investment disputes.
       Finally, the strategy should maintain openness to 
     membership for countries within and beyond the regions.
       The North American Free Trade Agreement already meets all 
     but one of these conditions--the procedure and standard for 
     accession. It is also the first international free trade 
     agreement in the world that includes both developed and 
     developing countries. Therefore, I believe that NAFTA should 
     be the foundation and starting point for expanding free trade 
     throughout the Americas.


  iii. what the summit of the American Presidents Needs to Accomplish

       The first public step in creating a WHFTA was taken in 
     January of this year, when NAFTA went into effect. The second 
     crucial step is the upcoming Summit of the American 
     Presidents. Decisions that are taken, or not taken, there 
     will greatly influence the direction, process and efficiency 
     of the effort to achieve the common goal of expanding free 
     trade throughout the Americas, enhancing social and economic 
     progress, and strengthening democracy.
       It is imperative, in my opinion, that the focus and goal of 
     the summit conference should be the expansion of free trade 
     through the creation of a Western Hemisphere Free Trade Area. 
     I believe that by concentrating on this goal, other equally 
     important goals can be achieved. Economic progress and 
     democracy will be strengthened if free trade throughout the 
     hemisphere can be achieved. Certainly, the NAFTA experience 
     has proven this to be the case. On the other hand, 
     overloading the summit agenda with too many issues will only 
     assure that no meaningful agreement may be reached on any 
     objective.
       Secondly, a decision on the strategy, including a mechanism 
     and time schedule for achieving the goal of establishing a 
     WHFTA, must be made by the summit conferees. Without a 
     strategy, the effort to achieve this great goal may be 
     stalled or frustrated. The summit leaders must grasp this 
     once-in-a-century opportunity now and move expeditiously to 
     realize it.
       Thirdly, a decisive first step such as beginning 
     negotiations with Chile for accession to NAFTA should begin 
     by early 1995, otherwise the momentum needed to move the 
     process may well founder. Successive steps should follow in a 
     defined scheduled for achieving a WHFTA by a certain date.


                               conclusion

       It will require courage and vision from the leaders 
     assembled at the summit to make these decisions in order to 
     build a genuine economic and political partnership in the 
     Americas. I believe that free trade can lead to the 
     achievement of many common goals in this hemisphere, and that 
     it can be the foundation for building a more democratic and 
     more just and prosperous society throughout the Americas. 
     Above all, our leaders and we need to take advantage of this 
     propitious time.
       As Shakespeare reminds us:

     There is a tide in the affairs of men,
     That taken at the flood,
     Leads on to fortune;
     Omitted, all the voyage of their life,
     Is bound in shallows and in miseries.

                          ____________________