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Time to listen to our neighbors

By Kevin P. Gallagher

Article re-printed from The Miami Herald 10/17/2003


The eyes of the globalization world will be watching Miami this November when Western Hemisphere trade ministers revisit negotiations for what could be the largest regional trading bloc in the world: the Free Trade Area of the Americas. The big question is whether Miami will be a repeat of recent world-trade talks in Cancun.

For U.S. Trade Representative Robert Zoellick, this is no small concern, as 12 of the 21 developing countries that opposed U.S. trade policy in Cancun are part of the FTAA negotiations. If the United States wants to see progress on trade, it will have to listen to the concerns of its southern neighbors.

During the 1990s, Latin America and the Caribbean listened to the United States. In response to major economic crises in the 1980s, a ''Washington Consensus'' preached trade and investment liberalization, mass privatization of state-owned enterprises and a general reduction of the role of the state in economic affairs. Latin America and the Caribbean dutifully followed the advice.

Unfortunately, according to a definitive assessment of the 1990s reforms conducted by the Economic Commission for Latin America and the Caribbean, only two countries had a faster economic growth rates in the 1990s than between the years 1950 and 1980: Argentina and Chile. Chile is the last standing.

For the rest of the hemisphere, exports increased significantly, but because imports grew faster, many nations have more worrisome trade deficits; investment and productivity recovered relative to the 1980s, but no large gains occurred; employment generation was poor and the quality of the jobs that were created presents ''serious problems;'' and inequality and poverty increased throughout the region.

Mexico is the paradigmatic case. Indeed, no country in the hemisphere followed the U.S. prescription more fully. Since 1985, Mexico has transformed itself from one of the most closed economies of the world to one of the most open.

Again, the numbers speak for themselves. According to official statistics, while exports and investment have soared since 1985, the Mexican economy has grown very slowly -- less than 1 percent annually in per-capita terms. Slow growth has translated into levels of employment that have not been able to absorb the new entrants into the workforce each year. Those who have been lucky enough to get jobs have earned low-quality jobs.

Real manufacturing wages have declined in Mexico by 12 percent since the North American Free Trade Agreement, and 45 percent of all new jobs do not have even those benefits mandated by Mexican law.

Environmental conditions, too, have deteriorated. The Mexican government estimates that the economic costs of environmental degradation have amounted to 10 percent of annual GDP, or $36 billion per year.

Many South American countries -- and their civil societies -- are ready to go head-to-head again in Miami. Building on the momentum gained at Cancun, South American nations have decided to negotiate a merger between the Mercosur and Andean Pact trading blocs to form a united South American market that will encourage intra-South American trade and square off against the United States in the FTAA negotiations. As for civil society, many South American groups have held plebiscites on the FTAA and are going to Miami in full force.

The most contentious issues that plagued the Cancun talks are on the FTAA table -- agriculture, investment, government procurement, competition policy and subsidies. Our southern neighbors will come with an agenda that includes demands for reductions in agricultural support in the United States and an insistence that any new trade rules give nations in the hemisphere the space to install national policies to spur development.

The rest of the hemisphere listened to the United States during the 1990s. Now it's time for the United States to listen to the hemisphere.

Kevin P. Gallagher is a research associate at Tufts University's Global Development and Environment Institute.

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