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The Participation of the Latin American and Caribbean Countries in the Multilateral Trading System

by Esperanza Durán 

Director of the Agency for International Trade Information and Cooperation, AITIC (Geneva). The views expressed in this article are the sole responsibility of the author.

Introduction
Groups, Alliances and Coalitions : from the Uruguay Round to the WTO
Latin America and the Caribbean in the GATT and the Uruguay Round
Participation in the WTO : Convergence and Divergence
The Free Trade Agreement of the Americas
Conclusion
Table 1 : Accession of Latin American and Caribbean Countries to the GATT / WTO
Table 2 : Latin American Exports by Destination (1998)
References

 

I. Introduction

This participation of developing countries in the work and negotiations of the World Trade Organization (WTO)- and previously of the General Agreement on Tariffs and Trade (GATT)- has been a subject of continuous analysis and research (Note 1) : The literature is extensive, but amongst the most recent examples: Michalopoulos (1999), Krueger (1999), Srinivasan (1999), The World Economy (2000). There are three main reasons for this. One stems from the fact that the WTO is the prime multilateral forum where developing countries can promote (and defend) their international trade interests. Second that this organization has seen a steady increase in developing country membership. Correspondingly, developing country participation has become progressively more active, not only in the WTO normal work but also in negotiations, as was evident by the number of proposals tabled by developing countries in preparation for the Third Ministerial Conference in Seattle in 1999.  Third, the ‘growing weight and importance of developing countries in the multilateral trading system’ is not only widely recognised, but it has also been acknowledged that Seattle failed because the agenda did not accommodate developing country interests (Note 2 : EU Commission 2000).

However, the examination of the participation of developing countries in the WTO as a cohesive group may be deceptive: they are far from an homogenous whole. Although they share important concerns regarding some broad areas, such as the reduction of present and persistent tariff peaks and tariff escalation. However, on other issues,  such as the further liberalisation of trade in agriculture and textiles, or more specifically sensitive in goods like tropical products, fish and fish products, footwear and leatherwear, not all developing countries have common positions, nor would some developing countries consider them a priority. Indeed, the spectrum of trade subjects covered by and negotiated in the WTO has far surpassed market access. It cannot be taken for granted that developing country interests necessarily  coincide, nor that the trade obstacles faced by them are the same. Thus it is  the useful to concentrate on a particular geographical area and to conduct a more focussed analysis of the modalities and effectiveness of this participation.

Another indirect, although related, factor which points to the usefulness of examining developing country participation in the multilateral trade forum is the dramatic proliferation of trade agreements, regional arrangements, customs unions and bilateral agreements, particularly during the last decade. These have involved both developed and developing countries. The intensification of free trading arrangements raises a host of systemic questions regarding the coexistence of regionalism and multilateralism, and the future of the WTO as the main rules-making body and the forum for multilateral trade negotiations. Since developing countries comprise the bulk of the WTO (and previously GATT) membership, it becomes important to gauge the priority assigned by developing countries to the multilateral forum, in contrast to that given to the regional or bilateral arrangements. It is a fact, for example, that the African Caribbean and Pacific (ACP) countries traditionally have given precedence to the Lomé conventions with the EU (and now its replacement, the new Cotonou Partnership Agreement) over the WTO, agreements which raised important questions of compatibility between special preferential arrangements and WTO rules.

The case of Latin America and the Caribbean participation in the GATT and WTO as a particular group among the developing countries becomes relevant for a number of reasons. First, although the countries in the region are dissimilar in many respects (trade orientation, size of the economies, even language), they share a recent common trajectory: they all transited through the debt crisis during the 1980s (the so-called ‘lost decade’) and, from having previously followed an import-substitution model, they moved almost simultaneously to liberalising their trade and opening up their previously closed economies. Similarly,  trade liberalisation became an essential component of their economic policy as an export-oriented approach became one of the elements in the economic ‘stabilisation’ strategy pursued to overcome the debt crisis. Thus, for the first time, Latin America became an active participant in the GATT and the Uruguay Round. (Duran 1994, 280-81). Moreover, it is no coincidence that the most ambitious round of multilateral trade negotiations was launched in this Latin American country. A major force which made this possible was the commitment and personality of the then Uruguayan Minister of Foreign Affairs, Enrique Iglesias aided by Uruguay’s very experienced Ambassador in Geneva, Julio Lacarte Muró.

Second, this recent common trajectory of Latin American and Caribbean countries led to a host of trade agreements. At the end of the Uruguay Round, the Economic Commission for Latin America and the Caribbean (ECLAC) introduced the concept of "open regionalism" (Note 3 : Although there is no commonly agreed definition of ‘open regionalism’, the concept was introduced by the APEC Eminent Person’s Group in 1993 (at the time when the successful end of the Uruguay Round negotiations was still open to doubt) to describe a trend towards achieving regional  free trade on a ‘GATT-consistent’ basis, if further global liberalisation was not achievable) to  illustrate a dynamic trend prevalent in Latin America and the Caribbean towards unilateral liberalisation and the movement towards hemispheric integration, a trend that has gained in scope and speed. At the regional level, the Latin American Free Trade Association had been a long-standing regional integration initiative. More effective agreements at the  sub-regional level were Southern Common Market (MERCOSUR), the Caribbean Community (CARICOM), the Andean Community and the Central American Common Market. Even the North America Free Trade Agreement (NAFTA) could be included, involving a Latin American country and two members of the Quad. At the bilateral level almost all Spanish speaking countries have signed bilateral free trade agreements or bilateral agreements involving economic complementation or free and preferential trade.

The most significant of these regional trade integration initiatives  was the decision of the Heads of State of the 34 countries in the Western Hemisphere to construct a ‘Free Trade Area of the Americas’ (FTAA) and to complete negotiations for the agreement by 2005. Significantly, the FTAA includes the largest trading partners in the region, the United States and Canada. It is of interest that Cuba, a founder member of the GATT, is not a participant in the FTAA, whereas the Bahamas, which not a Member of the WTO (and was not a contracting party to the GATT), is. Following in the wake of the FTAA, on the initiative of Brazil, the leaders of twelve South American countries issued a communiqué in early September 2000 (‘Brasilia Communiqué’) pledging to amalgamate South America’s two main trade agreements, MERCOSUR and the Andean Community.

Given the array of trade agreements in the region, it becomes particularly important to examine the participation of Latin America and the Caribbean in the multilateral trade forum par excellence, the WTO. Where do their trade concerns  truly lie, at the regional or the multilateral level?  What are the trade-offs between the multilateral and the regional fora? Is the region more inclined towards regionalism than multilateralism?  Is there a commonality of  interest of the countries in the region on key WTO issues, as there seems to be on regional arrangements? What are the coordination mechanisms drawn on by the region? Have these been effective? Are there any effective sub-regional coalitions? Answers to these questions would point to issues of more general interest, such as lessons to be learnt from the Latin American experience on how can developing countries exert more effective influence in multilateral trade negotiations; the coexistence of regional arrangements with the multilateral trading system; the level and importance of developing countries acceptance of multilateral trade rules. Which leads to the mystifying thought as to whether it will be possible at all to launch a new round of multilateral trade negotiations, and therefore whether the Uruguay Round was the last such round.

The rest of this article is divided as follows: Part II is an overview of the general alliances and coalitions that have been active historically in the contexts of the GATT and the WTO. Part III sets the background for the present participation of Latin America and the Caribbean in the WTO through the examination of their role played in the GATT and the Uruguay Round negotiations. It seems important to single out the mechanisms used at the time, namely the Latin American Economic System (SELA), which proved to be a successful catalyst in the coordination and exchange of information among the Latin American and Caribbean countries.

Part IV seeks to illustrate the convergence and divergence of Latin American and Caribbean interests. Obviously, countries will coalesce when their interests coincide, as is the case of the Latin American members of the Cairns group,  all of whom were promoting the liberalization of agricultural trade. In contrast, several Latin American and Caribbean countries have diverged, most notably in the case of banana trade dispute, which is examined as an example of divergent trade interests between different countries in the region.  Similarly, the importance assigned by Latin America and the Caribbean is well illustrated by their participation in the wider framework of the WTO’s Dispute Settlement Mechanism, where they have defended their rights against developed countries and against other countries in the region. Examples of convergence are observed through the participation of the Latin American countries in recent WTO negotiations, particularly through their contribution to the Third Ministerial Conference in Seattle.

Part V seeks to look at this participation in the multilateral forum and weigh it against the Latin American and Caribbean participation in the negotiations taking place in the framework of the FTAA.

Part VI, the conclusion, points to the fact, although keeping an interest in the multilateral trade forum, the WTO, the priorities of the Latin American and Caribbean countries lie closer to home and that they prefer to negotiate bilateral, sub-regional and, most importantly, hemispheric trade arrangements, than global multilateral rules.

II. Groups, Alliances and Coalitions : from the Uruguay Round to the WTO

It is commonplace to refer to the World Trade Organization as ‘member-driven’.  Its nature, structure and functioning, conformed from the times of the GATT, as well as the fact that it is the forum of continuous negotiations, have highlighted the importance of active participation of the members to further national trade interests.  In the realm of international trade negotiations, especially from the time of the Uruguay Round, the formation of loose groups and coalition-building in defence of common interests has been a well-established practice. Their presence and influence was particularly important during  the Uruguay Round.

In the WTO, informal groups are formed to exchange information and coordinate positions. Some of these groups are based on geographical or ‘economic’ identity or proximity, e.g. the Informal group of Developing Countries, the African Group and the Latin American and Caribbean Group (GRULAC). But because their common interests stem from general geographic or economic coincidence, their shared aims are frequently limited to generalities based on the lowest common denominator. Thus, geographically- or economically-based groups tend to be rather loose and seldom act collectively on concrete issues. A relative exception to this general trend is the GRULAC participation in the Uruguay Round negotiations. During this negotiating cycle, the GRULAC was the more cohesive among the geographically-based groups, and its collective participation as a whole, or through the Latin American countries members of the Cairns group, was deeply felt during the Uruguay Round.

By contrast, other types of alliances, those created by countries linked by more formal structures or more specific common interests, tend to be more effective. Examples of the former would be countries participating in customs unions, which have a more solid basis for acting in common. The epitome of these groups would be the European Union, whose individual countries have ceded their voice in the WTO (previously in the GATT) to the European Commission.  Other regional trading arrangements, such as MERCOSUR or Association of East Asian Nations (ASEAN) often coordinate positions and speak with one voice, but it is not their secretariats who present their positions (as in the case of the European Community) and, frequently, they keep their own national identity when presenting views or defending positions.

Groups of countries also come together around particular trade interests. The best-known example of such groups is the Quad, formed by the trade ministers of the four largest trading entities: Canada, the European Community (represented by its Commission), Japan and the United States. Other groups have formed around more specific causes or issues, and some formed in GATT times are still active and have proven the effectiveness of a collective approach in negotiations. The best example in this category is the Cairns Group, formed by countries exporting agricultural products to press for trade liberalisation in this sector. In the context of an examination of Latin American participation in the GATT/WTO, it is relevant to point out the importance of Latin America in this particular group: a third of the fourteen original members of the Cairns group were Latin American (Argentina, Brazil, Chile, Colombia, and Uruguay) and four others have joined since (Bolivia, Costa Rica, Guatemala and Paraguay) (Note 4 : At its creation in 1986 its members, apart from the five Latin American countries mentioned, the other nine were: Australia, Canada, Fiji, Hungary, Indonesia, Malaysia, New Zealand,  Philippines, and Thailand. Hungary is no longer a member and , apart from the other four Latin American countries, South Africa also became a member).

Alliances on less specific issues have been formed through informal groups, such as the ‘De la Paix Group’, formed at the outset of the Uruguay Round negotiations  by representatives of ‘moderate’ countries to discuss tariffs and related issues. Later on, as the negotiating cycle  advanced and ran into difficulties, the de la Paix group helped to forge the compromises necessary to bring the Uruguay Round to a successful conclusion. In the same vein, more recently the "Invisible Committee" (Note 5 : Formed by capital-based officials of the following WTO Members: the Quad, Argentina, Australia, Brazil, India, Korea, Luxembourg, Morocco, New Zealand, Norway, Poland, Singapore, and Switzerland) was formed to discuss issues of common interest with a view to adopting a united front at the First Session of the Ministerial Conference held in Singapore in 1996. One of the issues discussed within this group was to need to set in motion global negotiations on further tariff reductions on industrial products.

Prior to the Third Session of the Ministerial Conference in Seattle, another group, the ‘Friends of  the Round’, was formed to discuss the organization and management of the negotiations, endorsing the principle of a so-called single undertaking but holding open the possibility of interim results (Note 6 : Its members were: Argentina, Australia, Chile, Costa Rica, Czech Republic, Hungary, Korea, Mexico, Morocco, New Zealand, Singapore, Switzerland, Thailand, Uruguay, and Hong Kong). These groups have included an interesting mix of both of developed and developing country members of the WTO.

Groups have also been formed solely by developing countries. During the Uruguay Round the ‘Group of Ten' (Note 7 : Argentina, Brazil, Cuba, Egypt, India, Nicaragua, Nigeria Peru, United Republic of Tanzania and Yugoslavia) that came together to express their reservations on the negotiation of the ‘new issues’ in the Uruguay Round (services, trade-related intellectual property, and investment measures) and was particularly active. (Kumar 1993) More recently, the so-called ‘Like Minded Group’ brought together countries (Note 8 : Pakistan, India, Egypt, Indonesia, the Dominican Republic and Malaysia) coalescing around the positions that implementation issues be resolved before any new negotiations take place; that developing countries receive additional time to implement certain trade obligations; and that existing agreements be changed to provide developing countries with the benefits they  had negotiated but which had yet to materialise.

III. Latin America and the Caribbean in the GATT and the Uruguay Round

Of all the Latin American and Caribbean countries, only Brazil, Chile and Cuba were among the 23 original signatories of the GATT in Geneva in 1947. Subsequently, Latin American and Caribbean countries acceded to the GATT through two main procedures: through the normal negotiations accession process or under GATT Article XXVI:5(c) (Note 9 : This article stipulates that:  “If any of the customs territories, in respect of which a contracting party has accepted this Agreement [the GATT], possess or acquires full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement, such territory shall, upon sponsorship through a declaration by the responsible contracting party establishing the above-mentioned fact, be deemed to be a contracting party”). It was through the latter practice, which allowed dependent territories to become contracting parties without accession negotiations (provided they assumed the same GATT obligations that applied to them before independence), that most of the Caribbean countries acceded to the GATT (see Table 1 below).

Although  many Latin American and Caribbean countries acceded relatively late to the GATT (two continental Latin American countries were never contracting parties to the GATT, Ecuador and Panama), most of them were keen participants in the Uruguay Round negotiations; some even while their accession process was taking place. Subsequently they became active Members of the WTO. In fact, Latin America can be singled out within the group of developing countries as an area that has been particularly diligent in abiding by its WTO obligations. Also, in contrast to many developing country groupings, Latin American and Caribbean countries were key players in the Uruguay Round negotiations exercising a powerful influence at certain junctures. It is worth noting that it was the five Latin American members of the Cairns group that cut short the Mid-Term Review negotiations in Montreal in 1988 and, similarly, these same countries prompted the breakdown of the agriculture negotiations and thus of the Ministerial Conference in Brussels in 1990, where the Uruguay Round was originally set to conclude. (Ricupero 1998, 21-22; Croome 1995, 173, 279).  However, their role was not only  ‘obstructionist’ (Note 10 : Although the term ‘obstructionist’ is debatable; as has been pointed out, halting the negotiating process in Montreal and Brussels was preferable to having had a ‘fraudulent’ success which would have postponed trade and textiles trade liberalisation; that in fact, Montreal and Brussels ‘saved’ the Uruguay Round. (Ricupero 1998, 22). As a group, Latin American countries contributed positively to the Uruguay Round negotiations, their role as a group having been particularly important in the services negotiations.

The circumstances which allowed greater coordination among the Latin American and Caribbean countries were the existence of the Latin American Economic System (SELA) and the enthusiasm and commitment of its Permanent Secretary at the time, Ambassador Carlos Pérez del Castillo. SELA provided the Latin American and Caribbean delegations not only with analytical and practical support throughout the negotiations, but also with an invaluable institutional framework, both for regional activities at its headquarters in Caracas, and in Geneva, through its close collaboration with the UNCTAD/UNDP technical assistance project for the region mentioned below. It is worthwhile to note that, up to the present, no other region in the developing world enjoys the advantages of having such an institutional framework for their discussions and consultations.

SELA’s mandate to actively participate in GATT matters was initiated in 1982 (Note 11 : When, at  the initiative of Miguel Rodriguez Mendoza, from Venezuela, then Director of External Relations at the SELA Permanent Secretariat, SELA held a Consultation Meeting in Geneva. Mr. Rodriguez Mendoza is presently Deputy Director-General of the WTO). At the Latin American Council (SELA’s governing board) of that year, SELA members’ position in relation to the Ministerial Meeting of the Contracting Parties was discussed. From that meeting on, the GATT became a standing item on the Latin American Council agenda. SELA, maintained permanent contact with the GRULAC, composed of the ambassadors and permanent representative of these countries to the GATT (and afterwards to the WTO) who met regularly to discuss, exchange information and coordinate on issues of concern to the region in general or individual countries in particular.

SELA produced a work programme which included technical studies on GATT subjects. To be able to follow closely developments in the GATT, SELA obtained observer status in the GATT Council in 1984.  Subsequently, as the process for launching a new round of multilateral trade negotiations advanced, SELA argued for a global strategy to be adopted as the common position of the Latin American and Caribbean countries in relation to the multilateral trade negotiations. (Arriola 1994, 134-137). In contributing to the region’s negotiating strategy, SELA worked closely with UNCTAD and the UN’s Latin American Economic Commission (ECLAC) , through the UNDP/UNCTAD/ECLAC Regional Project (Note 12 : Under the co-ordination of Sergio Delgado, from Mexico). This project produced, among other useful instruments a qualitative evaluation of the issues at stake in the Round and a quantitative evaluation of the market access offers from most of the developed country markets for Latin American and Caribbean countries (Note 13 : GATT Document  MTN.TNC/W/41. Produced by a team  led by Esperanza Durán, external consultant, and Serafino Marchese, from the UNCTAD Secretariat). 

Another important contribution of the Latin American and Caribbean countries was in the negotiations on services, by putting forward. a Structure of a Multilateral Agreement for Trade in Services (Note 14 :Communication from Brazil, Chile, Colombia, Cuba, Honduras, Jamaica, Nicaragua, Mexico, Peru, Trinidad and Tobago, and Uruguay, Structure of a Multilateral Agreement for Trade in Services (GATT Doc. No,. MTN/GNS/W/95, 26 February 1990), quoted in Stewart 1993 (b), 2376), which covered a range of important issues for them and developing countries in general. Among these:

(a) Progressive liberalisation. The group of Latin and Caribbean countries  proposed that the negotiated list of initial market access commitments be established according to the level of development of each country in that particular sector; that certain sectors could be ‘annotated’ for clarification or possible waiver of the provisions of the agreement; and that the initial liberalisation would be subject to review in three years time.

(b) National treatment. A proposal to exempt developing countries from the application of national treatment on export subsidies and on programmes for developing domestic supply capacity.

(c) Most-favoured nation treatment. The Latin American and Caribbean document proposed that developing countries be permitted to enter into agreements with other developing countries on a regional, sub-regional or intra-regional basis which would allow for specific preferential trade measures.

(d) Regarding market access, Peru proposed that developing countries could only be compelled to grant market access concessions if these were consistent with their development needs and on the condition that foreign service providers made available technology transfer, labour training, access to information and reinvestment in the developing country’s infrastructure, technology or research programmes.

(e) On the crucial issue of participation of developing countries, the proposal tabled by the Latin American and Caribbean countries was broad, presenting a spectrum of methods for providing special treatment for developing countries. These included: flexibility for developing countries to open fewer market sectors or liberalising fewer types of transactions; ‘credit and recognition’ of unilateral liberalisation measures taken by developing countries; granting of market access by developing countries conditional on their being able to exempt export subsidies from national treatment; and the inclusion of a provision to establish preferential trading arrangements between developing countries.

Another issue of special interest to developing countries in the services negotiations was the cross border movement of labour. On this, the Latin American countries, individually and collectively played an important role. Mexico, together with India, favoured movement of natural persons in labour-intensive service industries such as construction and tourism. In 1990, several developing countries (Argentina, Colombia, Cuba, Egypt, India, Mexico, Pakistan and Peru) submitted a proposed annex on ‘the movement of persons as a mode of delivery’. (Stewart, 1993 b, 2374).  It may also be important to note that the Chairman of the Negotiating Group on Services was the Colombian Ambassador Felipe Jaramillo, later joined by the Australian Ambassador David Hawes as de facto co-chairman.

IV. Participation in the WTO : Convergence and Divergence

For almost two decades, Latin American countries have maintained mechanisms for discussion and permanent consultations within the GATT and the WTO through the GRULAC and, during the negotiations of the Uruguay Round, through SELA. The coordination of Latin American and Caribbean countries was particularly visible on the Uruguay Round negotiations, be it through the Latin American ‘clique’ of the Cairns group, or through the GRULAC.  However, although the region has converged, as was seen above, on a host of important questions, the Latin American and Caribbean countries been  patently at odds on several trade-related issues. Perhaps the most infamous is the banana dispute.

A) The Banana Split

This is probably the best illustration of how trade interests may diverge. The long-standing banana trade conflict has caused rifts not only between the US and the EU, but between Latin American and Caribbean countries and between Latin American countries themselves. The origin of the dispute can be traced back to the days of the GATT, when the European Communities (later European Union) provided more favourable trade treatment to banana imports from former colonies in Africa, Pacific and the Caribbean over those of other regions. In early 1993, the Latin American producers Colombia, Costa Rica, Guatemala, Nicaragua and Venezuela turned to the GATT dispute settlement mechanism complaining about the discriminatory import banana regime of the EC, which allowed duty-free banana imports from ACP countries while discriminating against banana imports from Latin America by establishing quantitative restrictions. A non-binding dispute settlement panel (Banana I) was established in February 1993. The findings of the first panel was that 11 out of the 12 EC countries unfairly discriminated in favour of the ACP suppliers. The Latin American countries pressed the GATT Council to adopt the findings of the panel. Obviously, no consensus could be reached on the adoption of the panel report, as the discord at the GATT Council was reduced to arguments between the Latin American and Caribbean banana exporters, the latter fearful of losing their preferential access to the EC market if the panel’s finding were adopted.

However, a further complication was that, as a result of the establishment of the single market  in 1992, the EC established the Common Market Organisation for Bananas (Regulation 494). This new EC-wide import regime established tariff-rate quotas for banana imports effective 1 July 1993. The Latin American countries also requested the establishment of a  second panel (Banana II) against this regime, arguing that the new tariff rate quota system was in fact an increase of  the EC’s bound duty for bananas. The second panel also ruled against the EC.

The discussions in the GATT Council on the banana dispute set in opposition Latin American and Caribbean countries. Some of the smaller Caribbean islands insisted that losing their preferential access to the EC would destroy their economies. The debate was frequently reduced to an argument between Latin American and Caribbean countries as to which of these countries was poorest and who needed banana exports more. The Caribbean countries claimed that the support received by the Latin American countries from the US was unjust, as the US was not a producer country and was only defending its big distributors.

As the adoption of the Banana II panel findings was discussed, four Latin American countries negotiated separate agreements directly with the EU in exchange for not pressing for the adoption of the second panel. They were given a more favourable distribution of the EC tariff- rate quota. Indeed, Costa Rica, Colombia, Nicaragua and Venezuela signed the Banana Framework Agreement that assigned 48.64 per cent of the EU quota to them using a controversial export licensing system (Note 15 : This regulation established a tariff quota of 2 million tonnes.  Following the Banana Framework Agreement this quota would be increased to 2.1 million tonnes in 1994 and 2.2 million tonnes in 1995,).  After the 1995 enlargement of the EC, an additional tariff quota of 353 thousand tonnes was introduced for Latin American countries and non-ACP bananas). The Latin American countries which had not singed the agreement, together with the US taking the defence of its companies, felt undercut by the Framework Agreement which would not force the EC to modify its policies which were found to be GATT-inconsistent. The other Latin American banana exporters, Guatemala, Ecuador, Panama, Honduras and Mexico tried to develop a new proposal. The US on its part warned of the initiation of section 301 cases if the Framework Agreement was implemented, which was to come into effect on 1 January 1995. Subsequently, Nicaragua and Venezuela were no longer threatened by section 301 as they did not implement the Framework Agreement given that they did not produce enough bananas to fill their quota.  By mid-1996, instead of seeking the way to take unilateral measures against the EU (and Colombia and Costa Rica) under section 301, the US opted for the WTO’s dispute settlement mechanism. In February 1996, it requested consultations with the EC, together with four Latin American countries: Ecuador, Guatemala, Honduras and Mexico, joined by Panama in 1998.

In the end, the Latin American and Caribbean countries were radically split on the banana issue. Once the US brought the case against the EU under the WTO dispute settlement mechanism, the Caribbean countries, together with Colombia and Costa Rica sided with the EU, whereas Ecuador and the other Latin American producers took the US side. The banana saga is still far from resolved. However, for the first time a small developing country, Ecuador, was authorised to retaliate against a WTO member in violation of the trade rules. In this case it happened to be one of the largest members of the WTO. Moreover, it is a case where, also for the first time, ‘cross-retaliation’ was permitted. Notwithstanding this positive outcome which proves that developing countries can successfully challenge powerful members of the WTO, the resultant acrimony between countries in the same region is not likely to disappear quickly.

B) Latin American and Caribbean Participation in the WTO Dispute Settlement Mechanism

Another means of evaluating Latin American and Caribbean participation in the multilateral trading system is through the WTO’s dispute settlement mechanism, a major achievement of the Uruguay Round. The well-known and long-standing banana dispute may not be the best illustration of the interests and coalitions of the Latin American and Caribbean countries. A more general look at their participation in the dispute settlement mechanism either as complainants or respondents presents another facet. Thus a few illustrations from some recent completed cases.

Several Latin American countries have been involved in disputes against the US and the EC.  Cases that have been settled in favour of Latin America in disputes with major trading partners (apart from the banana case) are: Brazil’s claim, filed together with Venezuela, against the US on standards for reformulated and conventional gasoline; Costa Rica’s complaint against the US on restrictions on imports of cotton and man-made fibre underwear.

Brazil, one of the most active participants in the dispute settlement mechanism, has not been successful in a few recent cases. As respondent, Brazil in its dispute with Canada regarding the aircraft dispute, Canada’s claim that Brazil’s export subsidies to its aircraft industry were inconsistent with the Subsidies Agreement was validated. As complainant, Brazil was not successful in its claim that the EC regime for certain poultry product imports was inconsistent with GATT 1994.

Latin American and Caribbean countries have also filed cases against each other. For example, the complaint by Mexico against Guatemala on an antidumping investigation regarding imports of Portland cement from Mexico; the complaint by Honduras against Nicaragua regarding a tax on goods and services originating in Honduras and Colombia; Costa Rica’s complaint against Trinidad and Tobago regarding an antidumping investigation carried out by the latter against imports of pasta from Costa Rica; and even disputes between members of the MERCOSUR have been brought to the WTO, such as the complaint by Brazil against Argentina’s safeguard measures on imports of woven fabrics of cotton from Brazil.

C) Latin American and Caribbean Countries and the Seattle Ministerial

It is difficult to assess how much the banana dispute has impeded a closer cooperation between the Latin American and Caribbean countries, particularly since the WTO came into existence. One way is by studying the proposals made during a negotiation, as in the recent  preparations for the Seattle Ministerial, where a new round of multilateral trade negotiations was to be launched.

Several alliances were formed around different issues throughout the preparations for the Ministerial, particularly in the second half of 1999. However, in contrast to the Uruguay Round negotiations, coordination between Latin American and Caribbean  countries was not in evidence. Some reasons that could be adduced are that the SELA contribution was not ever-present, as was the case in the Uruguay Round. In addition, at the time of the Uruguay Round, many Latin American countries were new to the ways of the multilateral trading system and negotiations. It was the first time many of them had participated in a multilateral round and they lacked both experience and information, technical and otherwise. Thus, they found the constant exchange of information and informal coordination among them useful. In contrast, at present, information is readily available and countries are not only better informed, but have grown in experience and know-how, being now sufficiently self-assured to adopt individual positions, making the need for coalition-building less necessary. This was certainly demonstrated in the number of individual proposals put forward by Latin American countries, e.g. Brazil, Chile and Colombia on safeguards;  Mexico on TRIMS; Jamaica on agriculture. In the particular case of Mexico, which has gone alone and has not joined any other WTO members in tabling specific proposals, it could be due to its uniqueness as a member of NAFTA, the only Latin American country in a major free trade agreement with two developed countries. However, Mexico’s independent stand has been well-established and it would be more likely that its not joining others in presenting common proposals or declarations has to do with pursuing its own interests and independence, than its belonging to NAFTA.

In preparation for the Seattle Ministerial, it is notable that, within the regional trading arrangements, MERCOSUR joined with Chile in presenting a series of proposals on transparency in food aid, special safeguards and on state trading enterprises. However, such as the Andean Community and the Central American Common Market did not present joint proposals as such . However, in the case of the Central American Common Market, several of the member countries shared common positions with other countries both within and outside the region.  It is worthwhile mentioning the existence of the ‘Paradisus Group’ which has assembled El Salvador, Guatemala, Honduras, Nicaragua, Panama and Dominican Republic in speaking collectively and sharing similar positions with regard to issues such as implementation.  Despite of  the lack a ‘regional’ approach to Seattle, the Latin American and Caribbean countries found like–minded partners on a number of issues, as can be seen from the following proposals.

One of the most comprehensive documents issued by a group of developing countries for the Seattle Ministerial was: Implementation issues to be addressed before/at Seattle (Note 16 : WTO Document WT/GC/W/354, 11 October 1999). It was jointly submitted by several Latin American countries (Cuba, Dominican Republic, El Salvador, Honduras) joined by Egypt, India, Indonesia, Malaysia, Nigeria, Pakistan, Sri Lanka and Uganda.  This proposal touched on a wide range of issues. These included: antidumping, on which these countries sought to restrict ‘back-to-back’ investigations by proposing that no investigation be initiated for a year from the date of finalisation of a previous investigation for the same product which had non-imposition of duties. In addition, that the rule of the lesser duty be mandatory while imposing an antidumping duty on a developing country. On the Subsidies agreement, this group of countries proposed that subsidies used by developing countries for the development, diversification and upgrading of their industry or agriculture be non-actionable. On countervailing duties, they proposed that they be restricted to the amount by which the subsidy exceeds the de minimis level, for products originating in developing countries. In relation to Annex VII, they proposed to raise the threshold of the classification of developing countries with a greater leeway to introduce subsidies.  Regarding export credits, it was proposed that those given by developing countries should not be considered as subsidies if the rates at which they were provided were above LIBOR.

On the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (Note 17 : WTO Document WT/GC/W/209, 17 June 1999), the comprehensive proposal included several submitted partially by smaller groups of countries. One example is the proposal tabled by Cuba, Dominican Republic and Honduras (joined by Egypt; although the Dominican Republic withdrew subsequently) requesting that the transition period allowed under Article 65.2 of the TRIPS Agreement be extended for developing countries. Similarly on the Extension of Protection of Geographical Indications (Note 18 : WTO Document WT/GC/W/208,17 June 1999) Cuba, Dominican Republic, Honduras and Nicaragua, joined by Egypt, India, Indonesia, and Pakistan requested that they be extended for products other than wines.

Although as a group the Latin American and Caribbean countries did not present a common or cohesive front, their participation was nonetheless important individually and in small groups. It is interesting that seven Latin American and one Caribbean country participated in the limited, informal, but influential so-called Green Room discussions (Rodríguez, 2000).

V. The Free Trade Agreement of the Americas

As was mentioned at the outset, the regional and sub-regional trade integration of Latin America and the Caribbean has proceeded at a fast pace. But the launching of the process to constitute a free trade arrangement in the Western Hemisphere, the FTAA was a watershed. The process was started at the Summit of the Americas in Miami in 1994. Twelve working groups were formed on (1) market access; (2) customs procedures and rules of origin; (3) investment; (4) standards and technical barriers to trade; (5) sanitary and phytosanitary measures; (6) subsidies, antidumping and countervailing measures; (7) smaller economies; (8) government procurement; (9) intellectual property rights; (10) services; (11) competition policy; and (12) dispute settlement.

At the fourth Trade Ministerial held in  San Jose, Costa Rica in March 1998, it was agreed to initiate the negotiating process that same year. In the same way as the launching of the Uruguay Round in Punta del Este in 1986, the commitment to trade liberalisation was the unprecedented:  it represented the most ambitious regional integration effort, involving 34 developed and developing countries, but also the broadest, covering not only those subjects which had been negotiated in the Uruguay Round and which fell within the ambit of the WTO, but also areas which are yet to be fully addressed in future in the multilateral forum. These are investment, government procurement and competition policy.

The structure of the negotiations follows that adopted for the Uruguay Round, with a Trade Negotiations Committee responsible for overseeing the negotiating process and composed of the Vice-Ministers for Trade. The negotiating groups established that were: (1) market access, (chaired by Colombia); (2) investment, (Costa Rica); (3) services, (Nicaragua); (4) government procurement, (US); (5) dispute settlement (Chile); (6) agriculture (Argentina); (7) intellectual property rights (Venezuela); subsidies, antidumping and countervailing duties (Brazil); competition policy (Peru).

It is still too early to gauge the significance of the FTAA process, particularly in the context of the eventual launch of a new round of multilateral trade negotiations under the aegis of the WTO. However, it is clear that the impetus of the FTAA contrasts sharply with the attention devoted by the Latin American and Caribbean countries to the multilateral trade forum. It is evident that they still have to abide by their commitments and participate in the WTO activities. But, the priority assigned to the hemispheric agreement seems paramount. The explanation for this is twofold: on the one hand, the multilateral process of trade liberalisation seems to have stalled, as the prospects for launching of a new round look dimmer. On the other hand, negotiating among a small group of relatively like-minded countries (34 in the FTAA as opposed to 140 WTO Members) facilitates negotiations proceeding at a faster pace. Additionally, trade within the Western Hemisphere represents the lion’s share of Latin America’s total trade (as an illustration, see Table 2 on Latin American intra-regional exports) making the road of regional trade liberalisation not only more feasible, but more logical in the absence of a major multilateral push.

VI. Conclusion

The economic trajectory of Latin American and Caribbean countries in the last two decades has made the region open to trade liberalisation. These countries were among the first developing countries to espouse the cause of free trade and engage in extensive unilateral trade liberalisation.  In this vein, the growing participation of the region in the GATT, the Uruguay Round negotiations and ultimately the WTO was consistent with their economic and trade approach. However, the impetus of ‘open regionalism’ became ever dynamic and desirable. The proliferation of regional trading arrangements culminated with the major project of completing a Free Trade Area of the Americas by the year 2005, and creating a South American trade bloc by 2002.  The scope and depth of the regional negotiations is wider than at present at the multilateral level. In addition, the countries in the region seem to give priority to negotiating hemispherically rather than multilaterally.  It is conceivable that negotiating among fewer countries, which share a geographical identity, economic outlook, and have a large proportion of their trade amongst themselves, will expedite further liberalisation, not only building on what has been achieved at the multilateral level, but expanding the depth and coverage of subjects.

There is considerable reluctance by a large proportion of the WTO members to initiate a new comprehensive round of negotiations.  Whilst important issues have not yet been resolved regarding the implementation of the agreements and there is no convergence on such  sensitive topics as investment, competition, government procurement, environmental standards and core labour rights, it seems plausible that regional liberalisation will advance further and faster than the multilateral one. It may mean that the future will be by way of a ‘two-speed’ liberalisation: a swifter one amongst regional partners and a slow-motion one at the multilateral level. The implication may also be that the Uruguay Round was the last round of multilateral trade negotiations. Perhaps the greater pragmatism of regional liberalisation, with the testing of concepts in a smaller forum leading later to wider multilateral liberalisation is the way of the new Millennium.

VII. Table 1 : Accession of Latin American and Caribbean Countries to the GATT / WTO

VIII. Table 2 : Latin American Exports by Destination (1998)

Source: WTO, Annual Report 1999, International Trade Statistics

IX. References

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Croome, John (1995), Reshaping the World Trading System. A History of the Uruguay Round (Geneva, WTO).

Devlin, Robert and Luis Jorge Garay (1996), ‘From Miami to Cartagena : Nine Lessons and Nine Challenges of the FTAA’, Working paper Series 211 (Washington, DC, Inter-American Devlopment Bank).

Durán, Esperanza (1994), ‘Acceso a los mercados y nuevas oportunidades de comercio’ in Patricio Leiva, La Ronda Uruguay y el desarrollo de América Latina (Santiago, CLEPI/PNUD).

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Krueger, Anne (1999), ‘The Developing Countries and the Next Round of Multilateral Trade Negotiations’, The World Economy, vol. 22 (7), pp. 909-932.

Kumar, Rajiv (1993), ‘Developing Country Coalitions in International Trade Negotiations’, in D. Tussie and D. Glover, The Developing Countries in World Trade ((Boulder, Lienne Rienner Publishers).

Michalopoulos, Constantine (1999), ‘The Developing Countries in the WTO’, The World Economy, vol. 22 (1), pp. 117-143.

Ricupero, Rubens, (1998), ‘Integration of Developing Countries into the Multilateral Trading System’, in J. Bhagwati and M. Hirsch, eds., The Uruguay Round and Beyond, Essays in Honour of Arthur Dunkel (Berlin, Springer Verlag).

Rodríguez, Miguel (2000), ‘America Latina en la OMC’, Manuscript, (Geneva).

Srinivasan, T.N. (1999), ‘Developing Countries in the World Trading System’,  The World Economy, vol. 22 (8), pp. 1047-1064.

Stewart, Terence P. (1993), The GATT Uruguay Round. A Negotiating History (1986-1992), vol. I (The Netherlands, Kluwer).

Stewart, Terence P. (1993 b), The GATT Uruguay Round. A Negotiating History (1986-1992), vol. II (The Netherlands, Kluwer).

WTO (1999), Annual Report, International Trade Statistics.

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