I would like to say what a pleasure it is for me to be back in Montreal after quite some time and to have been invited to come north during the spring weather. I would like to thank the organizers of this conference for the invitation.

The topic I have been asked to address is certainly a challenging one that seems to be at the forefront of general concern in conferences around the hemisphere. That is, “In the present International Context, is it realistic to expect that the FTAA can be on target for 2005?”

We all know that negotiation meetings have been regularly taking place on nine complex issues the agreement should deliver. Some 1000 negotiators travel to these meetings in four to five cycles of negotiations every year from all participating countries in the hemisphere. We also know The FTAA negotiators have agreed to put the draft FTAA Agreement available to the general public. You are now able to find this agreement in its entirety, over 400 pages of nine draft chapters, on the official FTAA website. We in the Western Hemisphere are one large step ahead of the WTO in this regard. Canada has also made its initial offers on services, investment, and government procurement publicly available and other FTAA participants may do the same, following this strong positive example.

I mention all of the above only to point out that a considerable amount of effort has already gone into the FTAA negotiations, and a tremendous amount of background work has been undertaken. That has been the origin of the widespread belief that the process will be successfully concluded by the projected end date of January 2005.

Indeed, the process has to date met all of its internally generated deadlines. The Vice Ministers had agreed on most aspects of the methods and modalities to begin market access negotiations in non-agricultural goods, agriculture, services, investment, and government procurement, and a timetable was established for the presentation of offers and requests. According to this timetable, in February 2003 countries started to exchange their offers for market access negotiations.

At successive points along the way since the negotiations began, FTAA Vice-Ministers and Ministers responsible for Trade have set out successive targets and mandates for the various negotiating groups and entities. And these targets and mandates have all been met, until very recently when for the first time we have witnessed a reluctance among some participants to meet the negotiating deadline for the presentation of market access offers in certain areas.

The question that you are certainly interested in exploring is whether this recent slippage is indicative of a general difficulty that the FTAA negotiations may now be experiencing or whether it is simply one of those inevitable ups and downs that negotiations always encounter as they move up the increasingly steep path towards an agreed conclusion.

Is the FTAA on target?
While the goal of hemispheric economic integration is a more pressing one than ever , there are nonetheless a certain number of factors that are weighing heavily on the FTAA negotiations and that may create a drag on their momentum. Since its inception , the economic and political environment surrounding the negotiations has become more complex and more difficult in at least four respects.

1. Trade Liberalization has Become Less Popular in Latin America and the Caribbean
First, policy reform and trade liberalization have become less popular in Latin America and the Caribbean countries. A decade ago most Latin American countries had enthusiastically put in place largely similar types of economic reforms designed to open markets through trade liberalization and privatization. Now there is a widespread disillusionment, for right or wrong, about the wisdom of this course of action, and it is widely felt that the reforms did not live up to their expected results to deliver higher growth, more employment and better standards of living. We should be aware of significant deterioration in the economic situation in many countries of the hemisphere during 2001 and 2002, with growth slipping to negative numbers and poverty on the increase. This exacerbates fiscal, social and political constraints, and makes the task more difficult, even for those reformist governments committed to freer trade.

On the other hand, this more difficult macroeconomic context makes it more imperative to progress toward and complete the FTAA in a timely manner so as to anchor economic policies, attract investment, and promote growth. But we also know that the “selling” of further trade liberalization and economic reform has become much more difficult in Latin America and the Caribbean.

The FTAA will only become a reality if each government in Latin American and Caribbean can make a credible case that the FTAA is good for the country, that it is a key ingredient to restore economic growth, increase employment, reduce poverty, in short, that the FTAA is an important element of a broader national strategy to reduce the economic and social distress that has been on the rise in recent years.

2. Greater Difficulty in generating Bipartisan Consensus for Trade Liberalization in the United States
Second, the situation appears to have changed in the United States as well. On the positive side, there is a perception of renewed and increased commitment to free trade by President Bush himself and his Trade Representative, Ambassador Robert Zoellick and his team with approval of Trade Promotion Authority. On the other side trade liberalization no longer commands general congressional backing.
The approval of the steel safeguard and the Farm Bill of 2002 have done much to reinforce this perception by countries in the hemisphere, and there are fears that protectionist constituencies in the U.S. will continue to resist liberalization. However, the United States has countered some of this skepticism recently through proactive stances in various negotiating forum and has put forward strongly liberalizing proposals in both the WTO and the FTAA negotiations.

Here in Canada you well understand the importance and economic openness since 45 percent of your GDP is generated by trade. The latest survey of Canadian attitudes toward international trade shows that the majority of Canadians feel that international trade has made a significant contribution, over the past ten years, to the growth of the Canadian economy, to job creation and to the emergence of new Canadian technology and innovations

3. Civil Society Concerns about Globalization and Income Disparities
The very success of global markets as witnessed by the growing interdependence of our societies in the 1990s has ironically given way to discontent about the consequences of this interdependence now called “globalization” and its impact on development and the freedom of action that citizens and governments can exercise. Concerns about globalization, which are often linked as one with concerns about free trade, range widely from irrational fears and misconceptions, to legitimate concerns.

Opposition to the FTAA shown in a number of public opinion surveys in countries around the Hemisphere is often linked to lack of faith that the large gaps and disparities between poor and rich countries, and poor and rich regions, will be smaller as a result of fostering greater hemispheric economic integration and lowering trade barriers. This is a serious and legitimate concern that should receive a studied policy response and that requires a challenging effort to incorporate development and equity considerations into the trade policy agenda.

A step in the right direction is being undertaken within the FTAA process through the Hemispheric Cooperation Program, approved by Trade Ministers at their meeting in Ecuador last November. The Hemispheric Cooperation Program is designed to help build trade-related capacity and improve competitiveness in countries of the hemisphere, both as the negotiations are ongoing and during the implementation of the FTAA agreement after it is concluded.

Of course, aid and international resource transfers along with capacity-building technical assistance projects and training activities need to be supplemented by appropriate internal re-distributive mechanisms in the form of tax policy, social insurance policies, and adequate social safety nets.

4. The Doha Development Agenda and the multilateral scene
Lastly, since the FTAA negotiations were launched, a new round of multilateral trade negotiations has been undertaken by the WTO in the form of the Doha Development Agenda. Covering basically the same issues as the countries in the Western Hemisphere are doing in the FTAA, these negotiations are viewed by many as holding the key to the success of the FTAA in certain key negotiating areas. Importantly, now that the multilateral process has been engaged, major players in the hemisphere feel that it is not possible to negotiate improved disciplines on domestic support for agriculture in a regional context, and that such improved disciplines must have the blessing of all the major trading nations, including in particular those that subsidize agricultural producers heavily, such as the EU and Japan.

As we all know, progress in the Doha Development Round has been slow, at best, since its inception, and has now hit a series of missed deadlines in critical areas including the definition of agricultural modalities, recommendations on how to incorporate special and differential treatment into WTO rules, recommendations on resolving implementation issues left over from the Uruguay Round, and the question of intellectual property rights and public health.

With the WTO clearly off track, and the FTAA more or less on track to present, how does this impact on regional prospects for concluding an agreement? I believe that it is not exaggerated to say that the prospects for the FTAA to meet the January 2005 deadline are more uncertain. One may read into the reluctance of certain countries to present market access offers in investment and services, the desire to ensure that progress is made in all of the negotiating areas, including market access for goods and agriculture, in a balanced manner.

However, it can be argued that the current set of economic circumstances in the hemisphere makes it more imperative than ever to conclude the negotiations in a timely manner, so that the implementation of agreed trade liberalization can be carried out without delay and its benefits be reaped by all countries in the hemisphere. We are convinced that the projected gains from hemispheric-wide removal of barriers to trade in goods and services and investment would be considerable.

. Let me now comment on some of the key challenges on the negotiating front for the FTAA in the months ahead.


Key negotiating challenges
The first major negotiating challenge will be how to arrive at a mutually acceptable balance of reciprocal concessions in the FTAA. In the United States significant opening up of key sectors where Latin American and Caribbean countries are competitive, such as textiles, clothing, footwear, leather, food and agriculture, and revision of trade remedy laws are particularly sensitive issues and yet, those are the areas with the largest potential benefits for Latin America and Caribbean countries.

Some of the larger economies would not be very attracted to sign up to the FTAA if the balance of concessions does not mean concrete and significant additional business opportunities and market access in key products.

Canada and the United States may also face a similar dilemma between maximizing trade liberalization and market access gains in Latin America on the one hand, and their desire to advance the broader agenda of economic and social development of Latin America as well as to supporting political and security objectives through the free trade agreement.

A second negotiating challenge gravitates around what could be called the agricultural conundrum . Presently, Latin American countries have strongly argued that if there are no significant advances in agriculture in the FTAA, independent of the Doha Round, the FTAA is not a sufficiently attractive proposition.

A third key negotiating challenge in the FTAA is the treatment of smaller economies. Exactly how to define differential treatment in the context of so many different country specificities is a major challenge for all participants. We also have a lot of challenges on institutional issues and on how to approach labor or environmental concerns.

A final negotiating challenge may be constituted for the FTAA by the current politics of "competitive liberalization" and the seemingly unending enthusiasm of FTAA participants to negotiate ever more bilateral or mutilateral trade agreements, even as the FTAA negotiations remain ongoing. This is evidenced in the current negotiations between Canada and the four countries of Central America, between the United States and the five Central American countries, and between Mercosur and the Andean Community members, just to name a few.

Opportunities Offered by the Summit of the Americas Process
Lastly, I would like to comment on the unique aspect of the FTAA negotiations being housed within the Summit of the Americas process.
The FTAA was conceived from the beginning as embedded in a wider process of hemispheric rapprochement and cooperation that has added to its appeal and credibility and set it apart from other trade negotiations. Placing the FTAA in a broader Summit of the Americas process and within the Inter-American system and institutions also allows for other pressing concerns of a social and developmental nature to be more easily addressed and provides a unique opportunity to integrate these different dimensions.

This integrated approach would go a long way in allowing each government in the region to make a credible case that the FTAA, and the broader Hemispheric process in which this project is embedded, is an important element of the broader national strategy to promote economic growth, increase employment and reduce poverty.

However, doubts have been expressed as to how powerful is the glue provided by the Summit process. A new Summit of the Americas Meeting as proposed by Canada would present an extraordinary opportunity to answer many of the concerns about globalization, strengthen policies that go beyond the Washington Consensus, and cooperate to help countries do the necessary national homework within a shared vision of democracy, development and collective security.