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Speeches

CÉSAR GAVIRIA TRUJILLO, SECRETARY GENERAL OF THE ORGANIZATION OF AMERICAN STATES
TRADE AND ECONOMIC INTEGRATION IN THE WESTERN HEMISPHERE ON THE EVE OF A NEW CENTURY - TO THE AMERICAS BUSINESS FORUM

November 2, 1999 - Toronto, Canada


I would like to begin by thanking the organizers for the honor they have given me in inviting me to participate in this America's Business Forum, and to thank Mack McLarty for his kind words. My thanks also to the government of Canada for the magnificent arrangements they have made for holding this inter-American gathering. I would also like to express my gratitude to the city of Toronto, its authorities and its citizens, for their generous hospitality as hosts of this important event.

This is the fifth time that you, as business and financial leaders, have come together in advance of the Ministerial Meeting, and in the course of those gatherings you have made a significant contribution to the integration process in the Americas. The Business Forums have provided new opportunities for business and investment, their inputs have influenced the terms of reference of the working groups, they have contributed technical analysis and information on the strategic objectives and aspirations of the private sector, and they have succeeded in maintaining excellent coordination between the public dimension and the business dimension. Indeed, they have been the principal channel for explaining and communicating the progress and benefits that the FTAA will mean for business people and citizens throughout the hemisphere.

Since the business forum at San Jose there have been a number of stimulating developments. The first of these was the successful ministerial meeting that was held immediately afterwards, where for the first time we saw how sub-regional agreements can come to constitute one of the major assets in the process. There was a tremendous amount of political will that was reflected in these agreements on the route that we must follow, on the negotiating areas, the negotiating sites and sub-sites, selecting people to chair the many meetings throughout the process leading up to signature, as well as agreements on technical and administrative support. Issues about logistics, methodology and the kind of support needed by participating countries were also settled. There is no doubt that having settled these issues in San Jose will facilitate the negotiations, and we can avoid unnecessary delays and detours in the very difficult discussions that lie ahead. At the same time there is a feeling that a good balance has been struck among all the sub-regional groups, and this has given a real boost to the entire process.

Our Heads of State and Government also adopted the recommendation of ministers to wrap up the preparatory stage and get on with the negotiations themselves. Our Heads of States had no hesitation in adopting the recommendations from the Ministers in San Jose, and we have seen a great degree of commitment to the process, despite the particularly difficult timing.

The international setting has certainly been full of obstacles. Until very recently some people believed that globalization, prosperity and economic reform were unstoppable trends, and they tended to downplay the potential political and social roadblocks. Yet this euphoria has been fading, in the face of the risks and surprises that have accompanied the process of globalization, and some difficult hurdles that we have encountered in our path.

In this way, the magic formulas, the shortcuts, the so-called economic miracles, the clean and simple formulas have become blurred and diluted. Globalization certainly offers us opportunities, but to take advantage of them we need sound policies on many fronts, and not only with respect to trade.

Along with results in terms of economic growth, people are now demanding results in the battle against poverty, they want a fairer distribution of income, higher real wages for workers, lower unemployment rates, and an educational system that can cope with the requirements of globalization and the communications revolution. Our citizens are also demanding concrete results in the struggle against terrorism and against insecurity, corruption, impunity and drug trafficking. And they are calling on us to strengthen democracy and basic freedoms, as well as to clean up our political habits.

But perhaps the most significant thing that has happened since our meeting in San Jose has been the crises in Russia and in Asia, with the so-called contagion effect, which has threatened to undo the progress achieved during the 1990s. Once again we are face-to-face with what has turned out to be the most undesirable feature of globalization: financial volatility, a characteristic that, if we do not succeed in coming to terms with it, will pose a threat to many of the impressive achievements we have made in the decade just ending.

We may feel that stock markets have shown a disproportionate and knee-jerk reaction, and that market players fail to distinguish, when they are in a panic, between good policies and bad policies, temporary imbalances and structural ones, sound companies and insolvent ones.

But it is also clear that we have emerged from each crisis in a sense strengthened, better prepared, with better instruments, and with sounder institutions. We may also say without a shadow of a doubt that our authorities have reacted remarkably promptly and firmly. In most countries they have put all their political capital on the line to defend hard-earned price stability and to implement hard-learned lessons about the importance of sound macroeconomic policy, putting aside outdated arguments and, in most cases, restoring themselves within a few months to the path of stability and growth. No doubt we are today more aware of our vulnerabilities and we take a more realistic and more mature approach in assessing our possibilities and the virtues and shortcomings of our economic structures.

In my opinion we must now move ahead with a clear and firm determination not to allow these episodes to lead to confusion, to fear of change, to backsliding and some kind of nostalgia for returning to the past. Because time and again studies have shown that the countries that grow the most are those that have made the most reforms, and that the only way to breathe new life into our growth rates is to accentuate reform and address new areas of institutional change, with a greater emphasis on democracy.

The other important task facing us is to make sure that the financial crisis does not derail the very positive results we have achieved over the past decade in liberalizing and integrating our economies. We will have to accept greater integration and economic interdependence. Many technological and business trends suggest that this is the way of the future. The basic question is: how can we achieve high-quality integration into the world economy?

An intelligent approach to world economic integration requires us to develop a domestic agenda for enhancing the competitiveness of our industries, reducing our vulnerability to external shocks, attracting productive investment, creating jobs, as well as all the other economic and political objectives that we have mentioned and that are to be found in the Action Plans from the Summits of the Americas.

This is going to require participation by all our countries in defining international rules. The current membership of the WTO and the hemispheric exercise for negotiating the Free Trade Area of the Americas are examples of processes that allow for active participation by the smaller countries in designing and negotiating the rules of international trade. In fact, this geographical broadening of the negotiating process is one of the most positive aspects of the new reality of globalization, and represents an opportunity that countries must take advantage of, to put it in business jargon, so that the deal is good for everybody.

And yet, trade and investment by themselves cannot produce miracles, and trade agreements are not a cure-all for what ails us, just as free trade should not be made the scapegoat for all our uncertainties.

Recent progress towards creation of the FTAA.

Allow me now to refer to the process of creating the Free Trade Area of the Americas, particularly with respect to the progress made over the last 18 months since our leaders launched the negotiating process at the Summit of the Americas in Santiago.

In this new stage of negotiations, the Trade Negotiating Committee, made up of vice-ministers, has set the framework for action by the Negotiating Groups and has succeeded in keeping the process moving actively forward and on track. In the last year some 900 negotiators from 34 countries have been meeting in Miami and have been discussing issues ranging from tariffs and non-tariff barriers to agriculture, intellectual property, competition policy, investment and services. These Negotiating Groups and Special Committees have made significant progress in identifying approaches and methodologies for negotiations in each of the areas, and have made a start at drafting possible texts for the chapters that will make up the FTAA agreement.

The multilateral institutions that make up the Tripartite Committee, the OAS, the IDB and ECLAC, have provided important logistic and substantive support and have made progress in seeking the mandates, resources and technical backup necessary to serve the process in a economical and efficient manner. An unprecedented volume of reliable information has been made public and widely distributed, and after Toronto we will move much further in this direction, thanks to the transparency measures that are going to be adopted.

Of equal importance are the cooperation and technical assistance that we are working out for training and preparing negotiators, ensuring access to information and promoting institutional strengthening, especially on behalf of the smaller economies, to help countries meet their commitments within the WTO. For certain, we believe that we are making a significant contribution to closing the gap between countries that do not have sufficient human and financial resources, or sufficient experience in complex negotiations, and those countries that have broader international negotiating expertise.

The group on small economies has done an excellent job, and we must build on its work to maintain and increase the flow of technical assistance for the benefit of the smaller economies This is one of the principal challenges of the coming years.

I don't want to miss this opportunity to say that both the government and the business sector of Canada deserve our recognition and applause for the extraordinary leadership they have shown in chairing the FTAA process over the last 18 months, and in hosting this meeting. The political will that they have shown at all times has been of invaluable support for governments of the hemisphere and for the organizations in the Tripartite Committee alike.

The immediate challenges.

Now then, if we look ahead to the months and years immediately ahead of us it is clear that we still have much ground to cover, and a number of major challenges await us. But before going into these I think it is important to highlight one point that is often overlooked.

No doubt the greatest benefits of the FTAA will make themselves felt only after the agreement comes into effect in the year 2005. Nevertheless, if we put all our emphasis on the critical date of 2005 we run the risk of discounting the ability of the negotiating process itself to create opportunities and to provide a series of collateral benefits. These benefits will include providing strategic direction to the process of economic reform in our countries; sending positive signals to markets and investors about where our countries will be five or ten years from now in terms of their macroeconomic situation and trade rules; and providing additional impetus to the regional integration efforts in Latin America and the Caribbean, an area where impressive progress has been made over the last few years.

This same negotiating process has also shown itself to be very important in promoting contacts between the business communities of the hemisphere, as can be seen from your presence here today in this forum, and the countless business and another events relating to trade and integration issues. One intangible but very important benefit has also been to stimulate greater mutual understanding and confidence within the trade negotiating community in the hemisphere - this is an important asset for fostering hemispheric cooperation and for avoiding an escalating number of trade disputes.

In identifying the major challenges, I would like to note that if, we are to achieve the ambitious objectives we have set for ourselves in all are countries, we must sustain the political will of our governments, our parliaments and our public opinion, and we must persuade our workers and other sectors of civil society to join together in the cause of inter-American integration.

Another of the basic challenges will be to keep the FTAA negotiations moving forward at the same time as the new multilateral round in the WTO. This will be a significant undertaking, both in terms of the complex interaction between the issues under negotiation on both fronts, and in terms of creatively managing the negotiating teams that will be required for the two efforts. All the countries participating in the FTAA, with one single exception, are members of the WTO. All have agreed that the WTO will represent the "floor" for commitments under the FTAA, and they have committed themselves to the objective of achieving a degree of liberalization that goes well beyond global standards. These two processes are compatible and in fact complementary - both negotiations are in a sense testing grounds for refining ideas and developing new approaches. I would like to refer briefly to some of these areas and cite a few concrete examples.

Agriculture: Agriculture is probably one of the most difficult areas to deal with, partly because many of the issues require multilateral solutions. According to recent estimates, developed countries spent $362 billion on agricultural subsidies last year, 8 percent more than they spent the previous year. It is clear that the agriculture subsidies issue is going to demand urgent attention in a multilateral context. Nevertheless, regional initiatives can also have a positive impact. Might our hemisphere arrive at a common position for multilateral negotiations in this area? With the WTO ministerial meeting in Seattle only four weeks away, this would send a strong signal. It is an opportunity that the countries of the Americas must not miss.

Business facilitation. Our countries have been working intensely within the FTAA on this issue, since the San Jose ministerial meeting. It should be noted that many of the measures were suggested by the business community itself in previous ABF meetings. Within the hemisphere we now have the opportunity to provide leadership and to be innovative in this area at the global level, through a parallel and permanent exercise for negotiating and implementing an ever broader set of business facilitation measures.

Electronic commerce. Electronic commerce is an issue in which our collective experience is just beginning to evolve. How we should proceed in this area is one of the major challenges facing ministers this week here in Toronto.

Before ending I would like to reiterate the tremendous importance that the knowledgeable support of business people has for our hemispheric integration process. The exercise in which we are now engaged is in fact the most ambitious one that this hemisphere has ever undertaken. And with your support I know that we will go on to achieve the signing and ratification of the FTAA treaty. Anything less would be surely a waste of our wonderful potential.

Thank you very much.