More Than Trade To Talk About At Latin Summit
LATE last year, when the Clinton administration first proposed the 34-nation Summit of the Americas that will be held in Miami this weekend (Dec. 9-11), all signs pointed toward a free-trade fiesta in the Western Hemisphere.
Despite rancorous debate, Congress had just passed the North American Free Trade Agreement (NAFTA), and Chile, Argentina, and Colombia were all clamoring to be included. By mid-1994, however, Washington's trade-policy bureaucrats had locked horns over how to proceed in expanding NAFTA beyond the United States, Canada, and Mexico. NAFTA's foes had forced Congress to scrap the ``fast track'' negotiating authority that the president must have to admit new parties to the trade pact.
Having assumed that their hands were tied without the fast track, US planners began to load the Miami summit's agenda with everything from discussions about democracy to the environment - everything, that is, but serious talk about trade. Meanwhile, Latin American negotiators, annoyed with the ``don't ask, don't tell'' US stance on NAFTA expansion, quietly pressed for a straight discussion of both the procedural and the substantive questions surrounding trade in the Western Hemisphere. The US administration grappled to resolve its own internal differences about whether the path forward to hemispheric free trade lay in bilateral accords between the US and individual Latin states, entry into NAFTA, or a multilateral building on Latin America's cottage industry of budding trade blocs. On Dec. 5, the US circulated draft language endorsing establishment of an American free-trade zone no later than 2005.
While much will be made of this proposal, the Clinton administration should have other goals in Miami. The US must recognize that it needs to help Latin America address the strains already produced by the region's sweeping economic liberalization. Many countries, for example, have unilaterally reduced their tariffs as part of a macroeconomic strategy to contain inflation, as competition from imports helps to drive local prices down. This has meant a 50 percent increase in US exports to Latin America since 1991, and the emergence of the region as our fourth-largest trading partner. The flip side of these successes, unfortunately, stands out in Latin America's mammoth $43-billion current-account deficit last year, which exceeds even the precarious lows registered just prior to the outbreak of the 1982 debt crisis.
GIVEN these trade-related economic stresses, why not use the summit as an opportunity to fast-forward out of the narrow focus on the procedural details of free trade and into a long-overdue discussion of what constitutes a viable development policy for the Western Hemisphere in the era of NAFTA? Latin reformers, for example, need help easing gracefully out of their difficult macroeconomic balancing act. The US could build on the success of the new emergency stabilization fund that was institutionalized for NAFTA countries earlier this year; while stabilization funds are clearly the domain of the International Monetary Fund, the US could leverage the IMF into the more flexible and rapid approach embodied in the new NAFTA mechanism.
At the microeconomic level, all partners should recognize that the ``hands off'' economic restructuring of the 1980s has meant steep income losses for the poor and heavy casualties among small- and medium-sized firms that are most likely to generate new jobs. To help ease adjustment, existing resources, such as the Inter-American Development Bank's Multilateral Investment Fund, could be targeted toward small trade-oriented and employment-generating firms upon which economic growth and productivity gains will ultimately rest. These have traditionally been excluded from Latin credit markets. As for income distribution, a development policy for the Western Hemisphere should encourage Latin governments to go beyond today's mainly symbolic poverty-reduction programs and begin to reallocate credit, provide job training, and shift spending on education toward increasing worker productivity.
This leaves trade itself. Here, Mexico has clearly shown that NAFTA entry triggers new investments and signals lasting commitment to stable economic reform. NAFTA entry, in essence, has become the hemisphere's new union card, the ultimate stamp of credibility. The procedures for obtaining it must be clarified.
At the same time, free trade must not be mistaken as an end unto itself. The above trends suggest it is going to take nudging and shaping for North American markets to hit the high-growth, high-productivity stride envisioned by NAFTA proponents. The Opinion/Essay Page welcomes manuscripts. Authors of articles we accept will be notified by telephone. Authors of articles not accepted will be notified by postcard. Send manuscripts by mail to Opinions/Essays, One Norway Street, Boston, MA 02115, by fax to 617 -450-2317, or by Internet E-mail to OPED@RACHEL.CSPS.COM.