United States General Accounting Office

GAO Testimony

Before the Subcommittee on Trade, Committee on Ways

and Means, House of Representatives

For Release on Delivery

Expected at

2:00 p.m., EDT

Tuesday,

May 8, 2001

GAO-01-706T

FREE TRADE AREA OF

THE AMERICAS

April 2001 Meetings

Set Stage for Hard

Bargaining to Begin

Statement of Loren Yager, Director

International Affairs and Trade
Page 1 GAO-01-706T

Mr. Chairman and Members of the Subcommittee:

I am pleased to have the opportunity today to discuss our observations on two recent meetings

affecting the negotiations for a Free Trade Area of the Americas agreement: a trade ministerial in

Buenos Aires, Argentina, on April 7, 2001, and the presidential-level Summit of the Americas in

Quebec City, Canada, on April 20-22. The Free Trade Area of the Americas agreement, if

completed, would eliminate tariffs and create common trade and investment rules within the 34

democratic nations of the Western Hemisphere. As you know, these negotiations are among the

most significant ongoing multilateral trade negotiations for the United States. President Bush

has stated repeatedly that establishing the Free Trade Area of the Americas is one of his top

trade priorities.

We reported in March 20011

 that the negotiations are at a critical juncture and these two meetings

offered an opportunity to inject momentum and set an ambitious pace for the next, more difficult

phase of the negotiations. We also reported that, going into the meetings, the ministers faced an

ambitious agenda of decisions designed to start the next phase of the negotiations on a sound

footing. At your request, we reviewed the results of the meetings. Specifically, today I will

discuss what Western Hemisphere countries did to (1) address controversial issues, (2) set

objectives and deadlines for the next phase of the negotiations, (3) build public support, and (4)

adding needed momentum into the negotiations. My observations are based on our past and

ongoing work on the Free Trade Area of the Americas process, including in Buenos Aires,

Argentina. Before I get into the specifics of these topics, let me provide a brief summary.

SUMMARY

As we stated in our March report, the trade ministers for the Free Trade Area of the Americas

(FTAA) countries faced an ambitious agenda in the April meetings. This was because a number

of controversial and complex issues had slowed progress on the objectives and deadlines that

had to be concluded in the April meetings. However, accommodations reached by the ministers

 1

See Free Trade Area of the Americas: Negotiations at Key Juncture on Eve of April Meetings (GAO-01-552, Mar. 30,

2001).
Page 2 GAO-01-706T

on topics such as labor and the environment, antidumping, and nations with smaller economies

allowed countries to set forth basic principles while keeping topics on the table for future

resolution. For example, on labor and the environment, the ministers stated that any delegation

has the right to present negotiating proposals it deems relevant. However, the ministers went on

to announce that most ministers believe noncompliance with environment and labor rights

should not result in trade restrictions or sanctions.

As a result of the movement on these controversial issues, the trade ministers were able to set

out clear objectives and deadlines to promote progress during the next 18 months of the

negotiations. These negotiations will culminate at the next trade ministerial to be held in

Ecuador, in October 2002. So far, the FTAA negotiations have produced a draft text agreement,

covering nine major issue areas. The next negotiating phase will involve hard bargaining to

refine the draft text and begin negotiations on market access concessions. To move toward

consensus on the draft text, ministers directed negotiating groups to eliminate material that is in

dispute to the maximum extent possible. To prepare for the beginning of the market access

negotiations, ministers instructed specific negotiating groups to develop recommendations by

April 1, 2002, on the methods and modalities (basic ground rules) for negotiation. The ministers

also asked the groups to develop, where appropriate, inventories of tariffs, nontariff barriers,

subsidies, and other practices that distort trade. Ministers directed negotiating groups to initiate

these market access negotiations no later than May 15, 2002.

The FTAA trade ministers took several notable actions to build public support for the FTAA

process. The biggest surprise decision made at the April meetings was the agreement to publicly

release the draft text of the nine negotiating groups. In response to public pressure for greater

openness and recommendations by the business community, the ministers determined that

releasing the text would help ensure the transparency of the negotiating process and build broad

public understanding of and support for the FTAA. The text, which is several hundred pages

long, will be made public after its translation into the four official languages2

 of the negotiations.

The trade ministers also took action to enhance the role of civil society--meaning

nongovernmental groups representing business, labor, environment, and other interests--in the

FTAA process.

 2

English, French, Portuguese, and Spanish.
Page 3 GAO-01-706T

The April meetings appear to have been successful in providing high-level political leadership

across the hemisphere and fresh momentum to the FTAA negotiations. At their summit in

Quebec City, President Bush and other leaders signaled their commitment to the FTAA and their

desire to work together to attain the common goals of expanding trade, improving economic

opportunities, strengthening democracy, and redressing social and economic inequities. The

meeting also set new deadlines for completing and implementing the agreement, partly

accomplishing the feat of setting an accelerated pace for negotiations. Business and

congressional leaders attended, underlining interest by key U.S. stakeholders, even as protests

graphically demonstrated the opposition mobilizing against an FTAA. The outcomes at Buenos

Aires and Quebec allow the next phase of technical negotiations to start on a sound footing.

However, boosting U.S. congressional and public support, dealing with a large and complex

agenda of issues, and accommodating the diverse needs and positions of participants are among

the challenges facing FTAA negotiators in the hard bargaining ahead.

BACKGROUND

In December 1994, the heads of state of the 34 democratic countries in the Western Hemisphere

agreed at the first Summit of the Americas in Miami, Florida, to conclude negotiations on a Free

Trade Area of the Americas no later than 2005. The FTAA would cover a combined population of

about 800 million people, more than $11 trillion in production, and $3.4 trillion in world trade. It

would involve a diverse set of countries, from some of the wealthiest (the United States and

Canada) to some of the poorest (Haiti) and from some of the largest (Brazil) to some of the

smallest in the world (Saint Kitts and Nevis). Proponents of the FTAA contend that a successful

negotiation could produce important economic benefits for the United States. Business groups

say that if relatively high tariffs and other market access barriers are removed, U.S. trade with

the region could expand further. While an FTAA may provide benefits for the United States, it

may also adversely impact certain import-competing sectors. Other groups, such as certain

unions and environmental groups, have also strongly voiced concerns about the FTAA's impact

on U.S. workers and on the U.S. government’s capacity to act in the public interest.

From a technical standpoint, ministers agreed in 1998 at the San José Ministerial meeting that the

FTAA would be a single undertaking, meaning that the agreement would be completed and

implemented as one whole unit instead of in parts. They also agreed that the FTAA agreement

will be consistent with the rules and disciplines (practices) of the World Trade Organization, and

that the FTAA could coexist with other subregional agreements, like the Common Market of the
Page 4 GAO-01-706T

South (Mercosur) and the North American Free Trade Agreement (NAFTA), to the extent that

the rights and obligations go beyond or are not covered by the FTAA. An eventual FTAA

agreement would contain three basic components: (1) chapters on general issues and the overall

architecture of the FTAA and its institutions, (2) schedules for reducing tariff and nontariff

barriers, and (3) chapters on specific topics. The chairmanship of the negotiations changes every

18 months, with Argentina serving as chair through the April 2001 meetings, succeeded by

Ecuador for the next round of negotiations. Brazil and the United States are set to co-chair the

final round from November 2002 to December 2004. Ministers set out the workplans for the

negotiating process and select new chairs for the negotiating groups in 18-month increments.

The FTAA negotiations have so far met the goals and deadlines that the trade ministers set.

Since beginning the process in 1994, the 34 participating countries have succeeded in building a

technical foundation for the negotiations. As shown in figure 1, from December 1994 to March

1998, the participants developed the overall structure, scope, and objectives for the negotiations.

The participating countries then formally initiated the negotiations at the San José Ministerial

and the Santiago Summit of the Americas in 1998. The negotiating groups, illustrated in figure 2,

recently produced a first draft of chapters for specific issues, such as market access, investment,

and agriculture. According to U.S. and foreign negotiators, however, the draft text is heavily

bracketed,3

 indicating that agreement on specific language has not been reached. In addition,

negotiations on market access have yet to begin. Nevertheless, participants described this draft

text as an important accomplishment and stated that it will form the basis for future

negotiations. The negotiations have also produced several business facilitation measures and

improved coordination between participating countries on trade matters.

 3

The term “bracketed” refers to the punctuation placed around language in the draft chapters for which agreement has

not yet been reached. For example, if two countries submitted different proposals for language in a chapter, brackets

would be placed around each proposal until a consensus is reached on the differences between the two.
Page 5 GAO-01-706T

Figure 1: History of the FTAA Negotiations, 1994-2001

Source: GAO.

December

1994

Summit of the

Americas

Miami, Florida

March 1996

Second Ministerial

Cartagena,

Colombia

June 1995

First Ministerial

Denver, Colorado

May 1997

Third Ministerial

Belo Horizonte, Brazil

November 1999

Fifth Ministerial

Toronto, Canada

March-April 1998

Fourth Ministerial

San José, Costa Rica

Second Summit

 Santiago, Chile

April 2001

Sixth Ministerial

Buenos Aires,

Argentina

Third Summit

Quebec City,

Canada

Develop structure, scope, and

organization of negotiations

Prepare

annotated

outlines

Prepare

draft text

Initiation of

Trade Negotiations

1995 1996 1997 1998 1999 2000 2001
Page 6 GAO-01-706T

Figure 2: Organization of the FTAA Negotiations

Legend

SPS=Sanitary and phytosanitary measures (These measures are taken to protect human, animal, or plant life or

health)

Note 1: Current chairs of the various FTAA entities are listed in parentheses. The objectives of each negotiating

group and the Trade Negotiations Committee appear in italics.

Note 2: The Tripartite Committee provides technical assistance to the negotiations and is composed of the

Organization of American States, the Inter-American Development Bank, and the United Nations Economic

Commission for Latin America and the Caribbean.

Note 3: The FTAA ministers and negotiating groups are serviced by an Administrative Secretariat.

Note 4: The venue for the actual negotiations was initially located in Miami and will rotate to Panama City and Mexico

City.

Source: GAO.

Chairman of the 

Negotiations

(Ecuador)

Administrative

Secretariat

Negotiating Groups

Market Access

(Argentina)

Progressively eliminate

tariffs and nontariff

barriers

Investment

(Mexico)

Establish a fair and

transparent legal 

framework to promote

 investment

Services

(Caribbean Community)

Progressively 

liberalize

trade in services

Government Procurement

(Costa Rica)

Expand access to 

government procurement

markets 

Dispute Settlement

(Paraguay)

Establish a fair, 

transparent, and 

effective dispute 

settlement mechanism

Agriculture

(Guatemala)

Eliminate export subsidies,

address other 

trade-distorting practices;

SPS measures

Intellectual Property Rights 

(United States)

Promote and ensure

adequate and effective

protection of intellectual

property rights

Subsidies, Antidumping/ 

Countervailing Duties

(Peru)

Enhance WTO compliance

and improve application of

trade remedy laws

Competition Policy

(Colombia)

Ensure anticompetitive

business practices

do not undermine

FTAA benefits

Committee on 

Civil Society

(Dominican Republic)

Consultative Group 

on Smaller Economies

(Bolivia)

Committee of Experts

on Electronic Commerce

(Canada)

Other FTAA Entities

Tripartite Committee

Trade Negotiations Committee

Vice-ministers of Trade

(Ecuador)

Guide negotiating groups, develop overall framework and rules,

and agree on business facilitation measures

Technical Committee on

Institutional Issues

(Brazil)
Page 7 GAO-01-706T

MINISTERS DEFUSE CONTROVERSIAL ISSUES

FTAA ministers took measures in Buenos Aires to prevent several controversial or complex

topics from blocking the progress of the negotiations. In our March report, we noted that the

trade ministers faced an ambitious agenda in the April meetings because the controversies had

consumed considerable time in the preparatory process. One such issue involved the right of

countries to put forward text in the negotiating groups, specifically on labor and the

environment. The United States had sought to include proposals in the investment negotiating

group obligating parties to strive to ensure that their environmental and labor laws would not be

relaxed to attract investment. Other FTAA countries objected to this proposal, stating that labor

and the environment were outside the mandate of the negotiating group and did not belong in an

FTAA. The ministers resolved this conflict by stating that the negotiating groups should work

under the principle that any delegation has the right to present proposals it deems relevant,

though others may place these proposals in brackets if they do not agree. However, most

ministers went on to announce their opposition to the use of sanctions for enforcing labor and

environment provisions.4

Another challenging issue addressed by ministers to keep the process on track involved

considering the needs of smaller economies. As we reported, countries with smaller economies

are concerned with both technical and resource constraints that make the negotiating process a

challenge and with preventing their economies from being overwhelmed by the larger ones once

the agreement is implemented. According to FTAA experts, their concerns about resource

constraints were met in part by assurances from the U.S. Trade Representative and the President

of the Inter-American Development Bank that they would attempt to identify additional technical

assistance. In addition, their concerns about implementation were addressed in the ministerial

declaration, wherein the ministers in Buenos Aires reiterated their commitment to take into

account the differences in levels of development and size of the economies among the FTAA

participants. The ministers further directed the Trade Negotiations Committee to formulate by

November 2001 some guidelines for applying treatment for dealing with the differences in the

size of the economies.

 4

The text of the ministerial declaration states, "Most Ministers recognize that the issues on environment

and labour should not be utilized as conditionalities nor subject to disciplines, the non-compliance of

which can be subject to trade restrictions or sanctions."
Page 8 GAO-01-706T

A third area in which controversy was forestalled involved antidumping. Prior to the ministerial,

a U.S. alternative proposal in the negotiating group on antidumping created a controversy among

the FTAA participants. The Office of the U.S. Trade Representative has stated that the FTAA

agreement should ensure the right of each country to maintain and apply trade remedies within

the FTAA. According to one of the foreign lead negotiators, the U.S. alternative proposal angered

many other participants because it was viewed as an effort on the part of the United States to

take the antidumping issue off the negotiating table. While U.S. officials have denied that this

was their intent, the issue threatened to distract the ministers at Buenos Aires, according to

observers. The issue was defused, however, by several ministerial directives. Specifically, the

ministers placed language in the ministerial declaration repeating their initial charge from the

San José Ministerial for the negotiating group on subsidies, antidumping, and countervailing

duties to intensify its efforts to reach a common understanding and improve the rules and

procedures for operation and enforcement of trade remedy laws. The ministers further directed

the negotiating group to submit recommendations on the methodology to achieve this objective

by April 2002. In effect, the ministerial action reminds all participants that they have previously

agreed to seek improvements in trade remedy regimes, while providing a deadline for action

toward that end.

MINISTERS PROVIDE DIRECTION FOR NEXT PHASE OF NEGOTIATIONS

As we noted in our March report, an important task for the April meetings was setting the pace,

goals, and structure for the remainder of the FTAA process. At the Buenos Aires Ministerial,

FTAA trade ministers took a series of steps to set out the objectives and timeframes for the next

18 months of the negotiations, which will culminate in the next trade ministerial to be held in

Ecuador in October 2002. These steps are illustrated in figure 3.
Page 9 GAO-01-706T

Figure 3: FTAA Timeframes and Milestones, 2001-2005

Source: GAO.

One of the important tasks of the April meetings was to prepare for the beginning of market

access negotiations. Before countries can begin to negotiate on market access concessions, they

must agree on the basic ground rules of the negotiations, such as the type of tariff rate to use as

the starting point. Negotiators refer to these ground rules as the “modalities.”

5

 Several of the

specific directions ministers provided to the negotiating groups are listed below (applicable

negotiating groups are listed in parentheses):

Recommend methods and modalities for upcoming negotiations on tariffs, nontariff barriers,

rules of origin, subsidies, investment, government procurement, services, and other

practices that distort trade in agricultural products (market access; agriculture; investment;

subsidies, antidumping, and countervailing duties; services; and government procurement).

Create a preliminary inventory of nontariff measures (market access, agriculture).

Recommend what types of other practices that distort agricultural trade should be addressed

(agriculture).

 5

Other modality decisions include, for example, the period of time in which the tariff reductions will occur.

April 3-6,

2001

Buenos

Aires,

Argentina:

Viceministers

make final

preparations

for the

ministerial

April 20-

22, 2001

Quebec

City,

Canada:

Third

Summit of

the

Americas

April 7,

2001

Buenos

Aires,

Argentina:

Fifth FTAA

Ministerial April 2001 -- 2005

April 2002

Set modalities

for market

access

May 2002

Begin market

access

negotiations

August 2002

Submit revised

draft text

October 2002

Next ministerial in

Ecuador

January 2005

Deadline to conclude

FTAA negotiations

December 2005

Entry Into force 

of FTAA
Page 10 GAO-01-706T

A related step ministers took to advance the FTAA process was to set a date for beginning

market access negotiations. As we reported in March 2001, the FTAA participants had not set

out a date to begin the market access negotiations, where countries start to offer tariff and

nontariff concessions. In Buenos Aires, ministers directed specific negotiating groups to begin

these negotiations no later than May 15, 2002. This pertains to tariff liberalization in the market

access and agricultural groups, and rules of origin in the market access group. The deadline also

pertains to investment, services, and government procurement groups for market access

negotiations in their respective groups.

The ministers also instructed negotiating groups to take steps to reach consensus on the draft

text. As we reported, the draft text generally represents a consolidation of all proposals

submitted by FTAA countries so far. FTAA participants state that the draft reflects wide

differences between the countries over substance and philosophical approaches to key issues.

The ministers specifically directed the nine negotiating groups to intensify efforts to resolve

existing differences and reach consensus, with a view to eliminating brackets and consolidating

text to the maximum extent possible. Ministers also set August 2002 as a deadline for negotiating

groups to submit their revised draft chapters to ministers.

In addition to setting specific objectives for the negotiating groups, the ministers formed a new

Technical Committee on Institutional Issues to begin discussions on the FTAA's overall

institutions, like the location of a permanent secretariat and the type of mechanism that will be

used for dispute settlement. U.S. officials also expect that this committee will act as a

mechanism to deal with issues that pertain to all negotiating groups or do not fall within a

specific group. U.S. and other officials participating in the process stated that this new

committee is comparable to the negotiating groups in that it will have a different chair than the

chair of the negotiations and will be supervised by the Trade Negotiations Committee.

MINISTERS ATTEMPT TO BUILD PUBLIC SUPPORT FOR FTAA

In March, we noted that the April meetings represented an opportunity to build public support

for the FTAA and address concerns about openness. The FTAA trade ministers took several

notable actions in an effort to do so. The biggest surprise of the April meetings was the decision

to publicly release the bracketed text of the nine negotiating groups. As we previously reported,

Canada, more than 50 Members of Congress, and various U.S. nongovernmental groups had
Page 11 GAO-01-706T

called for the release of the bracketed text, because publicly available information on the FTAA

negotiations has been limited. In addition, recent public protests added to the groundswell of

support for releasing the text. However, given the ongoing and confidential nature of FTAA

deliberations, this proposal was expected to be controversial at the meetings. Nevertheless, in

response to public pressure and the recommendation of the business community, the FTAA

leaders determined that releasing the text would help improve the transparency of the

negotiating process and would increase public understanding of and support for the FTAA. The

text, which is several hundred pages long, will be made public after its translation into the four

official languages of the negotiations.

The trade ministers also took action to enhance the role of civil society in the FTAA process.

The Committee of Government Representatives on the Participation of Civil Society6

 has been

contentious since its creation. For example, one country had consistently blocked the

committee from preparing recommendations based on the public input received. In part because

of the disagreement over the role of the committee, many civil society representatives we

interviewed told us they were disappointed with the committee because there was little evidence

that their input was being given serious consideration in the negotiations. At Buenos Aires,

however, the ministers took action to strengthen and extend the role of the committee. For

example, they instructed the committee to

develop a list of options by the next Trade Negotiations Committee meeting on how to foster

a process of increasing and sustained communication with civil society,

analyze the possibility of incorporating more information on the FTAA’s web page,7

 and

forward the public input by civil society to the appropriate negotiating groups.

Whether or not these steps will be deemed sufficient by outside observers remains to be seen.

Nevertheless, the steps, taken in combination with the release of the bracketed text, will make

the FTAA process more open to public scrutiny and comment than it has been so far.

 6

The committee was created at the urging of the United States to provide a vehicle for public input on

business concerns, environment and labor rights, and other issues.

7

The English-version FTAA web page is located at www.ftaa-alca.org/alca_e.asp.
Page 12 GAO-01-706T

LEADERS TAKE STEPS TO PROVIDE POLITICAL MOMENTUM TO THE FTAA PROCESS

As we noted in our March report, one of the most important aspects of the April meetings was

the opportunity by hemispheric leaders to inject needed momentum into the negotiations at a

key juncture, since the phase of negotiations in which countries set out initial positions has

ended, and the coming phase is expected to narrow the many substantive differences that

remain. The leaders addressed the issue of momentum in two ways. First, they set precise

deadlines for concluding and implementing an FTAA. Second, they provided political-level

support and direction to the process as it enters a more ambitious and difficult phase.

In April, hemispheric leaders endorsed a more precise formulation of the dates for the

conclusion of negotiations and the entry into force of the agreement that should accelerate

technical-level progress. As we reported, at the 1994 Miami Summit leaders set 2005 as the

original target date to conclude the negotiations but did not specify precisely what this meant.

Chile put forward a proposal last year to move up the target date to December 31, 2003, with a

final agreement entering into effect on January 1, 2005. However, some FTAA participants, most

notably Brazil, publicly stated that these dates were unrealistic. As a compromise, FTAA leaders

approved a ministerial recommendation at the Quebec City Summit to establish January 2005 as

the deadline for concluding FTAA negotiations and December 2005 as the deadline for the

agreement's entry into force. The U.S. Trade Representative called this step a key development

to add momentum to the process and later noted that the United States is prepared to try to help

beat these deadlines.

On the political level, the April Summit engaged President Bush and other heads of state in the

FTAA process and provided an opportunity for leaders to renew their countries’ political

commitment to the FTAA. For the U.S.’s part, President Bush underlined the importance he

attaches to achieving progress in liberalizing trade and to solidifying and improving relations

within the Western Hemisphere as a means to increase and spread prosperity and foster freedom

and democracy. At the same time, he said, “Our commitment to open trade must be matched by

a strong commitment to protecting our environment and improving labor standards.” Calling the

vision of “a fully democratic hemisphere bound by goodwill and free trade” both a “tall order”

and a “chance of a lifetime,” the U.S. President pledged to seek and secure from the Congress
Page 13 GAO-01-706T

“fast track” or trade promotion authority8 by the end of 2001. Other FTAA participants see this

authority as a litmus test of U.S. commitment to an FTAA and view it as necessary for concluding

and passing an eventual agreement. Demonstrating commitment to continued trade

liberalization in the hemisphere, President Bush also said he would seek to renew and expand

the Andean Trade Preferences Act, which accords unilateral U.S. tariff preferences to nations of

the Andean region, and to conclude a bilateral free trade agreement with Chile by yearend 2001.

Statements of other key regional players also underlined their political commitment to an FTAA.

For example, speaking on behalf of the Caribbean, Barbados Prime Minister Owen Arthur

expressed satisfaction that “arrangements for economic integration have now been so

deliberately designed to truly accommodate the special concerns of the smallest and most

vulnerable entities in our hemisphere.” Reluctance by Caribbean participants about accelerating

the pace of negotiations was a major factor at Buenos Aires in discussions on setting FTAA

deadlines, according to participants. Brazilian President Fernando Henrique Cardoso urged

fellow leaders to aim for a “Community of the Americas,” including an FTAA that progressively

eliminates barriers to trade, opens up opportunities for growth, and does away with inequalities.

At the same time, he warned that an FTAA that failed to provide access to more dynamic markets

would be “irrelevant or, worse, undesirable.” The only country taking a new stance in the

Quebec City summit declaration from the Buenos Aires Ministerial was Venezuela, which

reserved its position on the final deadline for concluding and implementing an FTAA due to

concerns about its technical ability to meet the implementation deadline.

Generating interest in and support of the FTAA within the U.S. Congress, the U.S. business

community, and the U.S. public remains a challenge. As we reported, many FTAA participants

believe this support will be crucial if the United States is to provide the leadership they believe is

necessary for concluding a deal. It is also required for ultimate approval of an FTAA in the

Congress and in the U.S. “court of public opinion.” However, some FTAA participants believe the

United States has been distracted from pursuing trade liberalization because it is without a

domestic consensus on the benefits of trade and the way in which to handle the overlap between

trade and labor rights and the environment. Moreover, U.S. policies on key aspects of FTAA

rules, such as investment, have yet to be announced. Support by the Congress and the business

community for the FTAA has been limited until recently, though a sizeable number of U.S. trade

 8

 In the past, the Congress has enacted trade promotion authority (also known as "fast track") to implement

trade agreements with other countries. This authority provided for a congressional vote within a limited

period of time to accept or reject the implementing legislation for a negotiated agreement without making

any changes.
Page 14 GAO-01-706T

associations and firms participated in the Americas Business Forum at Buenos Aires, and a

bipartisan congressional delegation accompanied President Bush to Quebec City. Meanwhile,

the opposition by key interest groups, who demonstrated in the streets of Buenos Aires and

Quebec City, is actively mobilizing. For example, the American Federation of Labor-Congress of

Industrial Organizations, Public Citizen, and the Sierra Club have launched campaigns against the

FTAA as it currently stands.

Longer-term Challenges

Facing a critical juncture in the FTAA process, the FTAA countries generally accomplished that

part of an ambitious agenda designed to start the next phase of the negotiations on a sound

footing. Still, as we have previously reported, significant challenges will need to be overcome to

successfully conclude an agreement. Hard bargaining will be required to turn the accumulation

of proposals currently on the table into a mutually agreed-upon, binding document. In addition,

the FTAA negotiations face other longer-term challenges, including

managing the sheer scope and complexity of work required to finalize draft rules,

negotiating market access concessions,

devising an institutional structure for the implementation of the agreement,

recognizing the diverse negotiating objectives and economic conditions of the FTAA

participants,

achieving consensus on the negotiated outcomes,

dealing with changing political and economic conditions as the negotiations unfold, and

summoning the political will to conclude an agreement.

A number of participants told us that the FTAA can be successfully concluded if the key Western

Hemisphere leaders demonstrate that they have the political will to conclude the agreement. The

April meetings provided a major step in this direction, as well as clear guidance and milestones

for technical-level progress. But the ultimate success or failure of the FTAA will rest on the

continued demonstration of political commitment to the negotiation’s conclusion.
Page 15 GAO-01-706T

- - - - -

Mr. Chairman and Members of the Subcommittee, this concludes my prepared statement. I will

be happy to answer any questions you or other Members may have.

CONTACTS AND ACKNOWLEDGMENTS

For future contacts regarding this testimony, please call Loren Yager or Kim Frankena at (202)

512-4128. Individuals making key contributions to this testimony included Anthony Moran, Jody

Woods, and Tim Wedding.

(320053)