	Introduction

In December 1994, the heads of state and government of the 34 democratic  countries in the Western Hemisphere agreed at the first Summit of the  Americas in Miami, Florida, to conclude negotiations to create a Free Trade  Area of the Americas (FTAA) no later than 2005. The ministers directed negotiating groups to initiate negotiations on  market access schedules no later than May 15, 2002. Rules are also being  developed on four other trade topics, which are addressed in chapter 3,  including intellectual property rights (IPR); dispute settlement; subsidies,  antidumping, and countervailing duties; and competition policy. Objectives, Scope, and Methodology

Our objectives for this report were to describe (1) the progress made to  date and the issues that remain in negotiating greater market opening  among FTAA countries, (2) the progress made to date and the issues that  remain in developing other rules and institutional provisions for an  eventual FTAA agreement, (3) the significant crosscutting themes affecting  the FTAA negotiations and how have they been addressed to date, and (4)  the potential effects of a completed FTAA on U.S. trade and investment  with other Western Hemisphere countries. FTAA Efforts to Open Hemispheric Markets

The five FTAA groups charged with negotiating market-opening  opportunities—market access, agriculture, services, investment, and  government procurement—have drafted rules and are now developing the  databases and methods that they will use to schedule the reduction and  elimination of trade barriers among FTAA participants. Among other  things, ministers instructed the group to  develop recommendations on the modalities for tariff negotiations by  April 1, 2002, in order to begin these negotiations by May 15, 2002;  accelerate the process of identifying nontariff measures so as to have,  by April 2002, a preliminary inventory of such measures;  submit recommendations on the scope and methodology for eliminating  export subsidies affecting trade in agricultural products in the  hemisphere by April 1, 2002;  make recommendations on the types of measures and a methodology to  develop disciplines on the treatment of all other practices that distort  trade in agricultural products by April 1, 2002;   establish a notification and counter-notification for SPS measures by  April 2002 and develop mechanisms to facilitate the full implementation  of the WTO SPS agreement; and  submit a new version of the draft text by August 2002. Given these domestic regulations, free market access may be hard to  define. But the United States does not have agreements with  countries such as Brazil, the largest Latin American nation. Negotiating groups have prepared draft chapters on their respective topics. All negotiating group texts contain proposals on  technical assistance or treatment for smaller economies. Civil Society

			Theme, Importance, and Mandate

The views of civil society groups (nongovernmental groups representing  business, labor, environment, and other interests) will likely affect the level  of U.S. public support for the FTAA. However, some U.S.  import-competing industries, such as textiles, apparel, and certain  agricultural goods, have traditionally received higher levels of protection. An FTAA agreement, however, would cover much more  than merchandise trade. Exporters and Increased Competition in Some Protected U.S. Sectors

Over the past decade, FTAA countries have pursued the liberalization and  integration of their economies through a wide variety of interregional free  trade and customs union agreements. These changes have lowered  barriers to U.S. exports, but tariffs and other barriers still remain relatively  high on many U.S. exports.
What GAO Found

The 34 democratic countries of the Western Hemisphere pledged in December 1994 to form Free Trade Area of the Americas (FTAA) no later than 2005. The FTAA agreement would eliminate tariffs and create common trade and investment rules among the 34 democratic nations of the Western Hemisphere. When completed, the FTAA agreement will cover about 800 million people, more than $11 trillion in production, and $3.4 trillion in world trade. The five FTAA negotiating groups pursuing liberalization of trade and investment--market access, agriculture, investment, services, and government procurement--have submitted initial proposals and agreed on a date to begin market access negotiations, but the groups face short-term and long-term issues. In the short-term, these groups must resolve several practical issues in order to begin negotiations on market access schedules no later than May 15, 2002, and to narrow differences and prepare revised trade rule chapters by August 2002. Over the long-term, these market-opening groups face fundamental questions about how much and how fast to liberalize. Narrowing outstanding differences may be difficult for the four other negotiating groups, which have made initial proposals on rules governing intellectual property; subsidies, antidumping, and countervailing duties; competition policy; and dispute settlement. Some groups face fundamental differences. Other negotiating groups have reached agreement on basic principles but disagree on key details. Two of the three crosscutting themes--smaller economies and civil society--have proven controversial. Because the FTAA's smaller economies are concerned about their capacity to implement such a vast agreement and its potential economic effects on their countries, they have been seeking assurances of technical assistance and other special treatment. The FTAA process has been viewed as not sufficiently open to the public, and past efforts to include nongovernmental interests, such as business, labor, the environment, and academia, have been widely seen as ineffective. Some steps have been taken to address these concerns, and other steps are being considered. As a comprehensive agreement, the FTAA could have wide-ranging effects on U.S. trade and investment with other Western Hemisphere countries. The elimination of tariff and nontariff barriers would improve U.S. market access; put U.S. exporters on an equal footing with competitors in FTAA markets; and expand trade, particularly in highly protected sectors such as agriculture. On the other hand, some protected U.S. sectors, including textiles, apparel, and agriculture, may face increased import competition and declining production if barriers were lowered.