February 3, 2004 Puebla, Mexico

In today's discussions, disagreements were exposed for all
to see

The voices of dissent were heard today as Caricom and
Bolivia presented very strong proposals. At the same time,
Mercosur directly confronted the group of countries led by
the United States. Tensions between countries remained
high. While trying to reach consensus, conflicts became
even clearer and countries became even more polarized. In
addition, while civil society representatives were excluded
from today's discussions, Bolivia was one of the few
countries that raised the issue of participation in the
discussions, and pushed for the promotion of social
dialogue, greater civil society participation, and greater
transparency.

This morning, each of the countries or groups of countries
hat had submitted proposals on Tier 1 of the FTAA (minimum
commitments) had the opportunity to present their proposals
to the entire group. Mercosur, Venezuela, Caricom, the
Group of 14, and finally Bolivia presented proposals. The
new so-called Group of 14 is yesterday's Group of 5 – US,
Mexico, Chile, Costa Rica, and Canada – with the addition
of Colombia, the Dominican Republic, Ecuador, El Salvador,
Guatemala, Honduras, Nicaragua, Panama, and Peru. In the
afternoon, discussion on each of the nine negotiating
issues began. The second Tier of the FTAA (comprehensive
commitments) will be discussed during the week, but the
agenda could still change and the issue could be put off.

Deep Differences Remain

1. Agriculture

Neither the G14 nor Mercosur have made any movement on
agriculture in their proposals. The G14, like the G5
before it, continues to ignore internal supports and
measures equivalent to subsidies in its proposal, while
these issues remain in the core of Mercosur's agriculture
proposal. The agricultural safeguard generated substantial
debate in today's discussions. Mercosur totally rejected
any type of safeguard, and, for their part, Bolivia,
Venezuela and Caricom demanded that any safeguard be used
only by developing countries and only for the protection of
small farmers. This vision is totally contrary to that of
the G14, which believes that all countries should have the
right to use the safeguard, for any agricultural sector, as
long as there is a flood of low-priced imports.

2. Market Access

The Mercosur and G14 proposals remain far apart on the
issue of market access. The Mercosur proposal envisions
the elimination of tariffs on the entire universe of goods,
while the G14 proposal only calls for the elimination of
tariffs on ¨substantially¨ all goods. The G14's position
would allow the United States to keep its market closed to
certain exports from those countries that only participate
in Tier 1 negotiations, creating an incentive for countries
to enter into Tier 2 negotiations in order to gain full
access to the U.S. market for their exports.

This fundamental difference is also reflected in the
positions of the two groups on Most Favored Nation (MFN)
treatment. While Mercosur proposes that all countries –
including countries that only participate in Tier 1 – be
entitled to MFN treatment for their goods, the G14 would
only accord MFN treatment ¨taking into account the
commitments and obligations of each individual country.¨
In effect, the G14 proposal would allow the U.S. (and other
countries) to discriminate against exports from countries
that refuse to participate in Tier 2.

The proposals of CARICOM and Venezuela offer no resolution
to this fundamental disagreement. Neither CARICOM nor
Venezuela addresses the relationship between market access
concessions and participation in the second Tier.

Both CARICOM and Venezuela call for the exclusion of some
goods from tariff elimination, directly contradicting
Mercosur's position. For Caricom and Venezuela these
exclusions would have to bear some relation to differences
in levels of development and differences in the size of
economies. Venezuela in particular calls for right to
exclude sensitive agricultural products from tariff
elimination.

In the same manner, Caricom and Venezuela emphasized that
reciprocity in market access between developed and
developing countries should not be required, citing Article
40 of the Charter of the Organization of American States.

3. Special and Differential Treatment

– As explained above, Caricom and Venezuela emphasized
the importance of implementing Special and
Differential Treatment (SDT) in market access rules.

– Caricom also calls for implementation of SDT in rules
governing services, government procurement,
antidumping, and dispute settlement. Venezuela also
has a detailed proposal on compensation funds.

– For its part, Bolivia proposes implementing the
principle of STD in a transversal manner to the entire
FTAA agreement including the additional commitments.

– Mercosur calls for the creation of ¨specific measures¨
on SDT in each area of negotiation, but does not
include such measures in its outline of the first
Tier. In addition, Mercosur's strong insistence on
MFN may prevent the creation of effective SDT measures
over the long term. Mercosur does, however, call for
the creation of compensation funds.

- The G14 proposal, instead of calling for specific rules
to implement SDT in the negotiations, calls for the
use of technical assistance, cooperation, and capacity
building measures to address different levels of
development and small economies. The G14's refusal to
implement SDT in a concrete way brought strong
resistance from the other countries. Caricom,
Venezuela, Bolivia and Nicaragua made strong
statements on the need to address structural problems
relating to differences among economies. Nicaragua,
even though it is a member of the G14, took a position
that any agreement must take into account different
levels of development, a principle that is not
recognized in the G14 proposal.

4. Competition Policies

This title does not refer to measures to control private
monopolies, but to the obligation of nation-states and
public enterprises to behave according only to commercial
criteria. The inclusion of this issue in the "minimal"
Tier 1 shows that this is not such a minimal FTAA after
all. The issue has still not been discussed officially,
but it will definitely be a controversial issue. The G14
has proposed including three points on competition policy
in Tier 1 which could have huge impacts: a) general
principles for competition legislation and policies; b)
measures to prohibit anticompetitive behavior; and c)
disciplines on state enterprises and monopolies. The
proposals of Mercosur and Caricom don't accept the
inclusion of any of these obligations in Tier 1. This
would be a very difficult point for any country to make
concessions on.