Atlanta's hopes for FTAA are in doubt

Submitted by Circuit:

The Free Trade Area of the Americas, a holy grail for Atlanta on par with the 1996 Olympics, faces serious challenges and may not materialize by the 2005 deadline U.S. and Atlanta officials are counting on, a government report says.

Atlanta wants to be the headquarters of the Free Trade Area of the Americas (FTAA), a trade zone stretching from Canada to Argentina. Landing the home office would bring more than 11,000 jobs to the area with an annual economic impact of $500 million.

But 20 months before the compact's deadline, an April report by the federal General Accounting Office raises questions about when or if the FTAA will be signed, which casts doubt on Atlanta's hopes to be its headquarters.

According to the report, the 34 nations involved are at odds over eliminating tariffs and halting subsidies to farmers. Key members, like Brazil, are having second thoughts. And the U.S. organizing team has only two staffers and limited funding.

In addition, a critical FTAA meeting this November in Miami is shaping up to be a disaster on par with the 1999 World Trade Organization meeting in Seattle, where protesters assaulted delegates and caused $3 million in property damage, the report said.

However, Atlanta organizers are unfazed, and have no indication from the U.S. Trade Representative in Washington that delays are ahead, said Gordon Giffin, a director of Hemisphere Inc., the nonprofit behind Atlanta's FTAA effort.

"We have a nine-inning game in mind," said Giffin, the former U.S. ambassador to Canada and a partner at McKenna, Long & Aldridge LLP. "We may have to readjust for extra innings ... but I think FTAA will get done."

Gov. Sonny Perdue and Atlanta Mayor Shirley Franklin formed Hemisphere, headed by Equifax Inc. CEO Tom Chapman, to win the FTAA's headquarters, or "secretariat," from Miami and other rivals. Organizers have raised $2 million.

Andrew Young, the former Atlanta mayor and United Nations ambassador, has agreed to be an adviser to Atlanta's effort, said Carlos Martel, deputy commissioner for international trade for the Georgia Department of Industry, Trade and Tourism.

U.S. Sen. Chuck Grassley, head of the Senate Finance Committee, asked for the GAO report and held May 13 hearings on the trade federation, citing his concerns about its future.

Warning signs
The report and subsequent testimony warned that the Office of the U.S. Trade Representative, which is heading the U.S. effort, is "stretched thin," which risks a "slowdown" in FTAA's progress.

Another problem is Brazil, which, along with the United States, is co-chairing the FTAA project. Brazil's "participation ... has slowed down," and its government has "appeared reticent to decisively embrace an FTAA," the report said.

Brazil's new president, Luiz Inacio Lula da Silva, said before his October election, "As it is being proposed by the United States, the FTAA is not an integration proposal, it is annexation politics, and our country won't be enclosed," the GAO said.

Even worse for FTAA's timetable, much of the 400-page preliminary agreement pact "remains in brackets," meaning it has yet to be argued or decided.

"[Negotiators have] made limited progress in resolving substantive differences in the agreement's text ... to improve market access," the report said.

Subsidies and reducing tariffs are key sticking points, and related talks on trade barriers at the WTO have "bogged down," which could "ultimately imperil [FTAA's] conclusion by January 2005," the report said.

A WTO meeting in September may decide whether FTAA is wrapped up by 2005, the report said.

Given the challenges, Brazil's foreign minister has said 2005 may be "too ambitious" a deadline, the GAO found.

Local officials were less pessimistic. "If everyone begins to be concerned and replicates doubt, it becomes a self-fulfilling prophecy," Martel said. "But if we focus on our commitment, there's a really good chance it will happen on schedule."

Miami faces challenge
Still, hurdles remain, chief among them the November FTAA ministerial gathering in Miami, the GAO said.

Miami organizers and the Office of the U.S. Trade Representative have limited funds to host the meeting of 5,000 delegates this fall, which the GAO estimates will cost $10 million. The Office of the U.S. Trade Representative budgeted $200,000 for the event.

Miami also does not have a security plan in place for an anticipated 20,000 to 100,000 protesters, the report said.

"The concern is that Miami is not ready for November," said Terry McCoy, director of the Latin American Business Environment Program at the University of Florida.

"It's a major undertaking, and I've seen what can go wrong ... the worst-case scenario being Seattle," said McCoy, who is also an adviser to Florida FTAA, the nonprofit group competing with Atlanta for the FTAA headquarters.

The last FTAA meeting in Quito, Ecuador, attended by Franklin and other Atlanta business leaders, had "chaotic" presentations disrupted by protesters. One person was killed during an anti-FTAA demonstration, the GAO said.

Success both in Miami and for the FTAA in general will require "intense preparations on the part of both the [U.S. government] and the Miami organizers between now and November," the GAO concluded. Despite four years of talks, "considerable work remains."

Reach Woods at wwoods@bizjournals.com