Next Monday at Monterrey in Mexico, Caricom Heads of Government will meet with other Heads of Government of the hemisphere in a Special Summit of the Americas. In and out of the conference rooms it is certain that the main focus of discussion will be the proposed Free Trade Area of the Americas (the FTAA). President Chavez of Venezuela has already declared that he will denounce the FTAA as being unsuitable for Latin America, President Lula da Silva of Brazil's uneasiness and concerns about the FTAA are well known and Presidents of other countries including Argentina, Bolivia and Ecuador may well be hostile or at best lukewarm. In fact there have been so many differing approaches and sub-regional negotiations that it is now difficult to say what is the FTAA. It is certainly no longer conceived as a zone of free trade stretching from Alaska to Tierra del Fuego in Argentina.

Nevertheless the FTAA will pose Caricom with difficult choices, the outcomes of which could stabilise and expand or threaten and weaken regional economies.

To understand the Caricom problem one must back up. As is well known Caricom is engaged at one and the same time in three sets of negotiations-for the FTAA, as already noted, with the European Union with negotiations beginning in earnest in February for an agreement on trade and in succession to the Cotonou Agreement, and in the World Trade Organisation (WTO) in the wake of the collapse of the negotiations in Cancun - a larger burden of external negotiations than that confronted by perhaps any other grouping in the world. The problem is one of how to maintain vital interests "across the board." Even though the negotiations are being conducted in separate fora and locations, Geneva, Brussels and several cities in this hemisphere, powerful actors ensure their interrelation - the USA in the FTAA and the WTO, and the European Union in the treaty succession negotiation with Caricom and in the WTO. In view of such interlinkage the overriding diplomatic concern of Caricom must be to ensure that their vital interests and objectives, which they are endeavouring to get enshrined in global trade rules (in particular special and differential treatment) in the WTO negotiation are not lost or diluted or compromised in the regional trade negotiation (FTAA and with the EU).

Sir Shridath Ramphal had drawn their need for a unified strategy to the attention of the Montego Bay Summit in a strategy paper in which he emphasised the "basic issue of the relationship between the WTO negotiations and Regional Trade Agreements - specially relevant to the FTAA - the contention being that WTO rules should provide the overall boundaries for regional agreements, with those rules being first made more flexible and development friendly. It follows that an FTAA process which runs ahead of WTO negotiations but falls short of them in quality is not only strategically imprudent for the Caribbean but ultimately harmful to Caribbean and developing country arguments at the global level."

Ramphal's contention is surely right but the context in which the strategy must be applied has changed fundamentally. Hence the difficult choices now facing Caricom.

The changed context may be described briefly as follows:

First, there has been the debacle at the WTO negotiations at Cancun. Contrary to the optimism expressed recently by the WTO Director General in Georgetown it seems most unlikely that the full negotiation process can resume any time soon in Geneva. In this schedule the concerns of small states will be at best seen as a peripheral issue. A pessimistic forecast on the future of the negotiations confronts the fact that this is the US presidential election year and that President Bush having recently eliminated steel tariffs is most unlikely to remove or lower farm subsidies. In consequence, the European Union is unlikely to move significantly on that issue and movement on this issue of farm subsidies remains central to the resumption of negotiations.

It should also be recalled that even before Cancun, the negotiations in Geneva on Special and Differential Treatment (SDT) as mandated at Doha had failed to reach significant results. The developing countries had submitted over eight amendments to secure S&D treatment. Only four had been agreed by the December 2002 deadline.

Second, there is the current outcome of the FTAA negotiations. Under Brazilian pressure that unless the major issues including abolition of farm subsidies are negotiated, which the US is unwilling to do, the FTAA must remain a low level or small scale agreement.

Hence at the recent November Miami negotiations the FTAA appears to be coming out as no more than a framework agreement.

It appears that Caricom had conceived its negotiating stance in terms of achieving a satisfactory position within an overall agreement as FTAA had originally been protected.

Before leaving this aspect it should be remarked that it is surely a matter for Olympian laughter that the US resisted Brazilian pressure by arguing that an issue such as farm subsidies with global implications must be reserved for negotiation at the WTO!

Third and most important of all the US, contrary to its original stance on the FTAA, is now showing a pronounced preference for sub-regional and bilateral trade agreements. A Bilateral Agreement already exists with Chile and an agreement CAFTA, has just been concluded with four of the five Central American republics, El Salvador, Guatemala, Honduras and Nicaragua. More recently it has been announced that negotiations are about to begin with the Andean Group of countries, Colombia, Peru, Ecuador and Bolivia.

The outcome of the negotiations with Central America could have grave implications for Caricom states. Although differing in history, language, religion, ethnicity and size to Caricom states, these two disparate groups (Central America and Caricom) have in recent times been somehow linked, particularly in US foreign policy perceptions. Thus both groups of countries are beneficiaries under the Caribbean Basin Initiative (CBI). More to the point in the context of the FTAA negotiations the study of the economics of both groups was entrusted to the same body namely, the Consultative Group on smaller economies.

Therefore is it not highly probable if not inevitable that the agreements reached with Central America will provide the precedents for negotiations with Caricom? In this connection such analysis of the negotiations between the US and Central America as became available (Girvan and Jessop) are not reassuring.

Two related events should be remarked upon. First the Dominican Republic which identifies with the Caribbean in the case of the evolving Cariforum relationship with the EU will, in all likelihood, as a result of a US initiative join the Central American Trade Pact (CAFTA).

Second it has been reported that Costa Rica withdrew at the last moment the negotiations and that it did not sign the pact.

It might be useful to Caricom to find out what motivated the Costa Rican withdrawal.

All of the above-mentioned developments are definitely not just of academic interest as it is entirely possible that the US may nudge the Caribbean into sub-regional negotiations. This could happen at the conference which the US is sponsoring in the Caribbean early in the year that seeks to find ways to mutually reinforce what it describes as its Third Border. Does Caricom have a position if and when this occurs?

More and more it appears that the US is implementing a strategy in which sub-regional agreements may be fitted sometime in the future into an FTAA framework pact. Such a strategy suits the USA as it enables the US to bypass at least for the time being the difficulties posed by the demands of Brazil, Argentina and other states and at the same time secure its own interests in a fait accompli before global negotiations resume in the WTO.

In this confused situation it may well be the best course for Caricom to concentrate resources on the negotiations with the EU which begin in February. This time round such negotiations will have particular difficulties. Caricom will not as in the past be negotiating as part of the ACP, an inter-regional agreement for all three regions. In view of fundamental change in the EU policies, Caricom, it is understood, will be negotiating on its own, a region-specific agreement with all its consequent vulnerabilities enhanced. Nevertheless it may be the best prospect especially if undertakings could be secured from the EU to support similar positions at the WTO.