"This agreement will accelerate a process that is removing the government from vast areas of China's economic life. ... As [China's people] become more mobile, more prosperous, more aware of alternative ways of life, they will seek greater say in the decisions that affect their life."
-- President Bill Clinton,
speaking on accession of China to the
World Trade Organization, March 2000
"There are no guarantees, but in scores of cases from Chile to Spain to Taiwan, the link between democracy and economic liberalization has proven powerful over the long run"
-- Condoleezza Rice,
National Security Adviser to President George W. Bush,
Foreign Affairs, January/February 2000
Exactly three months after taking office, President Bush will face one of the biggest foreign policy opportunities -- and challenges -- of his term. In April, he will travel to Quebec to attend the Summit of the Americas, along with the leaders of the other 33 democracies of the Western Hemisphere.1 The main item on the agenda will be the launch of the final phase of talks to create a Free Trade Area of the Americas (FTAA) -- a proposed free trade bloc stretching from the Bering Strait to Tierra del Fuego. The FTAA promises to create a wide and deep market spanning almost the entire hemisphere, spreading much-needed trade and investment to all corners of the region. Yet, the FTAA process provides the opportunity to do more than simply expand trade. The new administration should seize this chance to affirm U.S. engagement in the hemisphere and commit the United States to the protection of democracy in the region, through the inclusion of a "democracy clause" in the FTAA.
The linkage between economic and political reform is not new. Under the Marshall Plan (which gave funding to European countries for postwar reconstruction), the United States required European nations to engage in regional economic cooperation and trade liberalization -- with the explicit aim of bolstering the weaker democracies of the region against the threat of communism. Similarly, the United States pursued the expansion of trade and investment with countries such as Japan to shore up their support for capitalism and democracy. More recently, the European Union added an explicit democracy clause to its formal charter once the membership of younger and arguably weaker democracies in Central and Eastern Europe became a real possibility. And during last year's debate on whether to grant China Permanent Normal Trade Relations (PNTR) status, President Clinton repeatedly drew a connection between economic and political liberalization, between the expansion of free trade and democracy.
Yet the connection between free trade and democracy is neither linear nor guaranteed. Fragile and young democracies benefit greatly from the "carrot" of support, advice, and assistance offered by mature democracies. There are also instances when coordinated external pressure and action -- in league with like-minded domestic forces -- can help protect democracy when it is threatened. Nowhere is this more true than in Latin America -- a region that has faced strong challenges to its nascent democracies over the past two decades. In the 1990s alone, the United States joined with other Western Hemisphere countries and the Organization of American States to deflect numerous challenges to democratic governance, including in Guatemala, Haiti, Paraguay, Ecuador, and Peru.
As the United States moves forward with trade liberalization in Latin America under the Free Trade Area of the Americas, it should work with like-minded countries in the Western Hemisphere to adopt an explicit "democracy clause." The clause should be modeled on those found in other regional economic agreements, such as the European Union and the Southern Cone Common Market (MERCOSUR), but could be stronger than those in three respects: the definition of democracy could be elaborated, institutional mechanisms for responding to problem cases could be specified, and actors other than national governments could be given standing to bring cases.
The exclusion of Cuba from the current FTAA negotiations is already an implicit limitation of the FTAA to democracies. But making the democratic clause explicit would have several advantages. Such a step would signal an uncompromising, unambiguous U.S. commitment to political as well as economic reform in the region; strengthen the hand of supporters of Latin American democracy in countries throughout the region; serve to deter would-be challenges to democratic rule; and provide a potentially powerful instrument for addressing threats to democracy as and when they arise.
While the relationship between free trade and democracy is not a simple one of cause and effect, trade liberalization can help to promote democratization. In heavily regulated and state-controlled economies, trade liberalization encourages the removal of government from many aspects of life and stimulates the private sector. The removal of barriers to foreign trade and investment also spurs competition, challenging domestic monopolies and entrenched interests. More broadly, increased contact with the rest of the world, encouraged by trade, fosters international awareness and understanding of democratic norms. The equations between modernity and democracy, between legitimacy and the rule of law, are strengthened. Over the longer term, the economic growth and prosperity supported by increased trade and investment promotes the expansion of a substantial middle class, with both increased interest in democratic structures and the power to maintain and reform them.
Yet simply noting the broad correlation between free trade and democracy is of little practical use in specific instances when democrac y in a trading partner is under threat. It is in precisely such situations that the pursuit of free trade and democracy often seem to conflict -- pressure increases on trading partners to "protect democracy" by taking action against the country concerned, and often those actions include trade sanctions. Unilateral action in such situations is likely to be both ineffective and subject to domestic protectionist pressures.
In contrast, a democracy clause included in the FTAA would establish a multilaterally agreed-upon procedure for handling situations when democracy is challenged in one or more members. It could be modeled on clauses in other trade and regional economic agreements, such as those in the European Union and MERCOSUR. In addition, a democracy clause could include language on accession, specifying that future members must adhere to basic democratic conditions. Such a clause would provide an explicit incentive for the one hemispheric nation outside the FTAA negotiations -- Cuba -- to democratize (at least once Fidel Castro departs the stage). It would also serve as a deterrent to those -- whether currently in power, such as Venezuelan President Hugo Chavez, or aspiring to rule -- that may be contemplating nondemocratic paths.
At the first Summit of the Americas, in Miami in December 1994, the 34 democratically elected presidents and prime ministers of the Western Hemisphere agreed to negotiate a Free Trade Area of the Americas by 2005. This agreement came on the heels of the North American Free Trade Agreement (NAFTA), and reflected the desire of other regional countries to gain the same preferential access to the U.S. market promised to Mexico by NAFTA. For others, even if the trade and investment incentives were not so obvious, the FTAA was regarded as insurance against future protectionism in the United States and as a mechanism to lock in domestic economic reforms against a resurgence of protectionism and statism. For the United States, the FTAA was a mechanism to extend the "spirit of NAFTA" southward, to gain easier access to Latin America's more protected markets, to advance market-oriented economic reforms, and more generally to strengthen intra-hemispheric relations. Throughout the hemisphere, the FTAA was understood as the cornerstone of a new era in regional cooperation across a wide range of issues.
The Miami summit set in motion an ongoing process of negotiations, lodged in nine negotiating groups (market access, agriculture, investment, services, government procurement, subsidies plus anti-dumping and countervailing duties, intellectual property, competition policy, and dispute settlement). The intention was to prepare a consolidated and comprehensive text -- albeit still in draft format -- in time for the third Summit of the Americas in Quebec City this spring.
The six-year process has already yielded some fruits.2 Modest trade facilitation accords have been enacted. A dense network of regular and systematic exchanges between middle-level public sector officials have created a network of negotiators that share similar information, databases, standardized language, and, to a degree, professional trust and mutual respect. These international meetings have had a multiplier effect on national administrations, compelling governments to commit human resources and political energies to talks focused on trade liberalization. Even the most reluctant governments have gradually realized that isolation is a high-risk strategy, giving way to a more constructive engagement.
We do not yet know the exact shape of the text that will be showcased in Quebec, nor how troublesome the draft language will be. Certainly, there will be much left to negotiate, and a key to Quebec will be whether the leaders signal that they have the political will to conclude the negotiations and gain approval of a meaningful agreement. But there is already considerable momentum behind the FTAA, and George W. Bush, as candidate and as president, has repeatedly voiced his unconditional support for hemispheric free trade. All the other regional leaders remain committed, at least verbally, to the project.
The FTAA talks have not directly addressed politics. But the FTAA was born out of the Summit of the Americas meeting in Miami, which was a celebration of the region's emergent democracies. Only democratically elected governments were invited to Miami, thereby indirectly excluding the government of Fidel Castro. At Miami and at the second Summit of the Americas in Santiago, Chile, in 1998, governments noted that their main themes -- political democracy, economic integration, and equitable development -- were complementary and mutually reinforcing.
The MERCOSUR nations (Brazil, Argentina, Uruguay, and Paraguay) have been more explicit. In their Presidential Declaration on the Democratic Commitment in MERCOSUR, signed in June 1996, they agreed that "the full effectiveness of democratic institutions is an essential condition for cooperation in the framework of the Treaty of Asuncion."3 The Southern Cone presidents went further: "In case of breakdown or the threat of breakdown of the democratic order in a Member State, the Parties shall immediately consult one another in such way they deem appropriate. ... In case the consultations ... prove unsuccessful, the Parties shall consider the application of appropriate measures. Such measures may range from the suspension of the right to participate in MERCOSUR forums to the suspension of rights and obligations emerging from MERCOSUR norms."4
At the hemispheric level, the Organization of American States (OAS) has gradually been strengthening its capacity to collectively defend democracy in its member states. It regularly monitors human rights practices and national elections, and provides technical assistance and shares best practices to promote capacity-building in democratic institutions. Specialized branches battle corruption and drug trafficking.
In sum, tying a democracy clause to the FTAA would be a natural progression from steps already taken in the region to protect democracy. It would provide governments in the region with an additional instrument with which to pursue common purposes, this time with the backing and participation of the United States. And it would provide a concrete basis for the United States' interest in protecting democracy in the region.
A democracy clause would also help bolster the case for increased global integration here at home. Anxieties over globalization have risen to new heights in the United States over the past few years. Protests in Seattle outside the World Trade Organization meeting and in Washington, D.C., during the World Bank and International Monetary Fund annual meetings, as well as the rancorous debate over the vote to liberalize trade with China, highlight a growing fear about the impact of globalization on ordinary lives. While the public generally accepts the premise that trade liberalization brings economic benefits, voters are also concerned about other globalization issues, such as the protection of the environment and workers rights and the promotion of democracy and human rights around the world. Failure to address these issues will likely result in continued skepticism and opposition, both among the public and in the U.S. Congress (similar to that witnessed during the 1997 and 1998 defeats of fast track legislation).
Thus, policymakers need to find innovative ways to address the challenges arising from globalization, while supporting free and open trade both in principle and in practice. Some free trade purists in the United States will no doubt argue that all such non-trade issues should be dealt with outside trade agreements in other relevant international forums. Indeed, other institutions should be used, or, where necessary, created, to deal with many of these challenges, particularly where there is a risk of disguised protectionism. A beefed-up International Labor Organization should take the lead in setting, monitoring, and enforcing internationally recognized core labor standards. Similarly, international environmental agreements are the best model for addressing global environmental problems.
Yet this focus on alternative international rules and institutions should not preclude addressing mutually reinforcing goals and values inside the trade arena, as long as the pursuit of free trade is not undermined. The FTAA is a suitable and appropriate forum for explicitly dealing with the promotion of democracy for three reasons. First, while there are reasons for optimism based on recent progress, Latin America has a long history of political cycles of democracy alternating with authoritarianism, such that there is reason to fear backsliding away from democratic rule. Many countries still have weak and underdeveloped democratic systems, public opinion polls show that many people are dissatisfied with the ability of their young democracies to deliver social progress so far, and authoritarian political impulses remain strong. Indeed, other regional treaties have included commitments to democracy for precisely this reason. (In contrast, a democracy clause would be redundant in a free trade deal with Switzerland.)
Second, a democracy clause is possible in the Western Hemisphere because the current democratic wave is at a crest, and all the countries but Cuba are, at least in form, electoral democracies. It would not be feasible to insert a democracy clause in an Asia Pacific Economic Cooperation (APEC) forum agreement, as this looser grouping includes several countries, such as China, that are not even formally democracies. Similarly, a democracy clause was inevitably omitted in the recent bilateral free trade accord signed with the Hashemite Kingdom of Jordan. Such "inconsistencies" are not hypocritical, but rather demonstrate realism in the face of the vast local differences that confront U.S. foreign policy around the world. Great powers should accomplish what they can where they can, rather than futilely attempting to advance with equal vigor all of their interests everywhere at once.
Finally, a democracy clause is appropriate in the FTAA because the trade deal will form the cornerstone of a wider concept of a community of democracies in the Western Hemisphere. The FTAA is a genuinely multilateral process, being driven by all of the nations in the region, and aims to deepen economic integration beyond simple tariff elimination. Indeed, the primary benefit of the FTAA to the United States is arguably not economic (such as increased exports) but political -- the building of stable, democratic, and prosperous neighbors to the south that are willing to work with the United States on a wide range of important issues of mutual concern, from combating narcotics trafficking and other international crimes, to better controlling migratory flows and protecting the environment, to harnessing the advantages of electronic commerce, telecommunications, and air travel. In effect, for a hemisphere largely at peace and devoid of major interstate conflict, the FTAA becomes the cornerstone of a hemispheric security alliance for the 21st century.
In sum, a democracy clause is not a universally applicable model for all trade agreements. In some cases it may be irrelevant, while in bilateral deals it may smack of U.S. unilateralism. It should certainly not become a blueprint for all future trade deals. However, in the case of the FTAA, where the United States' primary long-term goal is the promotion of economic development and democracy in the region, a strong commitment by all the parties to the protection of democracy is both relevant and desirable. It would be supported by most Latin American governments, who would welcome the implicit praise and signal of external support for their own democratic systems. The inclusion of a democracy clause will also help sustain and advance U.S. values in Latin America and rebuild support for the policy of economic engagement among the American public. By placing the FTAA in a broader political and security framework, a democracy clause could be critical to building a congressional majority behind freer trade with the Western Hemisphere.
Yet, even when convinced of the need for a democracy clause as part of the FTAA, skeptics might argue that such a clause will be ineffective in practice. They might suggest that there are too many technical problems in defining democracy and deciding when to take action, that it would never be invoked, and that such a linkage between trade and democracy will be opposed by our Latin American trading partners.
The problems associated with designing a democracy clause, though real, are not insurmountable. Most other examples (such as the European Union and MERCOSUR) simply refer to the protection of democracy and leave it to leaders to decide themselves if and when democracy is under threat in practice. Since democracy is a difficult concept to define, some flexibility in interpreting when democracy is under threat is useful. However, to guard against the trap of formalism -- where simply holding periodic elections becomes synonymous with democracy -- the FTAA partners should adopt a more elaborate definition of democracy in this context. It could include broad principles such as universal suffrage, regular free and fair elections (with independent monitoring), a plurality of political parties, and freedom of speech and association.
In addition, those with standing to bring a case under the FTAA clause might include individual member countries, the Secretary General of the Organization of American States (OAS), and, more controversially, certain nongovernmental organizations. Cases might be reviewed by whatever management structure is eventually established for the FTAA, or by the OAS Permanent Council (composed of OAS member states), perhaps advised by an independent body such as the prestigious Inter-American Human Rights Commission. It would also seem sensible to allow for a continuum of actions once a threat to democracy has been established, ranging from consultations, to the suspension of voting rights and expulsion from meetings, to the withdrawal of trade preferences in an extreme case. (The removal of trade preferences granted under a regional trade deal, rather than the imposition of import bans or prohibitively high tariffs, is also legal under WTO rules as long as all WTO members are fully informed in advance of any changes.5)
On the question of invoking the clause, there is already some precedent in similar clauses in other economic agreements. For example, following Paraguay's recent political instability, Paraguay's MERCOSUR trading partners, led by Brazil, threatened to invoke the agreement's democracy clause. Brazilian President Cardoso warned the Paraguayan authorities that the interruption of the constitutional order would result in Paraguay's expulsion from MERCOSUR. This pressure was a key factor in the resignation of then-President Cubas and his replacement with the leader of the Senate, as mandated by the Paraguayan constitution.
Finally, the objection that Latin American countries will oppose a democracy clause seems unlikely in practice. Many of the countries in the region have struggled with democracy and recognize the benefit of external support during crises. For example, at a summit of the South American heads of state held in Brasilia in September 2000, the presidents agreed that "maintenance of the rule of law and strict respect for the democratic system in each of the twelve countries of the region are at once a goal and a shared commitment and are henceforth a condition for participation in South American meetings." They also agreed to "conduct political consultations in the event of a threat of disruption of the democratic system in South America." Indeed, existing regional economic deals -- such as MERCOSUR -- already contain democracy clauses; the FTAA would simply be modeling itself on steps already taken in Latin America independently of the United States.
The April Summit of the Americas offers an excellent opportunity for the assembled leaders of the Western Hemisphere to insert a democracy clause into the negotiations for a free trade accord. For what could be President George W. Bush's first major venture into multilateral diplomacy, the adoption of a democracy clause -- coupled with a firm determination to conclude negotiations for the world's largest free trade area with all deliberate speed -- would demonstrate visionary leadership and strategic resolve. For the Latin American and Caribbean countries, agreement on an FTAA cum democracy clause would affirm U.S. engagement in their hemisphere, and promise them what they most want from the United States -- guaranteed access to the world's biggest and most dynamic market, and backing for their preferred form of government.
