Inter-American Relations: A Collection of Documents, Legislation ...

3. Latin American Free Trade Association (LAFTA)

a. Description

(ASOCIACIÓN LATINO-AMERICANA DE LIBRE COMÉRCIO-ALALC)

(ASSOCIAÇÃO LATINO-AMERICANA DE LIVRE COMÉRCIO)

CEBOLLATI 1461, CASILLA DE CORREO 577, MONTEVIDEO, URUGUAY

The Latin American Free Association was set up in February 1960. It aims at an eventual Latin American Common Market.

Established in 1965 as the supreme organ of LAFTA, the Council is composed of the Foreign Ministers of all member countries. It meets regularly and makes important policy decisions relating to regional integration.

CONFERENCE OF CONTRACTING PARTIES

The Conference of Contracting Parties is composed of delegations from each member country and makes decisions on matters that require a joint resolution of the Contracting Parties. Its functions are to take steps towards the implementation of the Treaty, to approve the annual Budget, to fix contributions, to elect a President and two Vice-Presidents and to appoint the Executive Secretary of the Permament Execu tive Committee. It meets in ordinary session once a year, when trade negotiations are carried out, and in extraordinary session when convened by the Permanent Executive Committee.

PERMANENT EXECUTIVE COMMITTEE

The Committee, consisting of one representative of each contracting party, is the Permanent body of the Association and is responsible for supervising the implementation of the provisions of the Treaty. Among its regular duties are the convoking of the Conference of Contracting Parties, to submit to the Conference an annual progress report and budget, to represent the Association, to carry out studies, suggest measures and submit recommendations to the Conference and NOTE. Reproduced with permission of The Europa Yearbook, 1972. Vol. I. London, Europa Publications Limited, 1972.

to apply for technical assistance and collaboration. The Committee operates at the headquarters of the Association in Montevideo.

SECRETARIAT

The technical and administrative functions of LAFTA are carried out by the Secretariat, which is directed by an Executive Secretary elected by the Conference for a term of three years. The appointment is renewable. The Executive Secretary participates in the work of the Council of Ministers, the Conference and the Committee.

The Secretariat is composed of the Departments of Trade Policy, Industrial Affairs, Economic Affairs, Agricultural Affairs, and Administration, and a number of specialized services.

FUNCTIONS

The Latin American Free Trade Association is an intergovermental organization, created by the Treaty of Montevideo in February 1960 with the object of increasing trade between the Contracting Parties and of promoting regional integration, thus contributing to the economic and social development of the member countries.

System of Tariff Reduction. The Treaty of Montevideo provides for the gradual establishment of a free trade area, which would form the basis for a Latin American Common Market. Reduction of tariff and other trade barriers is to be carried out gradually up to 1980 by two means, the National Lists and a Common List.

The National Lists form the basis for reductions of tariff and trade barriers between the member countries. Each country presents annually a list of those commodities on which it is prepared to concede reductions and agreement between the members shall be reached by negotiation. Reductions agreed in National Lists come into force on January 1st of the year following agreement.

The Common List includes those products on which complete exemption from all duties and charges shall obtain within the Free Trade Zone. The products represented on this list shall represent at least 25 per cent of the total trade of the area during the first three years, 50 per cent during the second three year period, 75 per cent during the third three year period, and the greater part of the inter-alia trade during the final three year period.

The Treaty includes provisions for Special Lists for more favorable terms for less developed countries. Paraguay has already obtained benefits under this clause, which also covers Ecuador, Bolivia and, to some extent, Uruguay.

Subregional Agreements. The Association approves in principle the drawing up of subregional agreements between its members, in accordance with the Declaration of the Presidents of America, signed at Punta del Este in April 1967, as being a means of encouraging the realization of a Latin American Common Market.

The Andean group of countries (Bolivia, Colombia, Chile, Ecuador and Peru) signed the Cartagena Agreement in May 1969 and in July 1969 the Permanent Executive Committee of LAFTA unanimously approved the establishment of an Andean Common Market.

A River Plate Basin Treaty (Tratado de la Cuenca de la Plata) was signed in Brasilia in April 1969, by Argentina, Bolivia, Brazil, Paraguay and Uruguay, to co-operate in joint development schemes in the area drained by the rivers which flow into the Plate estuary.

ACTIVITIES

Trade Liberalization Program. The annual rounds of negotiations have given rise to approximately 11,000 tariff reductions incorporated in the National Lists. More than 7,000 preferential tariff reductions in favor of less developed member countries have been included in Special Lists. These concessions cover almost 90 per cent of trade between countries of the region.

Negotiations for a second Common List were begun in December 1967 and continued July-November 1968, but no agreement was reached. In October 1969, when negotiations for the Common List were resumed, the Contracting Parties adopted a protocol, drawn up in June 1969 by the Permanent Executive Committee, modifying the Treaty of Montevideo. The amendments provide for prolongation of the strict time limits set for the introduction of free trade in the area, and the transition period is to terminate in 1980 instead of in 1973.

Growth of Trade. While from 1955 to 1961 the volume of intraregional trade decreased from $1,087 million to $659 million, since the Treaty of Montevideo came into effect it has increased to a total of $1.342 million in 1970.

Co-operation and Development. A number of industrial agreements have been completed in relation to electronics, chemicals, petro-chemicals, electrical appliances and pharmaceuticals and the Permanent Executive Committee agreed in September 1969 on proposals for a regional policy for industrial development, integration of industry by sector, widening of markets, investment policy, and measures to be taken to assist the less developed countries of the region.

LAFTA has established a System of Payments and Credits to facilitate commercial operations between member countries. The system functions by means of a network of credit agreements between central banks, and a procedure of multilateral compensation, which is administered by the Central Reserve Bank of Peru. Operations channelled through this system have increased from $6 million in 1966, the first year of functioning, to almost $165 million in 1971.

LAFTA has adopted a policy of co-ordination and harmonization of legislation, principally through special intergovernmental agreements, such as the Agreement on Transport by Water, the Protocol on Transit of Persons, and the Protocol on the Settlement of Disputes. A number of studies have been carried out on matters relating to integration, such as industrial property, harmonization of fiscal laws, customs legislation and the adoption by Contracting Parties of common positions with regard to third parties.

LAFTA-CACM Co-ordinating Commission, Comisión Coordinadora ALALC-MCCA). The Commission was created in September 1967 by LAFTA and CACM (Central American Common Market) to devise methods for the formation of a Latin American Common Market. Also included in the Commission are Latin American countries which do not belong to either LAFTA or CACM. The first meeting of the Commission was held in Port of Spain, Trinidad and Tobago, in October 1968.