A merican trade officials have agreed to pursue a free-trade zone that stretches throughout the Western hemisphere. The agreement they reached in Miami, Florida, last week is less than it seems, however. Following the breakdown of World Trade Organization (WTO) ministerial talks in Cancun, Mexico a few months ago, trade officials worried about the consequences of a failure to reach another agreement. The Free Trade Agreement of the Americas may yet come into existence but last week's compromise ensures that it will be much less ambitious that planned.

The FTAA was launched in 1994, following the birth of the North American Free Trade Agreement. Expectations of NAFTA's success led many to anticipate its expansion. And indeed, the United States proposed extending NAFTA to all the countries in the hemisphere, except Cuba, by early 2005, with the goal of turning the entire Western hemisphere into one free-trade area. As planned, the FTAA would not only eliminate trade barriers, but would have created codes of conduct for governments as well in such fields as intellectual property right protection and investment rules. In retrospect, NAFTA may be remembered as the high point of free-trade activism.

Those high hopes have been dashed by the less than convincing results delivered by trade reforms in the nine years since NAFTA was launched. Economic liberalization has been frustrated by a series of financial crises around the world, many of which were seen as the product of premature reforms. While there has been considerable wealth creation as a result of rising levels of trade, the results have fallen considerably short of expectations. Worse, the gap between haves and have-nots appears to have grown.