NEW YORK (Dow Jones)--The U.S. hope of sealing a free trade deal covering the Western Hemisphere by 2005 looks increasingly unrealistic, notwithstanding official declarations to the contrary.
U.S. Trade Representative Robert Zoellick spent the last couple days in Brasilia meeting with Brazilian officials to advance the cause, telling reporters Tuesday the deadline for the Free Trade Area of the Americas, or FTAA, still stands.
But given potential obstacles such as the U.S. electoral cycle and the touchy issue of its agriculture subsidies, and a smaller-scale regional integration initiative in South America, skepticism about the formal timeline abounds.
"Nobody but the administration in Washington talks about it with a straight face," said Gary Hufbauer, a senior fellow at the Institute For International Economics in Washington, D.C.
One of the main problems, he said, is U.S. elections next year. While trade negotiations don't traditionally influence election campaigns, the closeness of the 2000 vote means that sensitive issues such agricultural subsidies and tariff protections for steel would become political hot potatoes.
Another problem is the emergence of left-leaning leaders in Brazil and Argentina who want to reinvigorate the Common Market of the South, or Mercosur, customs union. Mercosur also includes Paraguay and Uruguay, while Bolivia and Chile are associate members.
Ricardo Amorim, head of Latin America research at IDEAglobal in New York, said the U.S. decision to relegate negotiations on agricultural products to the World Trade Organization may well have prompted Brazil and Argentina to focus first on Mercosur, and then negotiate with the U.S. as a bloc for enhanced leverage.
Zoellick, Tuesday, seemed to acknowledge that this appears to be in the cards. While noting that the purpose of his trip was to advance the FTAA, which the U.S. and Brazil are currently co-chairing, he said the U.S. "will continue to talk with our Mercosur colleagues."
Indeed, the U.S., he said, will put all U.S. tariffs - agricultural and nonagricultural - on the table. At the same time, it will also try to enlist Brazilian President Luiz Inacio Lula da Silva to help push the Europeans and Japanese at the Group of Eight summit in France next week, which Lula will be attending, to cut their agricultural subsidies. Lula and U.S. President George W. Bush will have a second opportunity to address the matter personally when they meet at the White House June 20.
Unless Europe and Japan go along, the U.S. would clearly be loathe to cut its support for domestic farmers, hence Washington's move to link talks on its agricultural product supports to the WTO.
But these are precisely the product lines, along with steel and apparel, that Brazil wants the U.S. to liberalize, and it's far from clear whether putting them on a dual FTAA-WTO track will accelerate the process or bog it down.
IDEA's Amorim thought this tack will make the FTAA 2005 deadline virtually impossible to meet. "This renders the FTAA not attractive at all to Brazil and Argentina," he said. "Unless there's a willingness in the U.S. to negotiate agricultural subsidies in the FTAA, there will be no important advances in my view."
Amorim, a Brazilian native, noted that Brazil and Argentina recognize the importance of gaining greater access to the world's largest market. Nonetheless, without Brazil, "there's no FTAA," which the U.S. wants for the promotion of trade, investment and economic development throughout the hemisphere.
That said, the U.S. doesn't appear to be banking entirely on the FTAA. It's due to sign a new bilateral free trade agreement with Chile on June 6 that the legislatures of both countries are widely expected to pass into law, and aims to wrap up another one with Central America before the end of the year. About a decade ago, the U.S., Canada and Mexico created the North America Free Trade Agreement.
And if Argentina and Brazil want to play hardball, the U.S. could always begin bilateral discussions with Colombia and Peru, both of which have been pressing Washington to begin bilateral free trade talks with each of them.
But the Bush administration has so far said the Central America Free Trade Agreement is the only other from the region in the pipeline, and that the focus should stay on the FTAA.
Aside from Cuba, the only country that has overtly distanced itself from the FTAA program is Venezuela, whose President Hugo Chavez has warned against its " neoliberal" design. Before integrating commercially with the U.S. on a hemispheric scale, the Andean region and Mercosur should unite, he says.
-By Charles Roth, Dow Jones Newswires; 201 938 2226; charles.roth@dowjones.com
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