NEW YORK (Dow Jones)--Maybe a tariff-free zone from Alaska to Patagonia isn't headed for the freezer, after all.
In a joint statement after Brazilian President Luiz Inacio Lula da Silva met with U.S. counterpart George W. Bush in Washington on Friday, the two nations reaffirmed their intention to ink a Free Trade Area of the Americas by January 2005 as originally scheduled.
The renewed commitment comes after Brazil had suggested in recent months that the start-up date for the 34-country FTAA be pushed back - and stressed just last week that deepening commercial ties with South America was a greater priority than clinching a hemisphere-wide pact.
"My impression is they're now on the same page and are working together," said Jeff Schott, a senior fellow and trade expert at the Institute for International Economics in Washington.
The Bush administration has long touted FTAA as a future engine for economic growth and political stability in the region, and Brazil's participation in the initiative is crucial. Not only is it the largest country in Latin America, but it's also co-chairing the current round of FTAA negotiations with the U.S.
Before assuming the Brazilian presidency last year, Lula, a veteran leftist politician, said the proposal amounted to "annexation" by Washington. Relations appeared to chill further when U.S. Trade Representative Robert Zoellick intimated Brazil could trade with Antarctica if it wasn't interested in FTAA.
But analysts say prospects began to brighten when Zoellick visited Brasilia in late May to spur on talks - and received a further boost from Lula and Bush's face-to-face encounter, their first since Lula assumed the Brazilian presidency in January.
"Without any question, I believe that we can surprise the world in terms of the relationship between Brazil and the U.S.," an optimistic Lula said Friday.
Ideological concerns largely appear to have been put aside in Brazil, which is booking record exports this year on the back of a weaker currency and embarking on a series of market-friendly economic reforms as Lula steers a centrist policy course.
Local businessmen also seem to be getting behind FTAA, albeit cautiously, as they calculate the pros and cons of a more leveled playing field.
"I think they understand it makes sense to negotiate and see what happens and yet be tough. In other words, take a real business approach," said Mario Marconini, an executive director at the Brazilian Center for International Relations in Rio de Janeiro.
U.S. trade officials hosted two days of informal meetings with 13 other countries outside Washington earlier this month in a bid to give new momentum to the free trade talks, which were launched at the end of 1994. The hemisphere's deputy trade ministers are scheduled to meet in El Salvador (news - web sites) July 7-11.
Talk is growing that the 34 countries will aim for a slimmed-down type of FTAA in order to meet their self-imposed deadline, leaving the more contentious issues to be resolved through the World Trade Organization.
The U.S. has already indicated it wants the thorny questions of agricultural subsidies and antidumping rules to be set aside and negotiated at the WTO. Latin American countries may go along with that if regulations governing intellectual property rights and telecommunications and financial services, two areas that many countries want to move slowly on, are also shunted off to the WTO.
Not everyone is sure that will be enough to get FTAA signed by January 2005.
"I think it's a bit unrealistic," Thomas O'Keefe, president of the Washington- based Mercosur Consulting Group, said of the current timetable.
Meeting in Asuncion last week, the Mercosur customs union, which groups together Argentina, Brazil, Paraguay and Uruguay, strengthened their resolve to negotiate with Washington as a bloc in a bid to force more concessions.
Mercosur got a boost from recent presidential elections in Argentina, where Nestor Kirchner defeated Carlos Menem, a former president who was open to the idea of striking a bilateral accord with Washington. With the climate changing, Uruguay has also dropped talk of negotiating directly with the U.S. and closed ranks with its larger neighbors, O'Keefe noted.
But U.S. negotiators are shrugging off last week's Mercosur gathering, pointing out that Washington has long been comfortable with the idea of dealing with the South American trade bloc.
"Personally I don't see a huge change," Sue Cronin, the USTR's director for Brazil and the Southern Cone, told Dow Jones Newswires last week.
Some analysts regard the next few months of negotiations as crucial, ahead of a high-profile ministerial meeting scheduled for November in Miami.
"If there isn't progress to illustrate the talks are really moving forward by Miami, then you might question the ability to meet the (January 2005) deadline," said the IIE's Schott.
-By Mike Esterl, Dow Jones Newswires; 201-938-4026; mike.esterl@dowjones.com
(Stephen Wisnefski contributed to this report)
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