QUITO, Ecuador (Reuters) - Trade chiefs from the United States, Canada and Latin America face a decisive hurdle this week in Quito, where they must strike technical accords to salvage a planned Americas-wide free trade zone by 2005.
Washington says the ministerial meeting on Friday will usher in the "final phase" of negotiations, in which the United States and Brazil -- the two largest economies in the Americas -- will co-chair the talks through their final three years.
It is likely to be a long, bumpy ride.
Brazil does not see eye to eye with the United States on the so-called Free Trade Area of Americas, or FTAA, urging South American unity to avoid what the president-elect has branded "annexation" by a U.S.-slanted free trade zone.
Brazil is also fuming over recent hikes in U.S. steel tariffs and new U.S. agricultural subsidies which have hurt its exports.
Other Latin American leaders have voiced skepticism about the deadline to tear down trade barriers from Alaska to Argentina as the region reels from economic woes and political uncertainty.
Argentina is still crippled from a disastrous debt default, and Venezuela's president -- who strongly opposes the FTAA -- barely survived a brief coup in April.
One U.S. trade official, who declined to be named, said the talks would concentrate on crucial procedural issues "which do not have very sensitive political implications." The United States has outlined a seven-point agenda for the meeting -- including the creation of a firm timetable to negotiate lower tariffs.
But analysts are skeptical.
"The administration is trying, obviously, to put these talks in a positive light. But there are still a lot of fundamental questions that are not resolved," said Michael Shifter of the Washington-based Inter-American Dialogue think thank.
"It's still not terribly clear there is going to be agreement on the basic issues of trade. ... And the big question is Brazil and the United States," he added.
TRADING WITH PENGUINS
Brazil on Sunday elected former metalworker Luiz Inacio Lula da Silva president of the world's ninth-largest economy. The leftist leader has announced no plans to send a delegation to Quito, leaving talks to the outgoing administration.
Lula, as the president-elect is known, is not expected to substantially alter what has already been a very firm stance by Brazil's government. In order to make FTAA worthwhile, Brazil has demanded the United States open its fiercely protected sugar, steel and citrus markets to freer competition.
Analysts agree that without Brazil there will be no FTAA, and it is unclear how quickly Washington can lower key tariffs.
The proposed zone would essentially be an extension of the North American Free Trade Agreement, or NAFTA, to span 34 countries from Canada to Chile -- creating the world's largest trade bloc.
U.S. Trade Representative Robert Zoellick and Lula have traded barbs over the proposed free trade area. Zoellick recently said that if Brazil did not want to trade with the United States, and instead chose "another direction ... Antarctica," the United States could also look elsewhere, perhaps Asia.
The comments sparked a storm of controversy in Brazil, where one newspaper editorial concluded that the United States was suggesting: either trade with us, or "the penguins."
Referencing to Zoellick, Lula responded that he wouldn't answer to the "deputy of the deputy of the deputy of the American (commerce) secretary."
To steer clear of political fallout in Brazil, and still move forward with negotiations, the United States is pushing to negotiate bilateral free trade accords with Latin America's more FTAA-friendly countries -- Bolivia, Peru, Chile and Central American and Caribbean nations. These smaller economies already enjoy some trade privileges with the United States.
Mexico, which has seen its exports increase by some 200 percent as a result of NAFTA, is, in the words of one analyst, "not against the FTAA, but not exactly cheering" to see once exclusive benefits offered to other Latin American nations.
Brazilian officials said they would object to the U.S. strategy of regional trade pacts at the Quito summit.
"This is not free trade, the way they're willing to do it. You'll have a group of free trade agreements, not a free trade area," said Brazil's ambassador to Washington, Rubens Barbosa.
"Brazil is in favor of the application of the most-favored nation clause in the hemisphere, if you grant one concession to one country, you'll have to expand it to others. This will be the most crucial issue during the negotiations."
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