34 NATIONS BEGIN TO BARGAIN OVER FREE TRADE \ ACCORD MUST SATISFY RICH AND POOR COUNTRIES

34 NATIONS BEGIN TO BARGAIN OVER FREE TRADE \ ACCORD MUST SATISFY RICH AND POOR COUNTRIES

It took more than three years to hammer out a structure for negotiating a Free Trade Area of the Americas, arguably the most ambitious free-trade initiative in the world.

But those three years were just the easy part, because 34 nations must now begin bargaining for a hemispheric trade pact to be inked by 2005. Spanning from Canada's Yukon territory to Chile's Tierra del Fuego, the trade agreement must satisfy interests from the world's largest economy - the United States - to the hemisphere's poorest - Haiti.

CANADA TO CHAIR

The talks were launched in April at the second Summit of the Americas in Santiago, Chile, and they will begin in earnest in September. Canada will chair the first 18 months of the seven-year negotiation and must ride herd on numerous crucial issues that were left undecided at the Chilean meeting of heads of state.

For example, while they agreed on nine negotiating committees, by the end of June the mandates of those committees must be clear and the size of each committee must also be decided. Countries taking part in the talks can negotiate individually or as part of a regional trade bloc. That means Colombia could negotiate by itself or as part of the Andean Community.

And while negotiations begin in September, there is great concern about how serious they will be since the Clinton administration has been unable to win broad fast-track negotiating authority needed to conduct serious trade negotiations. President Clinton vowed again at the Chilean summit to fight and win fast-track authority before he leaves office. But until it is in hand, countries may be unwilling to seriously engage in talks.

''No country, including my own, wants to negotiate twice,'' said Kathryn McCallion, chief FTAA negotiator for Canada and a key player in how quickly and successfully the hemispheric negotiations begin. Speaking to a trade group in Los Angeles in May, she added, ''The primary challenge is how to maintain momentum without fast track, seen as an absence of commitment (by the Clinton administration).''

WAITING FOR FAST TRACK

Brazil has said clearly that it does not care to negotiate fully until fast track is in hand. Foreign Minister Luiz Felipe Lampreia told the Jornal do Brasil in mid-May that the FTAA ''is not particularly a priority for Brazil.'' He said the priority, absent fast track, remains regional integration and that Brazil continues trying to purchase oil and energy from neighboring Venezuela and Argentina to strengthen regional ties.

In a recent interview, Canada's Ms. McCallion added that a lot of work must be accomplished before negotiations begin in September. The rotating secretariat that will serve as the site and logistical support for negotiations is just getting established in Miami and funding remains elusive, she said.

There are no clearly established rules and procedures for the negotiations and the talks will start with the Mercosur customs union - Brazil, Argentina, Uruguay and Paraguay - wanting a slow pace and the United States and Canada wanting early process to build momentum.

''We are at the starting gate of a seven-year process,'' cautioned the Canadian negotiator. ''We have a particularly tall mountain to climb, but I think we can do it.''

US, CANADA SET DEADLINE

One of the first battles in the negotiations will be business facilitation measures, sometimes referred to as an ''early harvest.'' The United States and Canada want to have the business facilitation measures in place by 2000 to give the trade community a feeling that the process is moving forward. Among the most frequently mentioned measures are customs harmonization or at least some move toward a more common approach to customs issues.

''It's the front line of trade barriers. It's one of the first encounters a trader has in moving his goods,'' said Charles Jainarain, director of Florida International University's Summit of the Americas Center in Miami.

HARMONIZATION ON AGENDA

''The presumption is there's a lot that can be done without entering into an FTAA. It can be unilateral, it can be an agreement between customs regimes. Most of customs is paperwork and when you export a product to another country you encounter a blizzard of paperwork. How can that blizzard be reduced?''

Customs harmonization is moving ahead with or without an FTAA negotiation, partly through the annual Symposium of the Americas - a meeting in Miami of hemispheric leaders in customs, trade and finance.

This year's meeting in Miami begins today and will address efforts at regional harmonization and elimination of corruption in customs practices. The symposium, sponsored by the Miami World Trade Center, will also address issues specific to administration of customs programs, such as textiles and other compliance-verification areas.

The discussion of customs harmonization in the hemisphere is important, in part because it is the one area continually mentioned for business facilitation. However, the trend appears to be moving away from that direction.

At the U.S.-Mexico border, the U.S. Customs Service is spending record amounts on anti-drug enforcement and the trend is clearly for more inspections through less intrusive methods like new X-ray technologies. By the end of this calendar year, most major U.S.-Mexico border crossings will be equipped with fixed or mobile X-ray units and within five years the border is to become as tight as passenger security clearance at U.S. airports, according to drug czar Gen. Barry McCaffrey.

PRE-EXPORT VERIFICATION

Meanwhile, Argentina last year began requiring that most imported consumer goods be subjected to a pre-export verification by one of four global inspection agencies. The reasoning, argued Argentina, was that its own customs service was so corrupt that the country was losing at least $1 billion in revenue annually. The move - questioned by some as a means of slowing imports and keeping its trade and current account deficits manageable - makes it more time consuming and costly to move goods to Argentina.

Brazil has also clamped down on contraband and false documentation, targeting a wide range of consumer goods for more detailed document verification. It is not, however, going as far as Argentina in requiring pre-export verifications.

To the delight of the trade community, Brazil is rapidly expanding the use of bonded warehouses known by their acronym EADI. The EADI's allow shippers of higher value, time-sensitive cargo to bypass customs and go straight to the bonded facility. The advantages there are quicker resolution of any documentation problems and the ability to store goods until needed - paying import duties at the time of removal from the warehouse rather than arrival in country.