Power play slows FTAA

Power play slows FTAA

It's increasingly unlikely that negotiations for a 34-nation Free Trade Area of the Americas will be completed by the January 2005 deadline set by participants.

"I wouldn't hold my breath for an FTAA breakthrough, at least not this year," said Brink Lindsey, a senior fellow at the Cato Institute and director of its Center for Trade Policy Studies. "I don't think either the U.S. government or the Brazilian government have FTAA success as priorities."

The U.S. and Brazil are joint leaders in the last step of the negotiations, which is supposed to result in a common set of rights and obligations for all member nations. A second level of conditions would be worked out by countries seeking a higher level of commitments.

"It's looking increasingly unrealistic they're going to meet their January deadline," said Jonathan Huneke, a spokesman for the U.S. Council for International Business. "The problems are deep enough that they can't even reach agreement on the common set of obligations."

The original approach to the FTAA, according to the office of the U.S. Trade Representative, was to develop a free-trade area covering all 34 nations. "However, it became apparent that several countries, notably Mercosur, were not in a position at this time to agree to such an ambitious and comprehensive package," Deputy U.S. Trade Representative Peter F. Allgeier said last month in New York. Mercosur is a trade alliance of Argentina, Brazil, Paraguay and Uruguay.

Last November, the negotiating countries decided to pursue the two-tier approach, with Brazil and the U.S. leading the work on developing the common guidelines.

Translating the concept of common guidelines into specifics has proved difficult. The challenge, which is causing the delay in further talks, is how to settle differences between the U.S. and Brazil. The primary sticking points with Brazil concern how much market access to provide for agricultural products, services and intellectual-property rights, a Bush administration trade official said.

The differences are not easily resolved. "The U.S. has no interest in making concessions on agriculture subsidies or on anti-dumping," Lindsey said. While the U.S. wants stricter enforcement of intellectual-property rights, Brazil wants greater market access for some of its agricultural products, such as orange juice.

"How do they reconcile all these things? So far they haven't said very much, except that they're making progress," said Sidney Weintraub, the director of the Americas Program at the Center for Strategic and International Studies. "They've been having a bunch of private meetings. There were problems. They've been postponing meetings because they had to work things out."

Allgeier and his Brazilian counterpart met in Washington this month but adjourned after little progress. The Brazilian official is scheduled to be at the Group of 8 economic summit this month at Sea Island, Ga., which may provide an opportunity for more talks, the U.S. trade official said.

The talks stalled this month as the World Trade Organization sided with Brazil against U.S. subsidies for cotton growers. Although obviously a trade issue, the cotton dispute is not expected to be a primary source of tension between Brazilian and U.S. negotiators working on the FTAA.

"The U.S. has always said emphatically that agricultural issues can only be handled in the WTO," said John Murphy, a vice president for Western Hemisphere affairs at the U.S. Chamber of Commerce. "To have that ruling affect our position on the FTAA would be inappropriate."

But the added tension doesn't help. "Brazil just scored a coup with the WTO," Cato's Lindsey said. "The mature response is to tip your hat and move on. Some people in the U.S. political arena are going to react in totally knee-jerk terms: Team Brazil is attacking Team USA."

Though the FTAA may not be completed this year, its future is not all bleak. "Ultimately, there is a sense in Brazil that knocking down trade barriers in the hemisphere is good for Brazil's economy, and emotional issues shouldn't be allowed to get in the way of that," Lindsey said.

Greg Mastel, chief international trade adviser at the Washington law firm of Miller & Chevalier, also said it's too early to write off the agreement. "Things like the FTAA are never dead," he said. "They just go into hibernation."