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Friday, 1 November, 2002, 11:06 GMT
Free trade deal in the balance
Market, Salvador de Bahia, - Brazil
Brazil is one of the world's biggest agricultural exporters

Fresh talks begin in Ecuador on Friday aimed at putting talks on the creation of a Free Trade Area of the Americas (FTAA) back on track.

But Brazil's new left-wing government is likely to prove the main stumbling block to the US-led effort for closer regional integration.

The US has already created a free-trade zone with Canada and Mexico, called Nafta, and it had been President George W Bush's highest priority before the September 11 terrorist attacks to extend that zone throughout Latin America.

But now the United States may have to settle for a series of bilateral deals with some of the smaller Latin American nations like Chile and Costa Rica.

The three largest economies - Brazil, Argentina and Venezuela - all have political or economic reasons for resisting further integration.

Venezuela has even tried to form a left-wing bloc with Brazil to resist American pressure.

Domestic pressures

Brazil's newly elected left-wing leader, Lula, has consistently opposed any FTAA deal.

During the election, he called it "an annexation of Latin America to the United States".

During his campaing he courted domestic business support , and indeed many Brazilian businessmen are comfortable behind the high tariff barriers which protect their industries.

Brazil has managed to build up a large domestic car industry, and even has huge success exporting high-tech goods like aircraft, manufactured by Embraer.

The Brazilian government complains that in the past free trade rules have generally been used against it.

Brazil is a huge agricultural exporter as well, growing soy beans, coffee, cotton, and sugar. Many farmers believe that US agricultural subsidies discriminate against Brazilian products.

Argentina, the second largest Latin American country, also has a contradictory attitude towards FTAA. Argentina suffered when Brazil devalued its currency two years ago, but its economic crisis means that it is highly dependent on financial support from the United States and the IMF.

One problem for both Brazil and Argentina is whether their existing free trade area - Mercosur, which also includes Paraguay, Chile, and Uruguay - is compatible with FTAA.

US pressure

Meanwhile, the US is determined to press ahead with free trade deals.

US Trade Representative Robert Zoellick is planning to travel to Chile to sign a free trade agreement with that country on Tuesday, regardless of progress on the broader FTAA talks.

Chile - which was the model economy held up by the US in the 1980s - has been pressing to join Nafta for some time, hoping to increase its agricultural exports to the US especially during the North American winter (and Chilean summer).

Mr Zoellick is also aiming to complete free trade talks with five central American countries - Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua.

He said that he would also consider bilateral deals with the Dominican Republic, Bolivia, Colombia, Peru, and Uruguay.

There are 34 countries that the US is negotiating with on a free trade area of the Americas - every Western Hemisphere nation except Cuba.

Doha Development Round

Mr Zoellick argues that the creation of the FTAA would help the US in its negotiations with other countries over a new round of world trade talks.

Talks on liberalising agriculture are stalled in the World Trade Organisation. Little progress has been made in other areas of concern to developing countries, despite the pledges made last year when the talks were agreed.

But countries like Brazil, who are locked in trade disputes with the US already, argue that they would be better off negotiating in the multilateral arena of the Doha Round, rather than face the US alone in the FTAA talks.


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24 Oct 02 | Business
27 Sep 02 | Business
20 Apr 98 | Americas
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