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U.S., Brazil standoff hampers free trade

(Friday, Nov. 7, 2003 -- CropChoice news) -- Associated Press: One of President Bush's most cherished economic goals -- creation of the world's largest free trade area covering 34 countries in the Western Hemisphere -- is being threatened by a tense standoff between the United States and Brazil.

The differences seem so wide that some predict that an upcoming meeting of trade ministers scheduled for the week of Nov. 17 in Miami could end just as disastrously as the September meetings of the World Trade Organization in Cancun, Mexico. Those talks on a global trade deal collapsed after negotiators were unable to narrow the wide gap between rich and poor countries.

``This is a very perilous trade situation facing the United States and the world,'' said Fred Bergsten, head of the Institute for International Economics, a Washington-based think tank. ``You could have another Cancun in Miami. That would mean the administration's goal (of a hemisphere-wide free trade area) would be, if not up in smoke, at least in suspended animation.''

In hopes of breaking the current impasse, the United States on Friday and Saturday will hold hastily arranged discussions with trade ministers from 16 of the 34 countries involved in the effort to craft a Free Trade Area of the Americas.

Before the talks begin with a dinner Friday night, U.S. Trade Representative Robert Zoellick will meet separately with Brazilian Foreign Minister Celso Amorin.

The United States, the world's largest economy, and Brazil, the largest economy in South America, are co-chairing the FTAA discussions as they enter what was to be the final stretch leading up to a Jan. 1, 2005, deadline for an agreement to tear down trade barriers between all nations in the hemisphere, except Cuba.

But instead of entering into tough bargaining over how tariffs and other trade barriers will be phased out, the United States and Brazil are still fighting over the scope of the agreement.

Brazil, miffed that the United States is refusing to negotiate over agriculture subsidies and how the United States imposes antidumping tariffs, has threatened to take off the bargaining table issues such as investment and intellectual property rights, two high-priority issues for U.S. companies.

The U.S. position is that the matters it wants kept out of the FTAA talks are already being negotiated in the broader WTO negotiations, and that Japan and the European Union, two big providers of agricultural subsidies, are part of those negotiations but not involved in the free trade talks.

But Brazil counters that the same thing can be said about investment rules and intellectual property rights, issues the United States insists belong in the FTAA talks.

Brazil's demands are coming at a politically awkward time for the Bush administration with the 2004 presidential election looming. Florida farmers do not want to see increased competition from cheaper-priced Brazilian oranges, and Brazil's other big exports -- sugar and soybeans -- also touch sensitive nerves in the U.S. farm belt.

Likewise, putting U.S. antidumping practices into the FTAA bargaining mix would upset such politically sensitive industries as steel and textiles, which benefit under the current rules.

The Bush administration is unhappy with Brazil because it organized a group of 22 developing countries who stood up to industrialized nations during the Cancun talks, resulting in the stalemate there.

Zoellick called Brazil the leader of the ``won't do'' countries and warned that America could turn away from a stalled FTAA and strike separate free trade agreements with ``can do'' nations in Latin America and elsewhere.

Since Cancun, the Group of 22 has shrunk as some nations have dropped out, fearful of raising U.S. ire. But Brazil still has the support of such key developing countries as China, India and South Africa and neighboring South American power Argentina, whose president, Nestor Kirchner, signed a statement with Brazilian President Luiz Inacio Lula da Silva last month pledging jointly to fight for fair trade agreements.

The growing tensions create a tough environment in which to reach necessary compromises.

``I am pessimistic that Miami can be a success, but trade negotiations are always a 'Perils of Pauline' affair where everything looks completely hopeless until the very moment a breakthrough is achieved,'' said Brink Lindsey, a trade expert at the Cato Institute, another Washington think tank.

Economists, however, warned that the trade brinksmanship the United States and other countries are playing could ultimately be dangerous to the global economy if investors become spooked by the discord.

``They could trigger a lot of unintended consequences that could be very damaging to financial markets and the economy,'' Bergsten said. ``Markets abhor trade wars and international conflict.''

Source: http://www.nytimes.com/aponline/business/AP-Trade-Tensions.html