US-Brazilian pact breathes new life into trade - for now

Following September's collapse of global trade talks in Cancún, Mexico, hopes for a comprehensive hemispheric trade deal seemed all but dashed. The United States and a coalition of developing nations led by Brazil blamed each other for the debacle, and recriminations have been flying back and forth across the equator ever since.

But over the weekend, Brazilian and US officials reached an unexpected agreement in the run up to the Free Trade Area of the Americas (FTAA) summit, currently under way in Miami.

Under the agreement, the 34 nations in the Western Hemisphere, excluding Cuba, would join a basic free-trade pact, with the option of participating in some of the more controversial aspects. It's being called "FTAA light," breathing new life into the talks and avoiding the obstacles that until last week looked likely to prevent implementation of any deal before the Jan. 1, 2005, target. However, analysts agree that the accord as it stands - it could still change - does not clear up the fundamental differences between the two sides.

"The tough issues have been deferred rather than resolved," says Harley Shaiken, the director of Berkeley's Center for Latin American Studies. "For the United States on the eve of an electoral year that's just fine. And for Brazil, [a country] deeply concerned with some of these issues domestically, that's also just fine. In effect they've chosen negotiating paths that satisfy domestic political concerns and, at the same time, give the illusion of movement internationally. You've got a meeting of minds that didn't seem possible."

Until now, the US had said its multibillion-dollar agricultural subsidies and tariffs would not be on the table. Brazil retaliated by refusing to discuss such issues as protection of copyrights and patents, foreign direct investment, and transparency in government purchasing. This new agreement opens those topics for discussion.

Mr. Shaiken says the big winner is Brazil, which wants an accord tailor-made to each of the diverse nations in a region that is home to both the world's biggest economy and some of its smallest. The question is whether or not it will be a pyrrhic victory. Frustrated with Brazil's intransigence, the US is doing an end run around South America's largest economy. Robert Zoellick, the US trade representative, said he will begin bilateral negotiations with Colombia and Bolivia next year and Peru and Ecuador soon after. The US also is planning independent deals with Panama and the Dominican Republic.

"Some countries are willing to move at a faster pace [than Brazil]," said Mr. Zoellick on Tuesday. "For those who are willing to do the most and accomplish the most, then we're willing to move forward."

The losers under the new plan would be Canada, Chile, and Mexico, countries that already have trade pacts with the US, Shaiken and other analysts say. Those nations, who say the text of the new agreement is too vague, want a broader agreement to augment the trade deals already in place and are fighting for a more inclusive and specific pact. The 34 trade ministers will aim to complete the text Friday.

The agreement is another sign that Brazil, whose President Luiz Inacio Lula da Silva last month tacitly accused the US and the European Union of "commercial apartheid," has cemented its position as the leader of developing nations willing to take on the industrialized world's trade giants. It suggests that if Brazil can strengthen ties to other large developing nations, it can wield considerable influence in future trade talks.

"As long as they can keep that coalition together ... as long as they can imply that they are speaking for the Chinas, the South Africas, the Argentinas, and the Indias of this world, they are in a much more influential position than they were six or eight months ago," says Riordan Roett, the director of the Western Hemisphere program at Johns Hopkins University in Baltimore. "They have much more clout. In general there appears to be a positive pattern emerging that favors Brazil."

That opinion would hearten Brazilian officials, many of whom were offended when Zoellick left Cancún, accusing Brazil of leading a cabal of "can't do" nations. What Brazil is doing is sticking up for itself, says Brazilian Foreign Minister Celso Amorim, and will continue to do so as long as it has what it considers a viable alternative.

"What used to happen mainly - mainly - is that what the United States and the European Union agreed would be the final word," Mr. Amorim said in an interview. "Maybe you would have the right to change a comma or two, as long as it didn't change the sense of the sentence. What we were able to do ... was to change that because it was not rhetorical; [we were] very pragmatic. We are not trying to gang up against the United States, we are trying to convince them that the formula we are proposing is the best one."