Americas See Road Bumps On Drive to a Trade Zone

TOP officials from North and South America's 34 democracies meet in Denver today to face their first hurdles toward creating a free-trade zone in the Western Hemisphere by the year 2005.

Their task, set forth at last December's Summit of the Americas in Miami, has run into three key challenges:

* Simmering differences between the northern and southern giants - the United States and Brazil - over how best to reach a hemispheric accord.

* Skepticism in many southern countries over the US political commitment to building the free-trade zone.

* A regional trade conflict between key South American partners Brazil and Argentina over auto imports - which threatens to distract the meeting from its focus on long-term hemispheric goals.

In Argentina, eyes are fixed on bilateral talks that will be held with Brazil in Denver on the auto issue. The two countries are members of the Southern Common Market, or Mercosur - along with Uruguay and Paraguay - which, since even before its inception as a customs union Jan. 1, has incited a trade boom among its members.

In a move that stunned its partners, however, Brazil earlier this month said it would limit auto imports, including from its Mercosur partner Argentina. The decision was eventually postponed to allow talks with Argentine. But it put a question mark over an expected $7.5 billion in foreign investment that international automakers are planning in the zone, and raised old doubts about Brazil's protectionism.

"In an organization [Mercosur] of equals, Brazil is showing that it believes itself to be more equal than the rest," says Oscar Cardoso, an international-affairs specialist with the Buenos Aires daily Clarin.

Felix Pena, an international economist here and former coordinator of Argentina's Mercosur negotiating team, believes the auto issue will be satisfactorily resolved. But he says the problem with Brazil remains the "main thing" for Argentina at the Denver meeting.

Beyond that, he says Argentina, and no doubt a number of its Latin neighbors, will use the Denver meeting to gauge continuing US interest in the hemispheric free-trade area. And the clearest indication of that, he adds, will be signals about US preparedness to grant Chile's bid to enter the North American Free Trade Agreement on a "fast track."

That method means Congress can only vote a simply "yes" or "no" on an accord, without amending it, after US officials negotiate it with Chile.

The Denver meeting's US hosts, including US Trade Commissioner Mickey Kantor, will be able to offer only verbal encouragement on the US position, since a congressional committee just recently began reviewing the fast-track question. But US officials will also need to stop the cracks in the 34-country agreement on what issues to initially discuss from turning into fissures.

"Clearly there are differences over what working groups the Denver meeting should set up first to get negotiations going," says Ambler Moss, dean of the North-South Center at the Univeristy of Miami. "To a large extent those differences are between the US and Brazil."

BEHIND technical trade questions is a deeper difference, Mr. Moss says. Brazil favors building a kind of SAFTA, or South American Free Trade Area, which could eventually negotiate from a position of strength a larger trade accord with NAFTA's giant, the US. In the meantime, Brazil wants to steer clear of talks on areas of interest to the US, such as trade in services, intellectual property, and government procurement.

Noting that Brazil's southern partners don't agree with a negotiation approach that could leave the southern giant their leader, Moss says the best course for the US to take is to make sure that talks towards a hemispheric free-trade area get down to specifics after Denver in a few key areas - and to give encouraging signals that the US is serious about the hemispheric goal.

"Fast track for Chile will be an important test of whether the US is really ready to go ahead," he says. "It's not a foregone conclusion yet."