U.S. Begins Talks for Trade Pact With Central Americans

www.nytimes.com January 9, 2003 By ELIZABETH BECKER

ASHINGTON, Jan. 8 — The Bush administration officially opened negotiations today to create a free trade agreement with five Central American countries within a year, a big leap in its ambitious plans for a Nafta-like zone throughout the Western Hemisphere.

The announcement cemented the role of trade as the administration's primary policy focus with Latin America. It gives the United States trade representative, Robert B. Zoellick, chief responsibility for promoting improved American relations in the region at a time much of the administration is focused on Iraq and terrorism.

Indeed, Richard E. Feinberg, former special assistant for inter-American affairs to President Bill Clinton and an early advocate of the regional free trade concept, said, "I believe these free trade agreements will be seen as the 21st-century version of strategic alliances."

Some critics in Latin America are annoyed at what they say is the administration's strategy of dealing first with small countries that have fewer trade disagreements with the United States rather than including bigger trading rivals like Brazil.

And the initiative intensifies competition between Washington and the European Union for access to the Latin American market, where Europe is the second-largest trading partner after the United States. European officials in Brussels have taken note of Mr. Zoellick's Latin American push since Congress granted trade promotion authority — once called fast track — to President Bush in August. And now the Europeans are working to complete negotiations for a similar free trade agreement with Mercosur, the world's third-largest trade group, comprising Argentina, Brazil, Paraguay and Uruguay as well as Bolivia and Chile as associate members.

"It is obvious we are in stiff competition right now," a European representative in Washington said. "Our agreement with Mexico came after Nafta, and we don't want to lose out again, especially not with Mercosur.

Flanked by representatives of several countries that just decades ago knew the United States mostly as a purveyor of weapons in their civil wars, Mr. Zoellick said American interests in the region were now centered on liberalized trade, economic development and democracy.

"This is more than a trade negotiation," he said. It is "a plan to strengthen democracy and promote development in a region that has known too little of both."

However, these five countries — Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua — offer relatively few of the problems that will appear in the hemispherewide talks for a Free Trade Area of the Americas, or F.T.A.A., since their trade largely meshes with the United States.

Critics, particularly in Brazil, say they fear that this regional agreement is an attempt by the United States to divide and rule, forcing the bigger Latin nations to accept Washington's dictates in the wider negotiations.

"I think this is tactical," said Mario Mugnaini, vice president for international affairs at the Federation of Industries in São Paulo. "If there are too many bilateral accords made around the region, then Brazil would ultimately favor closing the F.T.A.A. negotiations, but I don't think that's what the United States wants."

Still, United States trade with these five Central American countries is significant. They import a total of $9 billion worth of products from the United States every year, the rough equivalent of American exports to Russia, India and Indonesia combined. And the United States imports $11 billion worth of goods from the five countries, with nearly three-fourths of the products entering duty free under special-preference programs.

The European Commission's chief trade negotiator, Pascal Lamy, seeking to regain a European foothold in the region and to capitalize on its Old World ties to Spain and Portugal, will travel to Brazil in three weeks — seeking to fortify relations on a continent that in just a few months has moved swiftly toward a greater opening toward the United States.

The United States and nearly every country in the Western Hemisphere agreed on a blueprint for a Free Trade Area of the Americas in November with the goal of essentially expanding the North American Free Trade Agreement all the way to Argentina by January 2005. Brazil, the largest Latin American economy and the nation most skeptical of a free trade area, is now co-chairman of those talks with the United States.

Last month, Washington concluded a free trade pact with Chile — a model, Mr. Zoellick hopes, for the talks with the Central American nations, particularly in the areas of protection for laborers and the environment.

Bernard W. Aronson, assistant secretary of state for inter-American affairs under President Bush's father, who first proposed a hemispherewide free trade zone, said that while Mr. Zoellick might be making rapid strides now, they were perhaps 10 years too late.

"I think that the U.S. and Latin America have paid an enormous price for failing to spread free trade throughout the hemisphere after Nafta," Mr. Aronson said. "If we had, the hemisphere would look very different, and much of the economic and political disintegration wouldn't have occurred."

But some of the praise for Mr. Zoellick's efforts today was laced with criticism of the administration for relying on trade to solve a myriad of crises in Latin America. "Zoellick is doing a wonderful job, but it's extremely unfortunate that he is carrying the water for the whole administration," said Julia Sweig, a senior fellow at the Council on Foreign Relations. The region, she said, "deserves more senior attention."

At the beginning of the month, Brazilian officials were insulted when Mr. Zoellick led the American delegation to the inauguration of President Luiz Inácio Lula da Silva, leader of the leftist Workers Party. Not only was he considered too junior, but he has been held in some disdain for warning Brazil that it would be reduced to exporting to Antarctica if it failed to join in the Americas trade pact.

Brazil, indeed, has lobbied for the hemispherewide negotiations to be concluded as a single undertaking, meaning all loose ends of an accord must be tied up before all countries involved can sign.

Now, a senior trade official said, Mr. Zoellick is trying to push Brazil "into not just joining the pact, but leading the way."

The major sticking points in all the negotiations will be farm products, especially sugar and citrus fruit.

But the trade and economic ministers of the five Central American countries said today that they were willing to compromise to win permanent access to the United States economy and lure greater investment to their region.

"We're also talking about something more fundamental than trade," said Alberto Trejos, Costa Rica's foreign trade minister. "We'll derive many, many more permanent benefits and a vision of development that will mean more jobs and increased prosperity."

While concern over the strike-induced oil crisis in Venezuela and the civil strife in Colombia may occupy higher-ranking members of the administration, trade officials say they are well suited to be the most prominent representatives of President Bush in the region.

"Economics is the most compelling aspect of U.S.-Latin relations," said Peter Allgeier, a deputy United States trade representative. "Getting access to us gives the message to investors that their countries are a safe place to put their money."