Analysis: Lula plays hardball on trade
www.upi.com By Bradley Brooks UPI Business Correspondent From the Business & Economics Desk Published 1/30/2003 6:42 PM
RIO DE JANEIRO, Brazil, Jan. 30 (UPI) -- Brazil's new leader cut his political teeth as a union negotiator facing up to this country's military dictatorship in the late 1970s. Now, he is trying to use the tactics he learned there in trade talks with developed nations.
As he takes the reins of national power, President Luiz Inacio Lula da Silva is beginning to show some of that negotiating acumen -- namely in his attempts to play the European Union off the United States when it comes to a free trade deal.
During a trip to the World Economic Forum and subsequent travels around Europe earlier this week, Lula railed against the agricultural protectionism of the United States while also giving winks to EU leaders that a deal with the Mercosur trade bloc could be in the works.
Securing a deal with Mercosur -- the trade bloc made up of Brazil, Argentina, Uruguay and Paraguay -- before the United States is able to push through its Free Trade Area of the Americas pact, or FTAA, would be a coup for Europe.
Yet according to some analysts, such a scenario might not be all that unhealthy for the FTAA, either.
"My own view is that if the EU reaches a deal with Mercosur before we conclude the FTAA, that it would in fact stimulate the FTAA, at least on the part of the United States," said Sidney Weintraub, director of the Americas program at the Center for Strategic and International Studies in Washington.
"A lot of the congressional opposition that builds up with these things would dissipate if they saw the U.S. exporters being discriminated against in the Mercosur market."
Pascal Lamy, the EU's top trade official, landed in Brazil on Wednesday.
He was holding talks with the country's top business leaders Thursday, explaining why signing a deal with the EU prior to closing the FTAA is a good thing. On Friday, he meets with Lula.
Analysts expect some loud statements coming from the meeting, pronouncements sure to be directed toward Washington as Lula positions Brazil -- and Latin America as a whole -- heading in to talks on the FTAA.
The Bush administration is hoping to conclude the FTAA by 2005. The agreement would create a free-trade zone from Alaska to the tip of South America and include 34 countries, 800 million people and some $3.4 trillion in trade.
"We don't think it's possible to accept the protectionist measures that were approved by the American Congress, to even begin talking about the implementation of the FTAA," Lula said at a joint news conference with French President Jacques Chirac in Paris earlier this week.
Chirac joined the fray, touching on the most sensitive issue when it comes to trade in Latin America. Chirac said the idea that Europe gives more subsidies to its farmers than the United States "is more propaganda than reality."
Weintraub -- and most economists -- see it differently.
"That's nonsense," Weintraub said, referring to Chirac's statement. "That's not true. The only thing you might argue is that the EU perhaps tries to make its subsidies to be less objectionable in the sense that they don't encourage more production."
For his part, Lamy is aggressively touting the EU's trade plan with Mercosur during his trip in Brazil, saying it is more ambitious than "a simple free trade agreement."
Lamy is telling any Brazilian official who will listen that the country must take the lead in pushing an EU-Mercosur trade agreement.
He is also highlighting that the EU's ideas on trade deals include advancements in the social sector, right in line with Lula's priorities.
"A government inspired by solidarity -- like (Brazil's) current one -- could win since the agreement would increase economic cooperation, along with education and health programs," Lamy said.
But Weintraub thinks that the EU has a tough row to hoe in swaying Mercosur -- namely because of its own agricultural protectionism.
"I've always thought that reaching an agreement with Mercosur was going to be hard for the EU, because it's difficult for me to see what they are going to offer Argentina, let alone Brazil (in the agricultural sector)," he said.
Analysts say the big hurdle for both the United States and the EU in quickly clinching a trade deal with Latin America is that neither wants to negotiate agricultural issues only with the region.
"The biggest problem (the FTAA) faces is the desire of the United States to do the agriculture negotiations in the World Trade Organization, so that if it gives up its subsidies, it can get the Europeans to do the same," Weintraub said.
Lula and Brazil's negotiators -- long the most vocal opponents of agricultural subsidies in the developing world -- are certainly aware of this.
But they have little choice, analysts say, but to use the negotiating tactics at their disposal, however impotent they may be.
Yet, looking at history, Lula was able in the late 1970s to bring about the first wave of industrial strikes in Brazil, the first real blow against an iron-fisted dictatorship.
Despite having significant odds stacked against him, those who know Lula's history wouldn't be surprised if he is somehow able to squeeze water from the proverbial stones of trade negotiations with the EU and the United States.