U.S. Turns Attention To Latin America On Trade Front
sg.biz.yahoo.com Wednesday February 12, 4:51 AM By Mike Esterl Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Trying to breathe new life into flagging hemisphere-wide free trade talks, U.S. officials offered Tuesday to slash tariffs on a wide range of imports from struggling Latin American and Caribbean economies.
In the most important concession, U.S. Trade Representative Robert Zoellick said Washington is prepared to scrap duties on textile and apparel imports by 2010. In return, the U.S. wants, among other things, better access to financial services in a region that groups together nearly 800 million people.
"It's a nice first step. There's a possible problem in that they have shown their hand a little bit here, but you've got to do it," said Richard Fisher, a managing partner at Washington-based business consultancy Kissinger McLarty Associates and former Deputy USTR during the Clinton administration.
The U.S. plan would ax tariffs on 65% of U.S. consumer and industrial goods from the hardscrabble region and eliminate 56% of agricultural tariffs immediately after inking a comprehensive agreement.
But trade watchers say Washington will probably have to take several more steps if it hopes to clinch the 34-nation Free Trade Area of the Americas initiative by its 2005 target date.
While Zoellick said "everything is on the table," he made no mention of eliminating huge subsidies for U.S. farmers, long a sticking point for major agricultural exporters like Brazil and Argentina.
"To start a conversation, the U.S. has to review its policy of protectionism," said Walder de Goes, head of the Brazilian Institute of Political Studies in Brasilia.
Last year, U.S. lawmakers approved a record-setting $180 billion in agricultural subsidies over 10 years - the kind of support that Latin American officials argue makes it impossible to compete on a level playing field for consumers in the world's most lucrative market.
De Goes predicted the region is still "very, very far from an accord."
A public opinion poll carried out last month by CNT/Sensus in Brazil, Latin America's most populous country, found that only 15% were in favor of FTAA, compared with 39% against. The remainder are sitting on the fence, waiting for more fine print to arrive.
Brazilian President Luiz Inacio Lula da Silva, who assumed office Jan. 1, is expected to be a tough negotiator. The former union leader said last year that he wasn't interested in U.S. "annexation." Late last month, he announced an agreement with German Chancellor Gerhard Schroeder to try and seal a free trade pact between the European Union and Mercosur, a customs union linking Brazil with Argentina, Uruguay and Paraguay, before the FTAA deadline.
Nonetheless, a U.S. offer to open the heavily protected textile and apparel sectors is seen as significant. The U.S. imports around $20 billion in those sectors alone from Latin America and the Caribbean.
That particular proposal should be greeted warmly in a region that has watched lower-priced Chinese exporters make huge inroads. China is currently the largest supplier of apparel to the U.S., where import quotas are slated to be dropped in 2004.
The biggest battle on that front will likely be in places like North Carolina and South Carolina, where domestic U.S. textile manufacturers already are hanging on for dear life.
"The domestic textile lobby is still tremendously powerful. The USTR is going to have a tough time selling this to Congress," said Robin Rosenberg, deputy director of the North-South Center at the University of Miami.
In another development, the USTR said Tuesday it plans to speed up the collapsing of tariffs for exporters from the region's smallest, poorest countries while allowing them to phase out their own trade barriers more slowly.
That proposal eventually could pit smaller countries against regional giants like Brazil, instead of battling exclusively with Washington.
In another bid to ratchet up the pressure on wary Latin American negotiators, the USTR has said it's comfortable inking bilateral trade deals while engaged in the hemisphere-wide discussions. It finalized a free trade pact with Chile at the end of December and recently began talks with smaller Central American countries.
Tuesday's initiative also appears aimed at convincing skeptical governments in the region that Washington hasn't forgotten about its neighbors to the south even as preparations for a U.S. invasion of Iraq reach a fever pitch.
Many Latin America voters, frustrated with the lack of progress against poverty after a decade of free market reforms, have begun voting for left-leaning politicians less compliant to U.S. business interests. The Bush administration is hoping to reverse that trend by offering the region a chance to export its way out of its economic woes.
"Trade is strategic, trade is everything there is. When Zoellick does this, it's diplomacy, it's the only diplomacy in Latin America," said Rosenberg, who has been participating on an advisory panel of Florida's FTAA task force.
-By Mike Esterl, Dow Jones Newswires; 201-938-4026; mike.esterl@dowjones.com