Why Chile matters in quest for global free trade

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Last November, when the Clinton administration announced free-trade negotiations with Chile, it was carrying out a six-year-old promise.

Too bad it took so long. Aside from last year's agreement with China, the talks with Chile may be the most important US trade negotiations since 1993, when the North American Free Trade Agreement and World Trade Organization accords were approved.

True, Chile's $6 billion per year in two-way trade with the US amounts only to about one-third of 1 percent of all US trade. But the US-Chile talks are significant, because of their potentially powerful influence on the ongoing hemisphere-wide trade talks - and perhaps on future global negotiations.

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The Chile negotiations give the US the opportunity to reaffirm its commitment to the Free Trade Area of the Americas - a zone intended to include every country of the hemisphere.

Latin American governments have become increasingly skeptical about whether the US can be counted on to fulfill its free-trade pledges. The US's credibility on trade has been badly damaged by the Clinton administration's failure to gain so-called fast-track negotiating authority, which would have allowed the president to negotiate accords that Congress cannot amend.

Now, in less than three months, President Bush will join 33 other heads of state in Quebec for the next Western Hemispheric summit. President Bush might not be able to do much more than Clinton did at the 1998 summit - to vow to go after "fast track" quickly. But the new president will be more convincing if he can point to substantial progress on free trade with Chile.

If the Bush team promptly assigns high priority to Chile, these talks can advance rapidly, with perhaps a fully agreed text concluded by the Quebec summit. After all, congressional approval is not needed to accomplish this. The negotiators on both sides are experienced. And there are good templates from which to work, i.e., the accords that Chile has already signed with Canada and Mexico.

By helping confirm the US commitment to hemispheric free trade, a deal with Chile would generate renewed enthusiasm for the free-trade zone across Latin America.

The Chile negotiations are important also because they can point the way to addressing the most difficult and controversial problem facing future trade negotiations - how to deal with concerns about labor rights and environmental protection.

To obtain fast track, the Bush administration will almost certainly have to compromise with Democratic lawmakers on these issues, backing away from the standard Republican view that labor and environmental questions should be kept out of trade agreements. Recall that the approval of NAFTA required such a compromise, with the issues placed in side clauses.

In addition, the US has to come up with an approach that is broadly acceptable in Latin America, where the great majority of governments have strongly opposed including labor or environmental standards in trade pacts.

The Chilean government is prepared to negotiate these issues. Indeed, labor and environmental protections are part of their free-trade accord with Canada.

Chile, however, has made clear that it cannot accept a deal with the US that sets the same labor or environmental standards for both countries or that involves using trade sanctions to enforce such standards. The outcome of the US-Chile negotiations on these issues, which Congress will eventually have to approve, will set the stage for subsequent debates about including labor and environment in fast-track legislation - and eventually in the Free Trade Area of the Americas.

The US-Chile negotiations are the crucial next step toward building a hemisphere-wide free-trade area. Although it waited far too long, the Clinton administration finally got them going.

Now it's up to the Bush White House. How it proceeds will provide an early test of the importance it gives to hemispheric trade policy - and to hemispheric affairs in general.

Peter Hakim is president of the Inter-American Dialogue.

(c) Copyright 2001. The Christian Science Publishing Society

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