Hemispheric trade zone stumbles

President Bush returned to the US after a long weekend of talks in Latin America Monday, having addressed, at least briefly, several long-neglected regional issues: Mexican immigration, the war on drugs, and China's increasing influence on the continent. But one subject he skirted was the plan for a Free Trade Area of the Americas (FTAA), once a chief ambition of his administration.

President Clinton launched negotiations in 1994 for the creation of a 34-country hemispheric single market stretching from Alaska to Argentina, intended to be operational by 2005. The Republicans, even more ardent enthusiasts of free trade than their Democratic predecessors, had said, before Sept. 11, 2001, that the plan was a priority.

The hope was that the FTAA would function like an extended NAFTA (the North American Free Trade Agreement between the US, Mexico, and Canada) or CAFTA (the not-yet-ratified Central American version between the US, Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica, and the Dominican Republic). But it turns out not all were buying.

The initiative has stalled, as much because of the 9/11 hijackers and the war in Iraq as the diverging economic ideologies of North and South America. As US politics has drifted to the right in recent years, the South has, in large swaths, leaned left - in turn favoring smaller, bilateral treaties.

Last week, Eduardo Duhalde, President of Mercosur - a trade bloc of Brazil, Argentina, Uruguay, and Paraguay - blamed the standstill on Washington's unwillingness to stop giving generous subsidies to US farmers. He was responding to strong words from US trade representative Robert Zoellick, who said Mercosur has refused to open up such service sectors as banking, telecommunications, and transport.

Mr. Zoellick further warned that Mercosur risked being isolated as the US clinched one-on-one and regional free-trade agreements with a host of other Latin American countries. Indeed, the US and others are increasingly focusing time and effort on narrower pacts around the world. "When we came into office, we had free-trade agreements with three countries - Canada, Mexico, and Israel," Zoellick said this weekend. "We now have concluded free-trade agreements with 12 countries and we are negotiating with 12 more. So, we're busy on that front."

In Latin America, besides NAFTA and CAFTA, the US has also signed a bilateral agreement with Chile; is in negotiations with Peru, Colombia, and Ecuador; and is hoping to start talks with Bolivia.

The trade agreement with Chile is often cited by the US as a model. Under it, 85 percent of qualifying consumer and industrial goods passing between the two countries are now duty free, with the remaining tariffs to be phased out over the next 12 years. This year, US exports to Chile were up some 25 percent, and Chile's exports to the US were up 27 percent. Chile's $72 billion economy grew 3.3 percent last year, and this coming year it could hit 5.5 percent.

Chile, clearly warming to the model, has struck similar deals with the European Union and South Korea, has others in the works with New Zealand and Turkey, and announced just last week that it would start talks with China.

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