Latin America Won't Wait for US on Trade

When President Clinton says he's going to make trade with Latin America a priority in 1998, Latin Americans increasingly respond: "We've heard that before."

In fact, they heard it quite a lot in 1997, when Mr. Clinton took his first trip to South America. Then last month, the president failed to win "fast-track" legislation from Congress. It would have allowed him greater authority in negotiating trade deals with other countries, such as Latin America's tiger, Chile.

Despite the setback and other potentially "chilling" factors - economic turbulence in Asia, and a decided leftward tilt in elections from Mexico to Argentina this year - most observers here do not foresee a halt in deeper trade liberalization accords. Nor do they expect Latin America to retreat from its economic liberalization path - a path that includes continuing privatization of state-owned industries.

It's just that this may occur increasingly without US participation.

"I don't expect to see any revision of the region's economic reforms, there's really no turning back from that," says Dominique Hachette, an economist at Catholic University of Chile in Santiago. "What we could experience, though, is a weakened role for the United States in Latin America."

Chilean Public Works Minister Ricardo Lagos says Clinton's three-year-old proposal for an Americas free-trade area will remain on hold until the US takes the forefront. Calling speculation over waning US leadership exaggerated, the front-runner for Chile's 1999 presidential race nevertheless says, "Until the US makes up its mind on [hemispheric free trade], the idea won't progress."

Clinton himself has cautioned Latin countries not to "overreact" to the setback, promising to resubmit fast-track legislation to Congress early in 1998. His goal remains securing fast-track authority before the second Summit of the Americas in Santiago in April. The summit's primary agenda item is launching formal negotiations toward creation of the free trade area by 2005.

But timing for the White House is complex. By March 1, the president must submit an evaluation of drug-producing countries and their cooperation with the US. The "certification" battle always inflames anti-US sentiment in Latin America. But during November's fast-track debate, a growing number of congressmen expressed concern over the relationship between expanded free trade and international drug trafficking. Some Democrats were also concerned that establishing a free-trade zone would undermine US labor and environmental standards.

Clinton's trick will be to finish the certification process in Congress early enough to put it to bed well before the Santiago summit - yet without mixing it with the fast-track discussion.

Chile is one example of what some observers call "lost opportunities" for the US, as Europe and Asia knit closer economic ties with the US's southern neighbors. Already Chile conducts 24 percent of its foreign trade with Europe, compared with 21 percent with the US.

While Latin Americans may be demonstrating a "reform fatigue," as economist Hachette says, response to public discontent will come more in the form of renewed emphasis on social issues rather than a retreat from free-market policies. That position is bolstered by recent events in Mexico and Argentina.

In Mexico, victory by the opposition in July congressional elections led to speculation that the country could alter its economic course. But last week a 1998 budget enshrining President Ernesto Zedillo's tight macroeconomic goals was approved, with some opposition support.

And in Argentina, victors from the left-of-center Alliance in October elections were careful to emphasize social spending and closer relations with neighbors, rather than major shifts in the country's economic model.

Several years of laudable macroeconomic results - falling inflation, high growth - but poor income distribution and unmet education and health needs are causing Latin America's budding emphasis on social shortfalls, Mr. Lagos notes. "That doesn't mean any return to centralized systems," he adds. "But now is the time to think out what comes next."

Given a US electorate that is unconvinced either on free trade or relations with Latin America, Hachette says he believes Clinton will go "nowhere" in his quest for fast-track approval unless he gives his argument a grand, global spin.

"Clinton needs to appeal to [Congress's] sense of US leadership by demonstrating that world trade ... is in need of a new push, that the moment is ripe for more wealth-producing opening, and the US must be the leader," he says. "That's the only way he can achieve fast track."