US Bilateral FTAs Threaten Brazil's Latin American Dominance

 
President Bush took the opportunity on May 7 to begin in earnest his campaign for "Trade Promotion Authority," or fast track, by unleashing a barrage of arguments for fre acting deputy assistant secretary of state for Latin America, made some more sube trade at the Council of the Americas annual meeting. He was preceded by Secretary of State Colin Powell, who intoned the now familiar mantra of the benefits of trade and globalization for growth and democracy in the region. Peter Romero, thestantive remarks following the president's address. He revealed that the administration is not only working on an FTA with Chile, but also has initiated negotiations with Uruguay. Romero claimed that the US has tried to bring the Argentines into negotiations as well, but that so far they have refused, despite Economics Minister Domingo Cavallo's criticism of Brazil and MERCOSUR.

The Bush administration seems to be attempting to surround and isolate Brazil with bilateral agreements or at least negotiations. The goal may be to increase pressure on Itamarati, the Brazilian Foreign Office, from domestic business sectors nervous about missing out on access to the US market or losing their internal markets to outside competitors. Bush's message is clear: With or without the FTAA, the US will forge free trade agreements with the Americas.

The current uncertainties in Argentina and pressure on the real have underscored the lack of a viable Brazilian trade policy. On the one hand, some domestic groups are calling for the Brazilian government to replace Itamarati's dominance of trade policy with a new trade authority. On the other hand, Brazilian businessmen affected by imports are concerned that they won't be able to compete without some protection. This has made for a difficult balancing act by the Cardoso government.

Brazil played down Romero's speech, characterizing the agreement with Uruguay as merely one of a growing number of consultative agreements aimed at trade facilitation. The US State Department also disavowed Romero's remarks, but they had already made a strong impression, both in Brazil and Argentina (where the chancellor corroborated Romero's version).

Despite the tough issues involved in negotiations with countries like Chile and Uruguay, the US efforts in this direction have served to shake Brazil's confidence. As the fast track debate takes shape, it should create more urgency throughout the hemisphere to determine acceptable grounds for signing a free trade agreement with the US. Given that the FTAA is a "single undertaking" with unanimous consent, it is possible that bilateral agreements that leave some of the more difficult questions (agriculture, dumping) up to the WTO will begin to seem more attractive. In Brazil and Argentina, lack of progress of talks with the European Union will also contribute to a review of these countries' current positions with regard to an FTA with the United States. Contacts with the Europeans are moving slower than expected, and Argentina seems to be moving under the guidance of Cavallo towards its own treaty with the EU. This would really leave Brazil isolated and Itamarati without any strength to defend its position as Brazil's trade policy maker.