Global Policy Forum

By Jim Lobe

In its opening bid in negotiations for a regional free trade accord, the United States on Tuesday offered to eliminate all tariffs on textiles and apparel imported from other nations of the Americas within five years.

Trade Representative Robert Zoellick told reporters here that Washington was also prepared to provide duty-free treatment for almost two-thirds of U.S. imports of consumer and industrial goods from the region's countries once the Free Trade Area of the Americas (FTAA) takes effect, provided that its trading partners make reciprocal offers.

By 2015, according to Zoellick, all consumer and industrial goods produced in the Americas should receive duty-free treatment throughout the hemisphere.

On agricultural goods, a major source of controversy, particularly since Washington approved an 80 percent increase in government farm subsidies last summer, Zoellick said 56 percent of current agricultural imports from non-NAFTA countries could enter the U.S. market duty-free immediately under FTAA, with the poorest countries of Central America and the Caribbean benefiting the most.

NAFTA, the North American Free Trade Agreement, includes Canada, Mexico and the United States.

''President (George W.) Bush has made the FTAA a top U.S. priority, and today we deliver with bold proposals to lower barriers throughout the region,'' Zoellick said. ''The United States has created a detailed roadmap for free trade in the western hemisphere; we've put all our tariffs on the table because free trade brings us closer together as neighbours.''

U.S. critics of the administration's trade policy said they were baffled by some of the offers in Zoellick's proposal, which they said might alienate some of the region's strongest supporters of the FTAA, as well as its critics.

The failure to commit to ending U.S. anti-dumping laws - to which Zoellick had agreed at World Trade Organization (WTO) talks at Doha in November 2001 - would anger Brazil, whose steel industry has been hit hard by those measures, said Lori Wallach, a trade specialist at Global Trade Watch.

Similarly, the quick phase-out of textile and apparel tariffs could deal a serious blow to Caribbean and Central American economies that would effectively lose their preferential access to the U.S. market provided to them last year.

''U.S. trade partners are most interested in the elimination of anti-dumping laws and of big government subsidies, particularly of agriculture,'' said John Cavanagh of the Institute for Policy Studies. ''These proposals are silent on those.''

The proposal's insistence that U.S. offers will extend only to those countries that are prepared to reciprocate was also seen as potentially problematic.

''The FTAA is in need of this kind of stimulus,'' said Sherman Katz, a trade specialist at the Center for Strategic and International Studies here. ''The tough part will be bringing along countries like Brazil who will be threatened by the possibility that the U.S. will go ahead with highly favourable offers to those willing to go along when Brazil prefers a straight-up most-favoured-nation offer that applies equally to all countries. We're seeing some divide and rule here.''

Zoellick's presentation of Washington's opening bargaining position follows the agreement last November by the region's 34 countries, excluding Cuba, to conclude the FTAA by Jan. 1, 2005. It will be formally presented to negotiators meeting in Panama this week.

The United States, which is co-chairing the talks with Brazil, hopes to reach at least tentative agreements in some sectors by next November, when trade ministers gather in Miami to review progress.

The administration's hand in the talks has been greatly strengthened by Zoellick's success last year in winning congressional approval of ''fast-track'' negotiating authority, a mechanism that ensures that the trade accords negotiated by the executive branch cannot be amended or stalled in Congress.

Former President Bill Clinton was unable to get the authority during his second term, largely because his fellow Democrats demanded that tough and enforceable provisions protecting worker rights and the environment be included. Right-wing Republicans, on the other hand, strongly opposed such provisions. The impasse made a bipartisan consensus on fast track impossible.

But in a still-controversial decision, Zoellick lined up behind the Republicans and rammed through a fast-track bill that had almost no support from Democrats. As a result, any FTAA that reaches Congress may have a hard time drawing bipartisan support.

But with fast track in hand, Zoellick moved quickly to conclude a long-stalled free-trade agreement with Chile, which is expected to be signed by Bush in April or May and passed by Congress by year-end. He also launched new negotiations with Central American countries for their own free trade pacts.

The accord with Chile commits both countries to eliminate tariffs on 85 percent of commercial and industrial products when it takes effect and on 75 percent of farm products within four years. On some politically sensitive products, such as grapes and avocados, tariffs would be phased out over a longer period.

By locking up these smaller, bilateral accords, say analysts here and in Latin America, Zoellick is hoping to isolate Brazil, which is seen as the most important obstacle to the kind of free-trade agreement Washington is seeking.

He is following a similar strategy in other regions - by pursuing bilateral accords with Morocco, Australia and southern African - in hopes of injecting new momentum in the current Doha Round of global talks under the WTO, despite the fact that it is Washington's demands for greater patent protection for pharmaceutical companies that has bogged down those negotiations.

Some observers have argued that the bilateral route is a risky one, particularly as concerns the FTAA. Clinton's former trade representative, Charlene Barshefsky, recently told the 'Wall Street Journal' that agreements with Central America and Chile could well reduce congressional support for the more ambitious hemispheric pact.

The stakes are high for both economic and political reasons. If the FTAA were to be realised, it would set up the largest free trade area in the world, a market of 13 trillion dollars and 800 million people.

It would also tie South America, which remains an important market for European goods, much more closely to the United States at a time when the importance of Latin America and the Caribbean has been almost entirely eclipsed by the Bush administration's ongoing ''war on terror'' and incipient war on Iraq.

But Washington's opening offer, particularly its stress on reciprocity, may prove disappointing to its hemispheric trade partners.

It calls for the immediate reciprocal elimination of tariffs in such key sectors as chemicals, construction, mining, medical and electrical equipment, environmental products, and information technology - all areas in which the United States has a major competitive advantage.

In addition, the phase-out of tariffs for the 42 percent of agricultural imports that would not get immediate duty-free treatment under the plan is likely to hit the big South American countries, mainly Brazil and Argentina, hardest, particularly in light of the proposal's failure to address the elimination of the huge subsidies of U.S. agriculture.

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