Global Policy Forum

Bob Davis

During the past four years, the U.S. has focused its international economic attention on Europe and Asia. It has sought agricultural deals with the European Union, pressured China to revalue its currency, and encouraged India to continue to open its economy -- whether or not that means more U.S. jobs outsourced to Bangalore. But the next occupant of the White House will spend more time looking to Latin America, where trade policy is bogged down.

A contentious trade pact negotiated with five Central American countries and the Dominican Republic faces tough odds of winning approval in the U.S. Congress. Fights between the U.S. and Brazil imperil a decade-old effort to create a hemispheric free-trade zone. Concluding both deals would boost free trade globally, a goal that President George W. Bush and his Democratic challenger, Sen. John Kerry, embrace, although they differ widely in their tactics. Peter Hakim, president of the Inter-American Dialogue, an independent Washington think tank, says Latin America would welcome renewed attention after years of "feeling neglected during a difficult period of economic development." But there is no guarantee that such a focus would succeed; the opposite may be more likely. A defeat in Congress for the Central American deal and continued stalemate on a hemispheric trade package would sour relations and give a boost to populist forces in the region who already are dubious about the value of free trade.

President Bush's trade representative, Robert Zoellick, has pursued a complicated trade strategy that admirers compare to three-dimensional chess. Looking for ways to pressure big trading nations to agree to a new global trade deal, he opened separate negotiations for free-trade pacts with small nations and regional groupings. The clear message to the EU, Japan, Brazil, China and other big traders: Make concessions in global trade talks on agriculture, market liberalization and other issues or the U.S. will cut sweetheart deals with others. In addition to Central America, so far under President Bush, the U.S. has concluded trade pacts with places such as Chile and Singapore, and is negotiating others in Peru, Colombia and elsewhere. For the most part, these are small nations whose trade barely registers in the vast U.S. economy. But the U.S. has made little progress in concluding a global trade pact or one incorporating all of the Western Hemisphere.

Now the administration is stuck trying to win congressional approval of the most contentious deal, the Central American Free Trade Agreement, which would slash tariffs on U.S. exports, and do the same for imports of clothing made in Central America. Most of the U.S. textile and apparel industry opposes the pact, as do U.S. labor unions, so the Bush administration has held off a congressional fight until after the election. If the president wins re-election, he will rely on the lobbying power of U.S. retailers and importers to push the deal through Congress. He also may promise to crack down on Chinese clothing imports as a way to ease textile-industry opposition.

If Sen. Kerry wins, the equation changes. He says he would renegotiate the pact to improve labor and environmental standards in Central America. That is a reprise of former President Bill Clinton's position on the North American Free Trade Agreement, which was negotiated by the first President Bush. In 1993, Mr. Clinton negotiated Nafta labor and environmental side deals and won passage. But Democratic Party support for free trade is much weaker now than it was during Mr. Clinton's first term, so Mr. Kerry may be unable to win enough Democratic lawmakers to compensate for Republican votes he would lose. Despite the problems, neither camp would drop the accord, for fear of battering U.S. credibility throughout Latin America. "To Democrats we meet in Nicaragua, we tell them we signed an agreement with a country, not with a [Republican] political party," says Nicaragua's president, Enrique Bolanos.

If anything, plans for creating a Free Trade Area of the Americas are even more troubled. The U.S. and Brazil are "co-chairs" of the negotiations, but "chief antagonists" would be a more-accurate description. The U.S. is looking for Brazil to open its financial markets to U.S. investment, tighten its intellectual-property laws to protect U.S. drug makers, and slash manufacturing tariffs. Fat chance, say the Brazilians, who won't agree to changes until the U.S. reduces barriers protecting American growers of oranges, sugar, tobacco and other agricultural products. Each waits for the other to move first.

Bush and Kerry advisers see the same way out. If the U.S. could negotiate a global reduction in agricultural subsidies, that would make U.S. farmers more competitive with pampered European rivals. At that point, the U.S. might be willing to offer a deal that knocks down agricultural barriers in the U.S. in return for an opening of services markets and other trade concessions by Brazil and other nations. The problem: A deal with the EU could be years off. Given the difficulties, the U.S. and Brazil may be able to agree on only a very modest deal of tariff cuts that doesn't boost trade very much. So the U.S., under Mr. Kerry or Mr. Bush, would grapple with the same problem: how to improve trade relations with Latin America when the U.S. is boxed in politically.