Business Week | By Jonathan Wheatley and Paul Magnusson | October 20, 2003
It's a rude awakening for the Bush Administration. Brazilian President Luiz Inacio Lula da Silva, emboldened after bringing together 22 developing countries to confront the U.S. and Europe at global trade talks in September, now looks ready to derail talks for a Free Trade Area of the Americas. If Brazilian concerns such as America's generous agricultural protections are not on the table, the negotiations involving 34 countries in Miami on Nov. 20-21 could well break down. That would deal a new blow to U.S. trade strategy. Surprisingly Assertive U.S. TRADE REPRESENTATIVE Robert B. Zoellick had hoped to complete both a new round of trade liberalization at the World Trade Organization and the establishment of the FTAA before January, 2005. As talks have bogged down, Zoellick has been pursuing what he calls ''competitive liberalization'' -- an effort to forge bilateral trade pacts with countries to pressure them to agree to the broader frameworks. But increasingly Lula is challenging Zoellick at his own game. Mercosur -- the customs union linking Brazil, Argentina, Paraguay, and Uruguay, with Chile and Bolivia as associates -- recently signed a free-trade agreement with Peru. Talks are intensifying with Colombia, Ecuador, and Venezuela. ''Our objective is to integrate South America more and more,'' says Brazil's Foreign Minister Celso Amorim.
The aim is not only to improve regional trade ties but also to strengthen Mercosur's hand at the Miami talks. Lula wants the U.S. to open its market to Brazilian exports of steel, orange juice, and other commodities. Up to now, however, the Bush Administration has argued for negotiating those issues as part of broader WTO talks. Meanwhile, Brazil doesn't want to discuss topics dear to Washington, such as intellectual property rights. At a recent preparatory meeting, ''what was disappointing was Brazil's unwillingness to engage,'' says Ross Wilson, chief U.S. negotiator on the FTAA.
Lula's tough stance vis-a-vis the U.S. is at the core of his surprisingly assertive foreign policy since taking over the presidency last January. A former metalworker and trade unionist, he has been courting allies as far away as India and South Africa. Both governments backed Brazil's challenge to the U.S. and European Union at the September global trade talks. Now, Brazil wants to create a free-trade alliance with these two other large, developing democracies. They produce pharmaceuticals, and could try to maintain a united negotiating stand to protect their fledgling industry in global talks. ''We will be able to increase trade between developing countries without having to wait for results at the WTO,'' Foreign Minister Amorim explains. Lula has planned trips to Africa, the Middle East, and India to push his agenda.
What's the left-leaning President's ultimate goal? His aides insist that he does not want to destroy the multilateral trade regime or the decade-long effort to create a hemisphere-wide free-trade zone. But Lula clearly doesn't want Washington to call the shots anymore. His assertiveness is playing well in Brazil, where his support remains strong despite 13% unemployment. As negotiators head to Miami, the Bush team can likelyBusiness Week:
