Chile to play the field in free trade

From Michael P (NAFTA & Inter-American Trade Monitor ?), 10 September 1997

Chile's President Eduardo Frei last week said Chile would not choose one regional trading association at the expense of another, but instead will play the field by maintaining membership in multiple trading associations. A small country like Chile cannot reject and thus must accept all markets, the president said while on an official visit to Japan.

Chile has not yet decided to join NAFTA, and indeed will not join NAFTA to the exclusion of maintaining its associate membership in Mercosur - the regional South American trading group including Argentina, Brazil, Paraguay and Uruguay. Chile has already signed bilateral free trade agreements with NAFTA-members Canada and Mexico. Chile is also a member of the Asia-Pacific Economic Cooperation (APEC).

In other regional news, economists last week said the sluggish launch of the negotiations for the Free Trade Area of the Americas (FTAA) has taken its toll on Latin American trade liberalization. The three-year delay in launching talks has resulted in tariff reductions being halted. Latin American countries are holding on to their most powerful bargaining chip while awaiting the fate of ‘fast-track’ negotiating authority for the Clinton Administration. Without ‘fast-track’, FTAA talks will be further delayed.

Economists place Latin American tariffs at an average 15 percent and holding, after a period of significant reductions in trade barriers during the 1980s. Former NAFTA-negotiator Julius Katz said Latin American countries should agree during preparatory FTAA meetings to resume pulling down trade barriers while FTAA is being negotiated. FTAA negotiations are expected to last seven years, with a 10 to 15 year phase-in period.

Latin American countries are reportedly concerned over what kind of strings may be attached to the Clinton Administration's ‘fast-track’ authority, which the president will ask for this week. It is widely speculated that labor and environmental linkages will be included in any ‘fast-track’ bill passed by Congress, although the extent and nature of those linkages are uncertain and sure to be sources of great debate during the upcoming weeks. The 14 country Rio Group of Latin American and Southern Cone countries last week agreed at Asuncion that it would not support any labor and environmental linkages within the FTAA agreement.

Adding to the Latin American wariness, hemispheric trading partners were not happy with U.S. Trade Representative Charlene Barshefsky's recent comment that FTAA would be a tremendous free lunch for the U.S. The Chilean Ambassador to the U.S. responded to the comment saying Free trade must be an equalizer, and it must advance Latin America's development. If the U.S. does not conceive the negotiations as a two- way deal, then the only escape Latin America will have from poverty in the 21st century will be through massive migration.

Chile eyes trade zone for Americas over NAFTA, Mercosur, KYODO NEWS INTERNATIONAL, September 3, 1997; U.S. dithering seen slowing Latam trade liberalization, REUTERS, September 3, 1997; Fast track, destination uncertain, FINANCIAL TIMES, September 1, 1997.