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Former envoy urges Chile to reconsider Nafta Pact should be accepted on its terms: McLarty

Kevin G. Hall, Journal of Commerce staff writer
16 May 1999

SANTIAGO, Chile -- Almost six years after Chile was invited to join Nafta, President Clinton's former special envoy to Latin America said Chile should again consider membership.

Speaking to a small group of mostly Latin American economic reporters Wednesday afternoon at the start of the World Economic Forum's Mercosur Summit here, Thomas "Mack" McLarty suggested Chile could resolve a deadlock by simply agreeing to the North America Free Trade Agreement as written.

"I think this kind of approach would perhaps yield some results," Mr. McLarty, now in the private sector, said.

He noted now is a good time to press initiatives as Congress is debating trade with China. Although invited to negotiate access to Nafta in December 1994, Chile refused to join the pact because President Clinton has been unable to win broad trade negotiating authority, called "fast-track" authority, that permits a legislative vote on proposed trade deals without amendment.

Independent of Mr. McLarty's suggestions, Chile and the United States this month are expected to exchange information on their respective labor and environmental regulatory systems with an eye toward gauging how much compatibility exists.

Although Nafta is a pact directed at North American economic integration, most of the disciplines in the agreement are supported by Chile in other trade agreements.

But Chile's foreign affairs secretary, Jose Miguel Insulza, discounted any trade pact without U.S. fast-track authority.

"Fast-track for us is a political sentiment. It's an insurance that we want," Mr. Insulza said, noting the no-amendment nature of fast-track authority reduces pressure for unpopular concessions after a negotiation has concluded.

If Chile were to simply agree to current Nafta rules, it would have to abide by labor and environment side accords largely focused on U.S.-Mexico issues. The labor provisions of Nafta generally address workshop issues and efforts to harmonize workplace safety practices. But the environment panels created by Nafta, in particular, have less relevance to Chile.

Chile has moved aggressively to pursue other free-trade opportunities. It has negotiated a trade pact with Canada that could also serve as a base for a bilateral treaty with the United States, and also revamped a pre-existing pact with Mexico. Both the Mexico and Canadian trade pacts use Nafta mechanisms for resolving controversies and several other disciplines.

Chile is also an associate member of the Mercosur trade bloc -- which includes Brazil, Argentina, Paraguay and Uruguay -- and would be a full member if it did not have to raise its average global tariff to come in line with Mercosur tariffs.

In the first few years after the invitation to join Nafta, Chile publicly presented itself as a bridge between the more-sophisticated Nafta and the tariff-reducing Mercosur customs union. Chile had more in common with Nafta since its judicial system and regulatory environment are generally more sophisticated than those of its Mercosur neighbors.

But in his speech to reporters, Mr. Insulza said Chile sees itself as a natural member of Mercosur. Still, Chile wants its neighbors to go beyond on tariff reduction and coordinate macroeconomic policy and negotiate agreements on services, and create new dispute-resolution mechanisms, he said.

"We still want to be a bridge," Mr. Insulza insisted, noting Chile's outreach to other countries to forge accords that include Nafta-like disciplines.