US Backs Down Over Free Trade in Americas

The US has agreed in principle to a downgrading of the aims of this week's crucial ministerial meeting on the planned Free Trade Area of the Americas, in an attempt to forestall the danger of a possible walk-out by Brazil.

However, the delicate compromise is being put at risk by a group of other countries led by Canada and Chile, which want the ministers to commit themselves to far more ambitious and specific goals for the project than Brazil is prepared to accept.

The US, which is hosting this week's meeting, has long insisted on a far-reaching and comprehensive agreement to free trade and investment throughout the western hemisphere. But it has agreed under strong Brazilian pressure to much weaker and vaguer objectives, apparently because it fears the talks will otherwise fail.

The objectives are set out in a proposed ministerial declaration, intended to be signed by the ministers and drawn up over the weekend by the US and Brazil, which jointly chair the 34-nation talks. The FTAA involves every country in the region except Cuba.

The draft text, seen by the Financial Times, reaffirms long-standing plans to create the FTAA by January 2005. However, it calls for agreement only on a basic set of common rights and obligations and says individual countries should be free to make different levels of liberalisation commitments.

It suggests such commitments could be negotiated "plurilaterally" between groups of countries, as Brazil wants, rather than being entered into on a multilateral basis that would be binding on all FTAA partners.

Brazil, which has long been sceptical about the FTAA, wants many issues taken out of the talks and dealt with plurilaterally or in the World Trade Organisation. In particular, it opposes proposals for FTAA rules on investment, government procurement and intellectual property rights, all of which are priorities for the US and influential American business lobbies.

However, the concessions made to Brazil in the draft have come under fire from Canada and Chile, which have proposed much stricter provisions. Their position is believed to be supported by a number of Latin American countries, most of which are seeking bilateral trade deals with the US.

A draft text submitted by Canada and Chile says that, while countries should liberalise at a pace appropriate to their levels of development, their benefits from the FTAA should be made conditional on the commitments and trade disciplines they assume. It also calls for strong investment rules.

However, Brazil's negotiators reacted angrily to the proposals, saying this week's talks could reach an impasse unless the ministers' final declaration is based on the joint US-Brazil text.

Continued efforts to narrow divergences over the scope of the FTAA are expected in the next few days in the run-up to the two-day ministerial meeting, which begins on Thursday.