LATIN AMERICA

In a farsighted speech to the presidents of the Western Hemisphere in December 1994, President Bill Clinton proposed that the nations assembled at the summit merge their dedication to human dignity and economic progress into a Western Hemisphere free-trade area by the year 2005. Unfortunately, the president’s initiative has languished.

A contributing factor has been the executive branch’s lack of fast-track authority to pursue either the expansion of the North American Free Trade Agreement with Canada and Mexico (NAFTA) or trade negotiations with other regional groups. One of these is Mercosur, a trading bloc composed of Brazil, Argentina, Paraguay and Uruguay. A South American free-trade zone is clearly emerging under the leadership of Brazil. Chile, tired of waiting for long-promised access to NAFTA, has become an associate member of Mercosur, as has Bolivia. Venezuela and Peru have expressed strong interest.

The U.S. response has been to complain about alleged discrimination from Mercosur. But this querulousness misinterprets the challenge.

The essence of any regional grouping, including Mercosur--or NAFTA, for that matter--is that its external barriers, however low, are greater than its internal ones, and that the concerns of member states have greater weight than those of countries not in the system. In this sense, there is an element of truth to U.S. complaints. But it is also a case of sour grapes. Mercosur’s growing impact is, above all, a reflection of America’s retreat from its own initiatives.

The danger of continued drift is that Latin America’s attempts to transcend the nation-state will evolve to their own rhythm without reference to a larger hemispheric structure. As a result, the United States runs the risk of becoming spectators to historic changes in what it has always considered “its” hemisphere, and so reducing U.S. access to a market of 400 million people.

But the ultimate blow would be less to the U.S. economy than to American hopes for a world order based on a growing community of democracies in the Americas and Europe.

A measure of progress would be the expansion of NAFTA. This would require fast-track authority, which lapsed in 1994. The president has reiterated his request for such authority and, hopefully, he will fight to break the standoff between his administration and Congress over whether to link labor and environment to trade negotiations. Clinton’s visit to Latin America, scheduled for later this year, will enable him to avoid the looming confrontation with Latin America by defining Mercosur and NAFTA as complementary rather than competitive.

My recent visit to Brazil, the largest economy of Latin America and the driving force behind Mercosur, reinforced this conviction. Brazil has reduced its hyperinflation to less than 10% a year. State-owned enterprises are being systematically privatized. Trade barriers are being gradually reduced. Foreign investment is encouraged and is flowing. Economic growth is increasingly left up to market forces, not the government.

All this has been achieved while providing positive solutions to dilemmas that have troubled other Latin American countries: whether economic reform and political reform are mutually antithetical. Under the leadership of President Fernando Henrique Cardoso, Brazil is successfully managing both political and economic reform. The administrative reforms wending their way through the Brazilian congress are a good example of the combination of democracy and social change likely to metamorphose Brazil into one of the major economic and political players of the 20th century.

To be sure, Brazil’s reform is still in midstream. The country is learning that while market forces stimulate economic growth, they do not automatically translate into an improved quality of life or greater social equality. The restructuring accompanying privatization and exposure to international competition have, at least temporarily, turned endemic unemployment into as much of a challenge for Brazil as it is for the industrialized nations of Western Europe.

As Brazil overcomes its modernization problems, Mercosur is being built by Brazil’s highly professional foreign service into an increasingly cohesive institution. The United States cannot afford to be a bystander. Unfortunately, in the absence of fast-track authority, U.S. policy has lapsed into the technicalities of trade disputes geared to special interests, thereby undermining the broad view.

Displays of U.S. irritation will not erase this reality. It is far better to return to the principles of the summit and give content to the goal of creating a Western Hemisphere free-trade zone by 2005. This will require elevating the discussion above the technical biases of professional trade negotiators. In the current framework, U.S. negotiators are giving priority to tariff reductions; the Latin Americans, especially Brazil, insist on priority for eliminating nontariff barriers.

To the Latin Americans, the U.S. attitude threatens Mercosur’s existence; to Washington, the Latin reaction is an attempt to institutionalize discrimination. Both sides have a point. Yet, it surely cannot be beyond the wit of the leaders of this hemisphere to organize simultaneous negotiations on both sets of issues. Labor and the environment, important as they are, are best treated in forums other than trade negotiations.

The challenge to U.S. policy is to deal with Mercosur as a vital component of an overall Western Hemisphere structure embracing NAFTA. To build a stronger sense of community for the entire Western Hemisphere, attention should be paid as well to such issues as education, drugs, crime and the environment.

At their planned meeting in October, the presidents of Brazil and the United States can give a strong boost to developing such an overarching approach. In no area of foreign policy has Clinton been as creative as with respect to the Western Hemisphere; and Cardoso, a philosopher before he was a statesman, is an ideal partner in lifting U.S. sights to the fulfillment of the historic promise of the Americas.