Mercosur seizes initiative in free trade race

With the US handicapped at the weekend Summit of the Americas in the Chilean capital by its lack of "fast track", it was the …

With the US handicapped at the weekend Summit of the Americas in the Chilean capital by its lack of "fast track", it was the South American trade bloc, Mercosur, that set the pace for ambitious dreams of free trade across the hemisphere.

The US Congress's refusal to give President Clinton fast track negotiating powers meant the star turn fell to Mercosur, which seemed bent on pre-empting plans for a Free Trade Area of the Americas (FTAA) by signing a flurry of deals of its own.

The four-nation Mercosur groups South American giants Brazil and Argentina with Uruguay and Paraguay. It may be little known outside Latin America, but the market of 204 million people, with economies worth a combined $1 trillion (1,000 billion), is already one of the world's biggest free-trade blocs.

Its neighbours Chile and Bolivia are now associate members and in 1995 Mercosur signed a framework deal aimed at a free trade agreement with the European Union by 2005. Mercosur also struck a deal with the Andean Community states Colombia, Venezuela, Ecuador, Peru and Bolivia just before the summit in Santiago, and then signed up the five-member Central America Common Market on Saturday. Canada also wants a relationship with Mercosur.

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The Argentine Foreign Trade Secretary, Mr Jorge Campbell, said Mercosur was just "doing its job" by "step-by-step building up a free-trade zone". Mr Jose Alfredo Graca Lima of Brazil said the bloc's "gradualist" approach was the best way to "correct the assymetries between smaller and bigger partners".

Mercosur's Latin American partners believe its zeal has strengthened their hand in FTAA talks. Chile's Foreign Minister, Mr Jose Miguel Insulza, said that since the first Americas summit in Miami in 1994 a new role model had replaced the North American Free Trade Agreement: "Mercosur is much stronger now than then."

This kind of talk makes Washington nervous. The US Trade Representative, Ms Charlene Barshefsky, last week called it "not . . . an overly positive development". Washington wants to ensure it stays "at the centre of a constellation of trading relationships", she said.

Mr Campbell promised a "very prudent" approach from Mercosur in talks that will "change the map of business relations".