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Pressing for a trade pact

(Wednesday, Nov. 20, 2002 -- CropChoice news) --

Anthony Faiola, Washington Post: MOGI GUACU, Brazil--Waxy citrus groves run for miles through Brazil's orange country, where plump, juicy fruit dots the landscape of blooming orchards and shimmering man-made lakes. It seems an unlikely spot for a battlefield.

Nevertheless, it is in places like this where Brazilians such as Micklos Naday insist that the war over free trade in the hemisphere will be won or lost.

On his 18,000-acre orchard here in the fertile southeast, Naday, one of Brazil's largest citrus growers, picked a ripe orange off one of his trees.

"The U.S. talks about the need for free trade and for Latin America to stop being protectionist," he said. "I have one thing to say in response: stop protecting Florida citrus growers and let me sell the juice from this orange to you at a fair price. I'm cheaper, I'm more efficient and I'm ready to sell, but U.S. tariffs stop me."

The argument made by Naday and other Brazilians has become the fiercest point of contention as Washington attempts to construct a massive Free Trade Area of the Americas (FTAA) from the Arctic Circle to Tierra del Fuego by 2005. Brazil, Latin America's most populous nation, with 175 million inhabitants, is using the ongoing talks as a venue to air one of the developing world's biggest gripes about globalization.

As 34 nations in the hemisphere work to form the framework of the world's largest free-trade zone, Brazil is pressing the notion that it is time the United States and other industrialized nations change the way they think about free trade, breaking down their own barriers to some of most competitive exports produced in the developing world -- agricultural goods.

Wealthy nations, including the United States, have long been accused of pushing for open markets for their competitive service sectors and manufactured goods while protecting their less competitive agribusinesses and family farms with subsidies and high tariffs. Brazil, for instance, is the world's largest and lowest-cost producer of juice oranges, but it exports only small amounts to the United States, the world's largest orange juice market. Citrus growers here insist that is largely because of U.S. tariffs that make cheaper Brazilian orange juice prohibitively expensive on American supermarket shelves.

Brazil's insistence on major changes in U.S. agriculture policy as part of an Americas trade deal is bringing the issue to the forefront of global trade talks as never before, prompting applause from other developing nations that face similar barriers. But analysts and trade negotiators also say the staunch position taken by Brazil, the world's eighth-largest economy, is also threatening to derail the free-trade pact -- a sweeping project proposed more than a decade ago by former president George H.W. Bush and adopted by the subsequent Clinton and Bush administrations.

According to its most zealous supporters, an FTAA would spark a revolution in hemispheric commerce by lowering trade barriers across the region on many products, which would be a boon for U.S. companies eager to expand in Latin America while giving the struggling economies in the region greater access to the world's largest marketplace, the United States. U.S. officials additionally view the trade proposal -- which took a step forward this month when trade representatives from 34 countries agreed to keep the accord on track for 2005 -- as vital to bolstering free-market reforms in Latin America at a time when support for U.S.-style capitalism in the region has reached its lowest point in two decades.

But the sticking point may turn out to be oranges -- along with soybeans, cotton, coffee, beef and other farm products, trade experts and analysts say.

U.S. officials, pressed by the strong American farm and citrus lobbies, have resisted the idea of tackling issues such as agricultural subsidies in the trade talks. Instead, they say subsidies should be addressed in broader negotiations at the World Trade Organization with the participation of Europe and Japan, which have agricultural import barriers that in many cases are just as high or higher than those in the United States.

The Brazilians, however, fear that WTO talks could drag on for a decade or more and almost certainly won't be completed by the time the Americas trade zone is scheduled to be created about three years from now. They see President Bush's decision earlier this year to sign a key farm bill extending $180 billion in subsidies to American farmers over the next decade as further evidence of Washington's general unwillingness to bend on the issue. Given that about 43 percent of Brazil's $58.2 billion export industry and almost half of its domestic jobs are tied to agribusiness, many here fear that they would be offering the United States access to Latin America's prize market while getting little in return.

In addition, the Brazilians insist that Washington's position on agriculture, as well as new U.S. tariffs on imported steel, are robbing the United States of the moral authority it needs to promote free trade in the developing world.

"In the '90s, Brazil showed the world its intentions and began opening its markets more to foreign trade," said Brazilian Agriculture Minister Marcos Vinicios Pratini de Moraes. "But in many cases we are still not allowed to have access for our most competitive agricultural exports because of protectionism in the industrialized world. Free trade has got to be a two-way street. If not, what do countries like Brazil have to gain from free trade?"

The conflict over agriculture, sources close to the talks say, has created the single largest obstacle to the FTAA and fueled increasing opposition to the plan in Brazil. Brazil's new president-elect, the leftist former union leader Luiz Inacio Lula da Silva, described Washington's current free-trade plan as "an annexation of Latin American economies" during his recent electoral campaign. Lula's advisers have indicated that he is likely to take an even harder line on insisting that agricultural subsidies and trade barriers be part of any deal. But even trade negotiators for the current administration of President Fernando Henrique Cardoso have made no secret of their willingness to withdraw from the agreement -- a move analysts say would doom the trade pact -- if agricultural barriers are not widely addressed.

"If this accord doesn't include the removal of important [U.S. trade] barriers that affect our exporters, there is, obviously, no reason to have an FTAA," Brazilian Trade Minister Sergio Amaral told reporters during a key hemispheric trade meeting in Quito, Ecuador, this month.

U.S. officials, however, contend that the Brazilians stand to gain from a free-trade zone with or without major concessions on agriculture, adding that Brazil already has a $1.3 billion trade surplus with the United States, involving products that include many agricultural imports. U.S. officials also say they are serious about rapidly moving forward on broader reform of subsidies if Japan and European nations cooperate at the WTO.

"There are many other countries eager to have a free-trade agreement even if there is no agreement on agricultural subsidies," U.S. Trade Representative Robert B. Zoellick told reporters in Washington recently. "If a country doesn't want to negotiate with us because of the farm subsidies issue being incomplete, I don't find a shortage of countries willing to go forward with us."

He also added: "Our message to the Brazilians is, we think there's great potential for you and for all countries of the hemisphere" in joining a trade zone.

"It's up to Brazil." In addition, U.S. officials say they are willing to study import policies on some farm products important to Brazil, possibly increasing some quotas and lowering some tariffs to reach a deal. But, cautioned one U.S. official familiar with the talks, "agriculture is a hard issue -- maybe the hardest."

All sides agree, however, that one of the stickiest points is likely to be orange juice.

Mogi Guacu, an agricultural city of 100,000 people about 160 miles north of Sao Paulo, is in the heart of Brazil's orange country. Wild web-footed rodents called capybaras roam in the underbrush of the vast groves here, which yield the bulk of Brazil's $5 billion citrus product -- the world's largest.

Groves like the ones owned by Naday's company, Fazenda Sete Lagoas, are also among the most competitive in the world. The Brazilian cost of producing oranges is about 44 cents per pound, compared with about 78 cents per pound in Florida, according to a recent study by the University of Florida.

Florida orange growers argue that is because the Brazilians do not have to comply with the strict labor laws and sanitary regulations in the United States.

"The fact is the U.S. has higher standards and we have to comply with them, and that drives up our costs by about one-third compared with the Brazilians," said Andy LaVigne, chief executive officer of Florida Citrus Mutual, the trade association that represents 11,000 citrus growers in Florida.

The continued presence of pests and citrus diseases here is one reason the United States does not allow the import of fresh oranges from Brazil -- though the juice from those oranges can be imported. But more costly Florida juice still dominates the U.S. market in large part, critics here say, because tariffs are prohibitively high -- raising the price by about 40 percent and essentially eliminating Brazil's competitive edge.

If you take those tariffs away, "you would be handing over the market to the Brazilians," LaVigne said. "You would be creating a monopoly for orange juice and giving it to Brazil."

Nadai and other growers in Brazil concede that they would likely "wipe out" Florida's citrus industry if the tariffs were dropped altogether. But, he said, "there has got to be a middle ground."

"We understand the U.S. need to protect the industry in Florida -- but the tariffs should at least be lowered to the point where we have a fair chance to compete," he said. "Let us take part in the U.S. doctrine of free trade. We're ready. Just let us in."