A WILD CARD NOT ANTICIPATED BY EITHER supporters or opponents of the FTA was President Bush's June 27 unveiling of his "Enterprise for the Americas Initiative." For ten years, White House preaching about the virtues of a unified economy from "the Yukon to the Yucatan" had fallen on deaf ears. Mexico suddenly reversed its stand last year, primarily because it hoped to secure exclusive access to the U.S. market for its exports. On June 10, Presidents Bush and Salinas met in Washington to formally order negotiations for a bilateral free zone. Then, just two weeks later, Bush publicly proposed extending the FTA all the way to Antarctica. Bush said he foresaw the day when the countries of North, Central, and South America would all be "equal partners in a free trade zone stretching from the port of Anchorage to Tierra del Fuego." Mexico kept its reservations quiet. The Salinas Admini- stration could hardly be seen publicly opposing freer trade for the rest of Latin America, especially since it has been strongly advocating an aggressive liberalization of the intra- regional tariff structures governed by the 10-year-old Latin American Integration Association (ALADI), which oversees intra-regional tariff arrangements. And the Mexican govern- ment also understood that the initiative was intended to reassure the rest of the region that Washington was not cutting an exclusive deal with Mexico. Yet the promise of exclusivity for Mexico had in fact been implicit in earlier U.S. policy statements. And in Canada's case, special access to the U.S. market was promised explic- itly by the Mulroney government when it was pushing for acceptance of its bilateral U.S. free trade accord. The initial favorable reaction to the initiative in Latin America was quickly replaced by hard questions about U.S. political and financial commitment to the plan. Doubts intensified in August, when Bush canceled a scheduled South American tour, citing budget negotiations with Con- gress. Moreover, there were no immediate moves to push Congress for the appropriations or discretionary debt reduc- tion authority needed to take action on the initiative.* By contrast, the administration pressed forward on the U.S.-Mexico pact, notifying Congress of its intention to negotiate and dispatching Commerce Secretary Robert Mosbacher on a week-long promotional tour in October with his Mexican counterpart, Jaime Serra Puche. Serra said the reaction among the U.S. business groups they addressed during the five-city U.S. tour was almost uniformly positive, with only a few mild questions about textiles and automotive job losses. In New York, Serra recalled, he and Mosbacher were also questioned about possible negative repercussions of the pact for Canada, but concern seemed to him to be confined to the Northeast. Presidents Bush and Salinas and their trade and finance ministers met in Nuevo Le6n in November in a further effort to build support for the U.S.-Mexico pact. And in Washing- ton, emissaries from countries like Chile and Uruguay that sought to take up Bush's free trade invitation were told to wait until the Mexican agreement is concluded. As a practical matter, administration officials acknowledge that this means waiting until and if Bush is inaugurated for a second term. OBBYISTS TRACKING THE NAFTA DEBATE say many members of Congress may favor making Mexico another special case like Canada: both have a long land border, deeply rooted historic and cultural ties, plus an overwhelming dependence on U.S. investment and trade. But they would balk at extending the same market access to more distant major economies like Argentina and Brazil, where the risk of retaliation is too great and the rewards too small. As a trading partner, Latin America-minus Mexico-is not important enough. It is far from clear that the same assemblage of North American business interests would battle on the Southern Cone's behalf. Steel companies fear Brazilian competition more than Mexican. Detroit auto firms have nowhere near the same degree of investment commitment to South America that they do to Mexico. Export-oriented manufacturing in- vestment has been booming in Mexico, reinforcing the ranks of Mexico's corporate advocates abroad. By contrast, most Brazilian and Argentine foreign investment dates back to the inward-looking 1960s and 1970s and is still aimed primarily at the domestic market. The numbers are telling: the U.S. share of foreign invest- ment in Mexico is equivalent to its share of foreign trade: 70%. In Brazil and the Southern Cone, the former is twice as high as the latter: 40% compared to 20%. The axiom notwith- standing, trade does not always follow investment. Transna- tional corporations are more interested in pushing market reform below the equator than they are in improving South American access to foreign markets. While the North American economies are seen as essen- tially complementary, Brazil and Argentina offer substantial direct competition for the U.S. economy in agriculture (soybeans, citrus, wheat, sorghum, grapes) and industry (high-grade steel, small aircraft, military equipment). Com- plaints over Brazilian intellectual property rights rules make it unlikely that the U.S. electronics hardware and software industries enthusiastic backers of NAFI'A would fight in Washington for its incorporation into a hemispheric bloc. Bankers frustrated by Brazilian and Argentine debt arrears are unlikely to go to bat for either country. After NAFTA, the "CBI countries" of Central America and the Caribbean are expected to renegotiate their special relationships with the expanded North American bloc. The Caribbean Basin countries echo Mexico's arguments about emigration and cultural ties, proximity, and (through allu- sion, rarely directly articulated) neo-colonial responsibility. Together, the CBI economies (Central America, Hispaniola and Caricom) are barely one-third the size of Mexico. The four-country Mercosur bloc (Brazil, Argentina, Uruguay, and Paraguay), by contrast, is equal to two-and-a-half Mcxi- cos, with a hefty combined GDP of $437 billion and a population of 187 million. Latin America's southern hemisphere is simply not a first-rank supplier of goods or people to the United States, nor a major purchaser. Neither do Brazil and the Southern Cone have the history of direct U.S. political and military presence that typifies the Caribbean Basin. On all those grounds, a better case from a North American perspective could be made for the inclusion of the Philippines in an FTA, or Taiwan or Korea. Nor is it clear that giving preferential market access to U.S. goods and investors would be in South America's long- term economic interest. Brazil and the Southern Cone coun- tries would be well advised to put at least equal energy into fortifying their traditionally strong trading ties with Europe and Japan. The Enterprise Initiative could perpetuate a cycle of dependency and paternalism in U.S.-Latin American relations that neither side needs and which the thawing of the Cold War might otherwise have ended. Most danger- ously, the promise of greater North-South American interde- pendence could prove illusory. Lasting trade alliances must emerge from economic reality. They cannot be created by fiat. * The budget Bush submitted in January called for a $100 million appropriation for the initiative's business promotion fund and authorization to write off some outstanding debt to the U.S. govern- ment and its agencies. Yet there are strong doubts that Congress will authorize the appropriation unless the European Community and Japan first ante up equal contributions.
