Lula Raises the Stakes (Page 2)

Cancún was the flashpoint where Lula's ambitions collided head-on with American power. His diplomats helped organize the coalition of twenty-two developing nations that stood their ground in the WTO negotiations and did not yield to the usual pressure tactics from the United States, Europe and Japan. The talks collapsed, an emblematic victory for Lula in demonstrating that unity means power. After the breakdown at Cancún, US Trade Representative Robert Zoellick announced that he will negotiate individual trade agreements with the "can do" nations, never mind the "won't do" nations. Zoellick's rebuke was "an open declaration of war against Brazil," declared the liberal weekly Folha de São Paulo.

Indeed, it was. The United States began immediately to deliver economic threats and reprisals against the Latin nations that had stood with Lula at Cancún. Zoellick and his agents put the squeeze on them, one by one. The impoverished island nations of the Caribbean were told they could forget about their newly negotiated US trade agreement. They folded. Central American countries were threatened with loss of the modest trade preferences already granted to their products. Costa Rica, one of Lula's original allies, was hammered--privatize your energy and telecommunications sectors or be left in the cold--and gave in. Peru and Colombia both resigned from Lula's group. Paraguay and Uruguay also kept their distance, though both are partners with Brazil in Mercosur. Within a few weeks, Lula's G-22 coalition had shrunk to the G-12.

It looked like a rout, but the underlying reality was more complicated. Federico Cuello, while forced to resign as the Dominican Republic's WTO ambassador, expressed admiration for Lula's cause: "Brazil embodies the hope of countries like the Dominican Republic, showing that you can still have dignity at the negotiation table.... I doubt that Lula, who has massive public support and a top-notch Cabinet, will be intimidated."

Zoellick's offensive might not get the WTO negotiations back on track, but it was meant to soften up Lula for the next critical showdown--the upcoming FTAA negotiations. And when Lula didn't seem to get the message, Zoellick's deputy, Peter Allgeier, announced that the United States intends to go ahead on FTAA without him. The new agreement would include all of North and South America--every country but Brazil. Argentina, however, stood firm with Lula and turned down a backdoor trade offer. Its foreign minister, Rafael Bielsa, explained, "If the US hopes that our countries will be subservient, they are sadly mistaken."

Anyone who understands the dynamics of globalization will recognize that the US threat is quite hollow. Together, Brazil and Argentina account for nearly two-thirds of South America's economic output. Brazil, as one well-placed Washington trade lawyer confided, is the only reason US multinationals wanted the FTAA in the first place. It is intended as a NAFTA-style pact that will impose on the world's eleventh-largest economy the investment and public-policy rules that now confine Mexico. Other Latin American countries are small and already compliant by comparison. As recent events demonstrate, Washington doesn't need new trade agreements to push them around.

"Miami will probably decide whether there is an FTAA," predicts Vicki Gass of the Washington Office on Latin America. "I don't see the United States making any real concessions, and I don't see Brazil backing down. It's just not in their interest. They have seen what happened to Mexico under NAFTA."

The threats and warnings from Washington officials are perhaps better understood as an attempt to conceal their own failure. A few days before Miami, US and Brazilian diplomats had a more amiable exchange, perhaps hoping to avoid another drama of name-calling.

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