Quotes of the Day

In the world of trade negotiations, Cancún is already legendary. In September, as Caribbean waves lapped the beach outside their hotel, Brazilian Foreign Minister Celso Amorim handed U.S. Trade Representative Robert Zoellick a new set of demands from a coalition of 22 developing countries, led by Brazil, China and India. If the U.S., the E.U. and other developed nations failed to slash their hundreds of billions in agriculture tariffs and subsidies, the poorer nations would refuse to discuss issues dear to the rich, like investment rules and intellectual-property rights.

Zoellick stood up, Amorim recalls, and said that while he couldn't agree to those terms, "I can't accuse you of being unbusinesslike." Both sides knew that global trade relations had changed. The impasse between rich nations and Brazil's "G-22" group collapsed the five-day Cancún meeting — which Zoellick blamed on a cabal of "can't-do" countries led by Brazilian President Luiz Inácio Lula da Silva, who has emerged as the spokesman for the developing world.

It looks as if Lula may have more to talk about this week. The battle over First World subsidies could torpedo a new round of talks in Miami — talks meant to lead to the Free Trade Area of the Americas (ftaa), the proposed 34-nation, $13 trillion free-trade zone from Alaska to Argentina. Brazil is the U.S.'s co-chair in the Nov. 20-21 talks, which are meant to hash out ground rules for the final stretch of negotiations before the target completion date of Jan. 1, 2005.

Things got fierce before the meeting began. The U.S. used its carrots and sticks to successfully pressure nations like Peru and Colombia to defect from Brazil's alliance. Lula, meanwhile, accused Washington of creating a "commercial apartheid." He sent diplomats throughout Latin America to shore up support for what he and Argentine President Néstor Kirchner call the Buenos Aires Consensus, a left-leaning design for trade that emphasizes job creation and access to markets.

Now Lula faces a delicate diplomatic moment. If things melt down in Miami, Brazil could be blamed for derailing the ftaa. If Brazil is seen as giving in to the Yankees, it risks losing its heady new role as Third World standard bearer. "We are not trying to gang up on the United States," Amorim told Time. Instead, he insists, the U.S. has made "an attempt to corner Brazil."

America isn't about to budge on politically vital issues like agriculture subsidies. It hopes to make Brazil back down by painting its defiant stance as reckless international populism. That may be the only way left to salvage the ftaa, a pact the U.S. has long coveted as a guarantee against Latin America (today the U.S.'s second-largest export market) reverting to statist protectionism.

But Lula looks unlikely to blink and is "definitely prepared to walk away" from an ftaa, says Michael Connolly, an international-trade expert at the University of Miami. Brazil's $500 billion economy is South America's largest and among the world's top 15. It has always cared more about its own trading bloc, Mercosur — a $620 billion customs union that includes Argentina — than about an ftaa. So what seems to matter most to Lula is the chance to thwart U.S. hegemony. "The U.S. thinks first and foremost about the U.S., so now it's up to the Brazilians to think more about ourselves," he told Time last year. "Foreign trade and relations depend on daring, wisdom and political will."

Lula should have plenty of support for his strategy, since surveys show most Latin Americans have soured on closer trade ties with the U.S. Latin poverty has worsened amid capitalist reforms — a big reason why Bolivians last month forced free- marketeer President Gonzalo Sánchez de Lozada to resign. In Peru, the polling firm APOYO has found that only around one-third of voters agreed with their government's decision to take Peru out of the G-22.

Lula and Brazil have harnessed decades of pent-up frustration with hefty U.S. tariffs. For example, Brazil and the U.S. together produce 90% of the world's orange juice. Brazil exports all but 1% of its juice, while Americans guzzle 68 million glasses a day — a more than $3 billion market. But to protect U.S. citrus growers, Washington slaps a whopping 52% tariff on Brazilian o.j. In the past 15 years, that has cut Brazil's share of the U.S. frozen concentrated orange-juice market from 45% to less than 15%.

The U.S. claims it can't negotiate those duties in the ftaa. The reason: Brazil's lower wages and looser environmental standards, for example, make it over 60¢ cheaper for Brazilians to harvest a kilo of oranges, thus putting U.S. growers at a competitive disadvantage. Experts like Connolly say that handicap isn't as severe as the U.S. complains. Cases like the juice tariff — as well as the tariffs pampering U.S. industries like steel, ruled illegal last week by the World Trade Organization — make the developed nations' frequent lectures on open markets sound insincere at best.

But Brazil may be guilty of its own unreasonable demands. These include its insistence that areas like investment, intellectual property and government procurement be left out of ftaa talks — or, as Amorim says, made "more flexible, so some countries can opt out now and opt in later on" to suit their particular development needs. Given the Western Hemisphere's stark developmental disparities, he says, "you can't have a one-size-fits-all" ftaa. Connolly and other experts call that bunk. "You can't treat a free-trade agreement like a Chinese menu," says a Latin diplomat involved in the negotiations. The U.S. is especially opposed to such "flexibility," seeing it as an excuse for Brazil and China to perpetuate rampant piracy.

Hence all the pre-Miami drama. After the Cancún shock, the U.S. rushed to peel off some of the 14 G-22 members in Latin America. The region does almost half its foreign trade with the U.S. — and Brazilian officials say they suspect the U.S. of threatening smaller Latin nations, which need U.S. aid and access to its $10.5 trillion market. The U.S. denies that; but when the hemisphere gathered in Trinidad and Tobago last month for a pre-Miami meeting, at least five Latin countries had dropped out of Brazil's coalition; Colombian Commerce Minister Jorge Humberto Botero said the G-22 "ceases to be a useful tool for our country." The U.S. declared that Brazil's stance on the ftaa was "isolated." Brazil's leaders scoff at this. "The [U.S.] misrepresentation here is that Brazil and Mercosur don't want to negotiate," says Amorim. "That is certainly not true." Mercosur accounts for more than two-thirds of South America's economy, he notes — so to call Brazil isolated "is the same as negotiating with Asia and saying India and China are isolated."

This does not sound like a recipe for compromise, though in a meeting this month in Washington, Zoellick and Amorim tried to iron out differences. "What we're most likely to see in Miami is the ultimate failure of the U.S. and Brazil to agree," says Connolly. "At best we may see a cosmetic ftaa that has no teeth." That might not upset U.S. President George W. Bush. As he mounts his 2004 re-election campaign, U.S. labor unions and Florida citrus and sugar barons, all famed for lavish campaign contributions, have voiced their own loathing for the pact. In the end, Brazil's "daring" just may give Bush the political out he needs at home — as well as the political boost Lula wants abroad.

• TIM PADGETT | Miami and ANDREW DOWNIE | Brasilia
• Lula takes on the U.S. in trade talks