The United States was the odd man out yesterday as the European Union cut a deal with Latin America to create an ocean-spanning free-trade zone and oppose U.S. policies blocking the regulation of international markets.
The 15-nation European Union and 33 Latin countries announced their intent this fall to start talks aimed at lowering barriers to trade between the two continents and at the same time pledged to push for stronger regulation of world markets to prevent the outbreak of another global economic crisis.
Both goals are directly at odds with the United States, which has long viewed Latin America as its economic back yard and has wanted to create an American free-trade zone as part of larger efforts to open up markets to freer trade and flow of money around the world.
"We are entering a new era," German Chancellor Gerhard Schroeder, the European Union's current president, said in a speech in Rio de Janeiro yesterday, calling the summit "a major step forward."
Europeans have been working for years to cultivate closer ties to Latin America, taking advantage of a backlash in Congress to passage of the North American Free Trade Agreement that has resulted in a paralysis on trade legislation since 1994.
The failure to pass legislation giving President Clinton "fast-track" negotiating authority to win congressional approval of trade-opening agreements is widely attributed to the backlash, which also was fueled by Mr. Clinton's announced intentions to create a hemispheric free-trade zone as the next step after NAFTA.
The European Union also has been quietly opposing the United States in its efforts to keep world financial markets open in the wake of the debilitating recessions caused by the widening Asian financial crisis last year. Yesterday, European leaders won key allies in the Americas.
The 69-point Declaration of Rio pledges to combat the "destabilizing effects of volatile financial flows" by "strengthening regulation of the financial markets." It also espouses a variety of other political, social and economic goals, including the promotion of democracy, peace, disarmament and the "redistribution of wealth."
The provision to pursue controls on international investments responds to pleas from Brazil, the Latin country hardest hit by the global crisis, whose economy was dragged into recession this year by a hemorrhaging of money out of Brazil when the country suddenly devalued its currency, the real.
As the price of receiving loans from the West, Brazil was forced to take harsh, free-market medicine administered by the United States and the International Monetary Fund and was barred from imposing capital controls.
Mr. Schroeder appealed for efforts to establish new rules for capital flows. Speculative money flows cannot be allowed to destabilize entire societies and lead to the loss of thousands of jobs, he said.
Brazilian President Fernando Henrique Cardoso, the summit host, said the introduction of negotiations toward a Europe-Latin America free-trade zone is "an ambitious task."
The new zone would link the European Union with Brazil, Argentina, Paraguay, Uruguay and Chile. A meeting was set for November to work out the details of the negotiations, which won't begin before July 2001. …