Bush Plan for Trade Zone Has Potential, Analysts Say Call to Drop Barriers Takes on Some of World's Most Closed Economies

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IF Latin America was feeling left out in a world engrossed with economic and political changes in Eastern Europe, President Bush gave it a dramatic dose of attention this week.

He pledged to ease part of the $12 billion debt Latin American nations owe the United States and proposed a $300-million annual fund to spur investment in the region. But his most striking proposal was a free-trade zone encompassing the entire Western hemisphere - from the Yukon to Tierra del Fuego, a group of islands at the tip of South America. (Brazil begins loosening trade restrictions, page 4.)

The proposition has tremendous economic potential for the region, according to economists, although the potential is five to 15 years away.

Almost as striking as Mr. Bush's proposals was his political timing. On Tuesday, he made a low-key, but explosive, statement that higher taxes would be necessary to deal with the budget.

"Clearly, this administration knows it's in deep political trouble on the tax announcement," says political analyst William Schneider of the American Enterprise Institute. "The president clearly wants to talk about something else."

The tax statement came while Nelson Mandela's visit was dominating the press. It was followed shortly with a politically popular announcement that he would not allow further oil drilling off the California and Florida coasts.

The Latin America proposal was months in the crafting, but the final package appeared to be hurriedly put together. Administration aides were getting outside advice on fundamental aspects of the plan the afternoon before Bush's speech on Wednesday.

The obstacles to the plan, many economists say, are considerable. Latin America has been opening up to the marketplace steadily during the past two years, but the nations retain some of the world's most closed economies.

William Cline, senior fellow at the Institute for International Economics says Bush recognizes it could be many years before a hemisphere-wide agreement is reached. The framework agreements, says Mr. Cline, will be "embyronic," providing an ongoing forum for resolution of bilateral trade disputes.

Bush acknowledged that point. "Some countries aren't yet ready to take that dramatic step to a full free-trade agreement," he said Wednesday, "and that's why we're prepared to negotiate, with any interested nation in the region, bilateral framework agreements to open markets and develop closer trade ties."

Bush stresses the biggest obstacles to US-Latin commercial relations are "over-restrictive trade barriers that wall off economies."

But economist Peter Hakim, director of the Inter-American Dialogue, attributes the fall-off in US-Latin trade to a recession in Latin America, where countries have had to generate trade surpluses to pay off their debt. …

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