ANTIAGO, Chile The United States first began wooing Chile as a free-trade partner more than a decade ago, only to back away when it came time to commit. Now the courtship has resumed, but American negotiators are finding to their chagrin that not only are they just one of many suitors, but they may no longer even be the preferred partner.
Reflecting the new pecking order, President Ricardo Lagos went to Spain in May to sign a sweeping accord that establishes the European Union as Chile's closest economic and political ally. From start to finish, the negotiations took less than three years.
"We always thought an agreement with the United States would come before one with Europe," said Ronald Bown Fernández, president of the Chilean Exporters Association. "Europe, after all, is 15 countries trying to speak as one. But after a dozen years of promises and nothing more from the Americans, both the government and the private sector here are disillusioned."
The agreement with the Europeans goes into effect on Jan. 1 and includes both trade and political components. Tariffs on nearly 90 percent of Chilean exports are to be eliminated immediately, with the rest to be removed over the next seven years.
In contrast, negotiations with the United States, revived in December 2000, are once again stalled. During an interview here, Mr. Lagos recalled that when he first met George W. Bush more than a year ago, "he told me that we would have an agreement by December well, we're a little bit behind schedule."
With barely 15 million people, Chile has a relatively small economy, about one-half of 1 percent of that of the United States. But the Bush administration is formally committed to achieving a Free Trade Area of the Americas by 2005, and Chile's neighbors see the negotiations with Chile as a test case.
Having been rather unceremoniously jilted once before, Chilean leaders are understandably skeptical about any timetable the United States proposes. Mr. Bush's father initiated trade talks with Chile in 1990, and after the Clinton administration secured congresional approval of the North American Free Trade Agreement in 1993, Chile was told its admission would not be long in coming.
"We were invited to the party, and when we arrived, they said to us, `We're not ready, but when we are, you'll be the first in line,' " said Felipe Larrain, a professor of economics at the Catholic University of Chile. "Well, here we are now in 2002 and we're still not in."
Since 1994 Chile has negotiated free-trade accords with both Canada and Mexico, begun talks with several Pacific Rim nations and become an associate member of Mercosur, the South American trade union. But it is the deal with the European Union, which has already surpassed the United States as Chile's principal trading partner and source of investment, that presents the strongest challenge to traditional American economic domination of the region.
More than any country in Latin America, Chile "is a country that has made all the right decisions and taken all the economic steps we would have urged them to take" toward an open economy, said William R. Brownfield, the American ambassador. Unsuccessful negotiations here, he acknowledged, would leave the rest of Latin America wondering: "If we cannot reach a free trade agreement with Chile, whom could we reach a free-trade agreement with in the Western Hemisphere?"
From the Chilean point of view, one of the main impediments has been the failure of the American Congress to grant "trade-promotion authority" to either the Clinton or the Bush administration. That "fast track" negotiating tool prevents Congress from altering any proposed accord once the White House submits it for a vote. In March, more than half the members of the United States Senate, weighing in on their feelings about the talks, signed a letter demanding that Chile open its markets further to American products.
Prospects for a quick conclusion of the trade talks have also been clouded by the Bush administration's decision to invoke antidumping measures against foreign steel producers and by passage of an agriculture bill that grants $180 billion in subsidies to American farmers, who see Chilean fruit, wine and lumber producers as tough rivals.
"These are not exactly signals that point in the direction of free trade," Mr. Lagos said. Since Chile has both the lowest tariffs in Latin America and the highest growth rate over the past decade, Chileans feel that the time has come for the United States to practice what it preaches.
The accord with Europe, Chilean officials maintain, offers free trade and more. The political component in particular, they say, brings Chile as close to being a member of Europe as is possible for a country on the other side of the world.
"We see this accord as a sign of confidence in our policies and our institutions," said Osvaldo Rosales, the Foreign Ministry's chief trade negotiator. "An agreement with the United States continues to be a central priority," he continued, but "globalization doesn't wait."
Ambassador Brownfield estimated that the two sides have "worked their way through about 75 percent of the issues." But the questions that remain are the most difficult, including agriculture, labor and the environment.
"I think we will still have a free-trade agreement, and I think we will have it by the end of this year," Mr. Brownfield said. "But both sides are going to have to make some tough decisions to bring this to conclusion."
Mr. Lagos begs to differ. "The ball is in the American court," he said.
