WASHINGTON (AP) – The Bush administration, stymied in efforts to create a hemisphere-wide free trade zone, is trying to first take a smaller bite of the apple by establishing an alliance with five countries in Central America.

But even this scaled-down free trade agreement, which could be finalized as early as Tuesday, is running into stiff opposition from U.S. textile companies, the sugar industry and American unions.

Negotiators from the United States and the five Central American countries – Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua – met for an eighth day Monday at a downtown Washington hotel trying to overcome the final obstacles to completing a pact.

The U.S. side and the Latin American negotiators all expressed optimism that a deal can be reached by the self-imposed deadline of Tuesday.

“I would say that we are very, very close to a final agreement,” said Mario Arana, minister of industry and trade for Nicaragua.

U.S. officials also described the talks as close to completion but cautioned that unforeseen last-minute snags could jeopardize the goal of getting a deal done this week, especially given the complexity of the negotiations.

The administration sees a Central American Free Trade Agreement, or CAFTA, as a stepping stone to the bigger prize of a Free Trade Agreement of the Americas, or FTAA, which would cover all 34 democracies in the Western Hemisphere.

At talks last month in Miami, the administration was forced to accept a watered-down outline for the FTAA that will allow each nation to determine the extent it is willing to lower trade barriers on various politically sensitive industries.

That compromise covered over deep disagreements between the United States and Brazil concerning the scope of the negotiations that were threatening to derail the entire enterprise.

Faced with that setback, the administration is forging ahead with efforts to strike as many free trade agreements as possible with willing countries, hoping to pressure holdouts such as Brazil with the prospect that their competitors will gain barrier-free access to the United States, the world’s biggest market, while they will be left behind.

The administration earlier this year won congressional passage of free trade deals with Chile and Singapore, which will take effect Jan. 1. Those two countries will join Mexico, Canada, Israel and Jordan as the only countries that have free trade pacts with the United States.

But while the Chile and Singapore pacts passed with little opposition, opponents think they have a good chance of defeating the Central American deal in Congress.

The biggest opposition comes from labor unions, which fear the loss of jobs as American workers are subjected to competition from low-wage countries, and the textile and sugar industries, which contend the deal will trigger a flood of imports.

“As it now stands, CAFTA would result in the loss of thousands of U.S. apparel and textile jobs,” said Mark Levinson, chief economist for UNITE, the Union of Neddletrades, Industrial and Textile Workers.

“CAFTA is good for big retailers, not for apparel and textile workers.”

American growers of sugar cane and sugar beet, a political force in 42 states, fear the increased competition that could come if sugar imports from the five CAFTA countries are allowed into the United States without the steep tariffs imposed on sugar imports from other countries. The five Central American countries currently produce 2 million tons of sugar annually, more than the United States is currently importing.

Sen. Byron Dorgan, D-N.D., last week produced a study contending that increased imports from Central America could wipe out the U.S. sugar beet industry and greatly reduce cane sugar production in the United States.

“The sugar industry in our region and the family farms and rural communities it sustains would be devastated,” Dorgan said.

Faced with this type of opposition, there is speculation that the administration may not even try to get a vote on the Central America deal in 2004, a presidential election year.

But administration officials contend that they have had success putting together coalitions of groups that stand to gain from free trade.

To bolster the chances for CAFTA, the administration has already announced that it will negotiate an agreement early next year to add the Dominican Republic to the agreement before presenting it to Congress in hopes of picking up the support of key New York Democrats, including Rep. Charles Rangel, who have large constituencies from the Dominican Republic in their districts.

—

Associated Press reporter Nestor Ikeda contributed to this report.

AP-ES-12-15-03 1711EST