EUROPE CHALLENGES U.S. IN HEMISPHERE

RIO DE JANEIRO, Brazil -- Even before it starts, the summit of
European, Latin American and Caribbean leaders has challenged the
United States and its special relationship with Western Hemisphere
nations.

The possibility of a free trade zone linking the European Union and
the Mercosur trade bloc is a new option for South America, a region
sometimes seen as North America's back yard. And though free trade is
years away at best, there clearly is a new player at the table.

"We cannot go down just one path, or put all our eggs in one basket.
We want equilibrium," Brazilian Foreign Minister Luiz Felipe Lampreia
said.

The two-day summit that starts Monday will bring together at least 40
leaders -- organizers aren't sure yet who is coming. The free trade
talks are the centerpiece, but they will also discuss a "strategic
partnership" that includes respect for democracy and human rights,
sustainable development and a commitment to stamp out drug
trafficking.

Today, senior officials meet at the refurbished Museum of Modern Art
to work out the final draft of the Declaration of Rio de Janeiro and a
project for joint action that the leaders will sign. Then it's the
turn of foreign ministers, who meet tomorrow.

An obstacle to the free trade talks was removed this week when the 15
European Union nations agreed to authorize negotiations at the summit
with Mercosur -- which includes Brazil, Argentina, Paraguay, Uruguay
and associate members Chile and Bolivia.

Still, talks on reducing tariffs wouldn't start before 2001, and a
final agreement would not be concluded until the end of the next round
of World Trade Organization talks, which could last many years.

Europeans are worried about a massive inflow of cheap produce from
South America. France and Spain insist on excluding cereals, beef and
sugar.

Still, Mercosur benefits by playing Europe against the United States,
which has its own proposal for a Free Trade Area of the Americas to
start up by 2005.

"It's Brazil's strategy to raise the competition and force the United
States to offer a better deal," said Jose Luciano Dias, an analyst
with Goes e Consultores. "Brazil is looking for another card, but
there's no game without the United States."

The summit is Rio's biggest international event since the 1992 Earth
Summit, and the city has spent more than $12 million on a facelift.
Tunnels were scrubbed, streets paved, lampposts painted, and even the
beggars and street kids that hung out near the museum moved out.

Some 8,000 police and army soldiers yesterday checked the museum for
bombs and moved into the often-violent shantytowns that rise above the
hotel district and the route motorcades will follow from the airport