Study on trade curbs warns of overseas political fallout

Geopolitics could enter the debate over trade, says the Heritage Foundation, a conservative think tank. Even a ``relatively small cutoff of one major export earner can dry up hard currency for a third-world country -- and many aspects of development are left in a vacuum following years of rising expectations,'' the foundation notes in a report released Nov. 1.

A more restricted American market would put large numbers out of work and stifle growth in Asia. Ending ``even a fraction'' of exports to the United States would cripple development. Moreover, ``it is a fact of life almost everywhere,'' says the report, ``that economic dislocations produce `solutions' from committed extremists of right and left.''

In Malaysia, protectionism could rekindle racial tensions between Malays and ethnic Chinese. Sri Lanka -- already beset by insurgency -- would find many of its 100,000 textile workers unemployed. The recent coup attempt in Thailand is cited as instability with economic roots.

South Korea, China, Singapore, and the Philippines are likewise vulnerable. Even in Australia, the report says, an anti-US tilt could arise in retaliation against US protectionism.

By drawing a link between trade and stablility, the foundation hopes to recast some debate on protectionism. Geopolitics ought to be considered in the macroeconomic setting, the report asserts.

Heritage says gains in securing US market access are proceeding at a ``reasonable'' pace throughout the Pacific Rim, and retaliation against American goods is inevitable if tough trade measures are adopted in the US.

The study says that Japan would actually be the biggest beneficiary of any Asian retaliation against the US. Japanese trading companies are poised to strike at any Pacific Rim market and would readily seize contracts in foodstuffs, consulting, and electronics.