Clinton Team Shifts Toward Trade Activism

Blocs of regional partners may replace a truly global agreement

THE Clinton administration's new trade team is entering an arena marked by the breakdown of global talks and the rise of regional trading blocs and bilateral disputes.

While the president has been slow to articulate a trade policy, foreign officials and trade watchers are worried that the administration's initial steps - signing off on action initiated by the departing Bush administration, including this week's antidumping action on steel imports and sanctions against the European Community for unfair procurement practices - are early warnings that the new White House may be more protectionist. Momentum for a global trade accord, many say, is all but lost.

"There is no enthusiasm for resolving GATT," says Enrique Iglesias, who was chairman of the General Agreement on Tariffs and Trade Uruguay Round when it began in 1986. Mr. Iglesias was called the "hero of Punta del Este" by US trade negotiators for fostering the most comprehensive agreement in world commerce.

Today, Iglesias, president of the Inter-American Development Bank, says the Uruguay Round, which aims to ensure free trade of farm and manufactured products as well as a broad range of services, "was too ambitious."

Since 1986, US negotiators have been the strongest advocates of free trade. "Before, our discussions were ideological," says Geza Feketekuty, senior policy adviser to the US Trade Representative (USTR) and chairman of the trade committee at the Organization for Economic Cooperation and Development. "We said `we believe in free markets' and they said `we believe government has a role to play.' " More federal involvement would mean "moving away from theory and ideology and focusing on the economic issues a t stake," he says.

Laura D'Andrea Tyson, new chairwoman of the White House Council of Economic Advisers, calls for "aggressive unilateralism": US laws that help US producers who suffer from unregulated foreign trade practices. She supports federal spending and investment incentives for cutting edge industries - such as fiber optics and high-speed rail - that will be competitive in the 21st century.

And there seems to be synergy between Ms. Tyson's views and the $15 billion to $30 billion-plus stimulus package Clinton is preparing for congressional consideration. Part of the package is slated for upgraded telecommunications and a transport network.

ALL this intervention talk lured lobbyists to the White House and the USTR, says Mr. Feketekuty. US business is lining up for concessions ranging from permanent research and development tax credits (a likely part of Clinton's coming fiscal plan to be unveiled Feb. 17) to protective measures such as limiting imports of Japanese goods dominating the US market.

A senior White House official concedes privately that the US has learned a very valuable lesson from its most recalcitrant trade partner, Japan.

Intent on slashing its $52 billion trade deficit (today it is over $60 billion), Washington initiated trade talks with Tokyo in 1989; Japanese negotiators then prodded their American counterparts to buttress the US position by strengthening its competitiveness in key industries.

The White House official says if Washington took Japan's advice, stepping up federal investments, procurement and tax breaks for its own domestic industries, the US position would improve and trade frictions could decrease.

In the interim, regionalism is on the rise. In the US, this development took shape in the mid-1980s. By 1989, when the Bush administration was frustrated with seemingly impenetrable foreign markets (Japan, in particular), it decided to pursue trade agreements with a two-tiered approach.

Bush continued his commitment to multilateralism through the GATT, but began talks with Mexico and Canada for the North American Free Trade Agreement.

Though concerned about a possible inward, exclusionary approach by some Asian and European trade regionalists, Iglesias is enthusiastic about the evolution of sub-regional trade blocs within Latin America, such as the pact between Argentina, Mexico, and Venezuela, or the accord between Central American countries.

He is confident that these Latin arrangements are steps toward broader ties with the US, NAFTA, and multilateralism.

Mindful of a merchandise trade deficit that may soon hit the $100 billion mark, politicians such as Sen. Max Baucus (D) of Montana, chairman of the Senate Finance Subcommittee on Trade, support an approach that extends well beyond this hemisphere. "The prospects don't look good" for the Uruguay Round, he says, stressing the need "to be pragmatic in our pursuit of bilateral agreements whenever possible."

But Mr. Baucus seeks equity in trade. On Tuesday he introduced two trade bills into Congress. One would extend for five years the law known as Super 301, which allows the US to retaliate against countries that discriminate against American goods.

The other would allow US businesses to petition the US Trade Representative to review foreign compliance with trade agreements.

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