Regional Trade Blocs Trouble the Waters For Clinton Team

WITH the world economy slowing down, many countries are scrambling to do what they can - either bilaterally or on a regional basis - to push their exports into foreign markets and to protect their own domestic producers from competition.

The United States, the world's largest trader, is developing the most strident trade policy in its recent history. Though the White House wants to finalize the General Agreement on Tariffs and Trade (GATT) this year, its immediate actions - such as swift measures to pry open specific markets and establish a North American Free Trade Agreement (NAFTA) - are oriented toward bilateral, not multilateral, trade. In the process, the administration may be missing important market opportunities in Asia and elsew here, critics say.

The administration is under pressure to produce results quickly because of depressed demand for US exports coupled with a greater US appetite for imports. Those trends, US Trade Representative Mickey Kantor says, could produce a "potentially difficult" 1993, coming after a 29 percent hike in the US merchandise trade deficit last year.

Leaders of some of the strongest contributors to the nation's recovery support the focus on regional trade because, they say, ensuring a prominent US position in regional trade is vital for the US to regain its economic luster.

Barry Rogstad, president of the American Business Conference - a group of mid-sized, high-growth companies - notes "an erosion of the trade gains we made in the latter part of the 1980s.... The problem will not automatically correct itself. We must address the fundamentals underlying our trade decline. That means, first, aggressively pursuing ... congressional implementation of the NAFTA."

But Washington is flooded with policy papers by critics of NAFTA, such as Prof. Ray Marshall of the University of Texas at Austin. A former labor secretary, Mr. Marshall warns that unless Clinton enforces tough labor standards, NAFTA will do more harm to the US economy than good. Part of the effect, he says, "will be jobs lost to the less-stringent Mexican labor environment, and part will be continued illegal immigration attracted by US enterprises seeking to compete with lower labor standards in the Thi rd World."

Alan Tonelson, director of research at the Economic Strategy Institute, contests the assumption that by grouping with nearby trade partners, the US competitive position will vastly improve. Extending NAFTA beyond Canada and Mexico to other Caribbean and Latin American countries for the envisioned "hemisphere trade pact," he says, will "spread the benefits too wide." Despite US measures to improve trade opportunities by forgiving a series of Latin debts, the region's foreign debt rose in 1992.

Mr. Tonelson also says it is folly to focus locally and antagonize partners such as the European Community, which offers the US not only its largest single market, but also the "one regional bloc with the best plausible hope of reaching an understanding on trade rules."

And ahead is the possible emergence of a powerful all-Asian trading bloc designed to counterbalance or outweigh the European Community and the developing sphere of trade in the Americas.

Illustrating stark differences in regional prospects, the Asian Development Bank forecasts a robust 7 percent average increase in Asian-Pacific economic growth for 1993 and 1994, compared to the 1.5 percent 1993 growth and 3.5 percent 1994 growth it predicts for the worldwide economy.

While the US has a far greater stake than Europe in Asian trade, a senior White House official concedes that Americans are fast losing ground to aggressive Japanese investments and exports.

Ki-Ho Chang, economic counselor at the Korean Embassy in Washington, discounts the possibility of an Asian-specific regional pact that will close out other regions' ability to compete. "It won't work, because major trading partners like the United States are excluded," he says. He is much more optimistic about the 15-member Asian Pacific Economic Cooperation (APEC) group, whose members include Japan, Korea, China, Australia, and the United States.

"APEC can play a role in bridging the gap between NAFTA and Asian countries," he says, if it is enlarged to include Mexico.

Mr. Chang says it may turn out to be the only trade liberalization option. He expects that if the Uruguay round of the GATT talks fails to produce results, "then APEC could be a substitute that encompasses a trade and investment framework" that transcends regionalism.