- The Washington Times - Friday, November 28, 2003

The United States is working toward free-trade agreements with 19 countries — pacts that, if successfully completed, would more than triple the number of nations with such preferential deals.

But the impact of individual agreements on businesses and jobs is expected to be limited, largely because the countries have relatively small economies.

Several countries hope to wrap up talks this year. Robert B. Zoellick, the U.S. trade representative, and Mark Vaile, Australia’s trade minister, met this week, and their negotiating teams will gather next week in Washington to try and finalize a deal.

Negotiators from Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua will be in Washington the second week of December, hoping to nail down terms for a deal between the United States and the five-nation bloc.

Many U.S. business groups are eager for the deals so they get easier access to the markets, but others are worried that competition from Central America will cost profits or jobs.

The two proposed pacts also are indicative of the limited economic impact of bilateral or small regional agreements. U.S. exports to all five Central American nations was $9.8 billion last year, about 1.4 percent of all U.S. exports. Australia’s more prosperous economy offers a larger market, but still buys less than 2 percent of U.S. exports.

Mr. Zoellick, in describing his strategy, said such pacts help promote the Bush administration’s trade policy throughout the world through “competitive liberalization” as countries vie for access to the world’s largest market. They also boost regions such as Central America by promoting integration and locking in democratic changes.

“The bilateral agreements that the United States is pursuing are, in my own view, complementary to what can be achieved in [the World Trade Organization headquarters in] Geneva,” said Scott Miller, director of national government relations at consumer-products company Procter & Gamble.

But they do not have the same advantages — for businesses or developing nations — as a broader pact.

“We live in a world of global trade, and a world of global trade implies the need for a global, rules-based trading system,” Mr. Miller said.

That means the World Trade Organization, but WTO talks collapsed in September, pushing a Jan. 1, 2005, deadline to agree on new rules out of reach. Negotiations over the Free Trade Area of the Americas reached an important milestone last week with an agreement to continue negotiations, but no clear mandate on details.

That leaves the bilateral deals. In addition to Central America and Australia, the Bush administration said it intends to reach pacts with Morocco, Bahrain, the Dominican Republic, Panama, four Andean nations — Colombia, Bolivia, Ecuador and Peru — and five nations in southern Africa — Botswana, Lesotho, Namibia, South Africa and Swaziland.

The president this year signed pacts with Chile and Singapore. The United States already had pacts with NAFTA partners Canada and Mexico, as well as Israel and Jordan.

Pro-trade business interests see the bilateral deals as something of a consolation prize.

“We all recognize that a global-trade agreement provides greater benefits than a bilateral agreement, and that is the ultimate prize,” said Cal Cohen, president of the Emergency Committee for American Trade, a Washington group that represents some big exporters.

“But while these are perhaps not the largest economies in the world, when you accumulate them, they are significant,” Mr. Cohen said.

Also, the pacts can have a political impact, supporters of the approach said.

“While the size of the markets is relatively small, at the same time there are principles being established,” said Sherman Katz, a trade specialist at the Center for Strategic and International Studies, a Washington think tank that favors free trade.

Such principles can help create momentum for stronger regional or global deals, he said.

Not everyone agrees. Because the economies are small, the pacts will not create American jobs, and because the United States is bullying smaller economies, there will be little positive spillover for wider agreements, John Audley, a senior associate at the Carnegie Endowment for International Peace, said in a brief published last month.

“It is time that we adopt sensible trade policies at home and stop blaming other countries for failed trade talks,” he said.

Multilateral agreements, such as the one establishing the WTO in 1995, cover more countries and more goods than the smaller pacts and have helped the U.S. economy more.

The U.S. International Trade Commission, in a report this year, estimated that NAFTA boosted U.S. economic output by $10 billion to $50 billion and that the agreement creating the WTO increased annual income gains by roughly $122 billion.

But with apparent gridlock at the global level, the bilaterals can loosen resistance to U.S. objectives and serve political and diplomatic goals,said Dan Ikenson, a trade specialist at the Cato Institute, a pro-trade think tank.

They would, for example, show progress on the president’s trade agenda.

“So far they don’t have a lot to show for trade promotion authority,” Mr. Ikenson said, referring to congressionally granted power to negotiate agreements and submit them to legislators for a yes-or-no vote.

“Bilaterals are something to show.”


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