Asia Finds Little to Applaud in N. American Trade Pact : Commerce: Content rules on autos concern Japan. Korea and Taiwan worry about Mexican competition in textiles and electronics. : NEWS ANALYSIS

For decades, America has been the land of opportunity for Asia’s booming export industries. First Japan, then Taiwan and South Korea and finally Southeast Asia added muscle to their economies by selling low-cost clothes, televisions, cars and other products to price-conscious American consumers.

But with the announcement of a proposed North American Free Trade Agreement, which would reduce barriers to trade among the United States, Canada and Mexico, some on this side of the Pacific say the U.S. market no longer seems as inviting.

Moreover, Southeast Asian leaders worry that Taiwan, Korea and Japan will redirect their investments to Mexico, building production plants there in hopes of getting more advantageous access to the American market.

Korea and Taiwan worry about emerging competition from Mexico in textiles and electronics. Japan is concerned that its auto makers will be uncompetitive under the terms of the accord.

All Asia worries that the North American pact represents a big step toward the division of the world into trade blocs, a division that could be a nightmare for Asia’s trading nations.

“The United States doesn’t seem to be pushing globalism any more but rather developing its own trade region,” says Kunio Miyamoto, chief economist at Sumitomo Life Research Institute, a think tank. As America and Europe move toward encouraging trade within their regions, they may build walls that discriminate against outsiders. “Asia could be left out,” Miyamoto says.

“Although both the single European market and (North America) claim to be non-protectionistic, they will cause their businessmen to look inward at least for the short term,” Lim Boon Heng, Singapore’s senior minister of state for trade and industry, told Reuters.

Although countries such as Malaysia are pushing to develop an East Asia bloc, Japanese analysts say the proposals are unrealistic. In spite of growing intra-Asian trade, America remains the primary market for most Asian companies. “Asia can’t survive without the American market,” says Miyamoto.

Japan could eventually replace America as a major importer of Asian products, but that could take years.

Currently, Japan mostly exports machinery and parts to Asian countries, which use them to produce finished products for export to the United States.

Many here are reluctant to comment on the agreement until they see details.

But analysts suggested that strategies to deal with the agreement will vary greatly by industry and country. And not all companies will regard the creation of a large North American market as a negative.

Japanese auto makers will be the worst hit because of rules requiring that 62.5% of the parts of imported cars be North American-made.

Although Japanese companies will undoubtedly find ways to raise the local content of their autos, they say the measures will be costly and will reduce the competitiveness of their products.

Japanese manufacturers along the Mexican border that import parts, assemble products and re-export to the United States duty free--so-called maquiladoras-- will have to find local parts suppliers if they are to avoid duties.

Some companies are looking positively on the new market, however.

Akira Kitagawa, acting director of California’s office for trade and investment in Tokyo, says Japanese companies in fields ranging from kitchenware to food processing are interested in tapping the newly created 360-million-person, $6-trillion market.

Companies are considering dual operations that might typically involve a factory in Mexico to take advantage of the cheap labor but a designing and packaging operation in California that would allow the products to carry “Made in U.S.A.” labels. Food processing companies hope to be able to get U.S. Department of Agriculture approval for products partly processed in Mexico.

For the most part, however, observers say most Japanese companies will likely invest somewhere other than the United States.

Since U.S. duties are relatively low anyway, factors such as labor quality and infrastructure will be a key to investment decisions, says Yasuo Tanabe, director of North American Trade Policy Planning at Japan’s Ministry of International Trade and Industry. In that context, Tanabe says, Japanese high-tech manufacturers may conclude that Southeast Asia provides more attractive production sites than Mexico.

South Korean companies, however, worry that American companies will combine U.S. technology with cheap Mexican labor to compete better against Korean products in industries ranging from electronics and semiconductors to automobiles and textiles.

Kim Kyu Tae, a research fellow at the Korea Institute for Industrial Economies and Trade, has recommended that Korea transform its industrial structure as rapidly as possible to high-value products. That way, duties are less likely to hurt competitiveness. More vulnerable industries such as consumer electronics and textiles should be based in Mexico, Kim advised.

Southeast Asia, meanwhile, worries that its timber and mineral resources will be less competitive against Mexican resources and that Mexico’s special access to the American market will help it steal investors.

Asia’s biggest concern, however, is that America, having concluded its own free trade agreement, will be less aggressive in completing the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) talks, aimed at reducing trade barriers worldwide.

“They (U.S. negotiators) have been working late nights to complete the (North American) agreement, but you don’t see them putting that kind of energy into completing the Uruguay Round,” says Tanabe.