U.S. Battles Terrorism With Trade, but Conflicts Loom

Away from the frenzy of military action, the United States is pursuing a quieter campaign that uses trade to reward friends willing to fight terrorism.

In the weeks after the Sept. 11 attacks, the U.S. has openly played the economic security card, offering concessions to key players. In return for Islamabad’s support of the air war against the Taliban, Washington lifted its remaining economic sanctions against Pakistan. It also approved pending trade agreements with Jordan and Vietnam, and extended new trading preferences to exports from Indonesia, the most populous Muslim nation. U.S. negotiators helped secure World Trade Organization membership for China and Taiwan, and top officials flew to Moscow to advance the WTO ambitions of Russia, another key ally.

In effect, the Bush administration is trying to give economic security the same importance as physical security by offering to remove sanctions or give special trading privileges to countries that join the coalition formed after the attacks in Manhattan and on the Pentagon.

The U.S. also is trying to use the sense of solidarity to advance its trade objectives. Those include launching a new round of global trade talks and asking Congress for fast-track authority, which would give the chief executive greater control over trade issues. But sometimes those goals conflict.

“Free trade implies a shrinkage of borders, an effort to make those borders more porous, so you can have fast-track lanes at airports so businessmen don’t even need visas,” said Donald Emmerson, a Southeast Asia expert at Stanford University. “Security demands just the opposite.”

The tension between freer borders and increased security will be most visible when President Bush, who was in California on Wednesday, arrives in Shanghai for the Asia-Pacific Economic Cooperation forum this week. Free trade has always been part of Bush’s agenda, but it took on a greater urgency after the terrorist attacks.

While the administration insists that increasing regional trade is still the main agenda for the APEC meeting, the focus has shifted to drumming up political support for an anti-terrorism pact that would increase restrictions on borders and money flows.

The Bush trade policy has not been embraced by everyone. Critics of unrestrained free trade have taken a different lesson from Sept. 11. In their view, the attacks heighten the need not just for more world trade but for linking trade to development in poorer countries where terrorism festers. That could put new pressure on the U.S. and other rich nations to reduce subsidies and open up their markets in ways that let developing countries achieve healthy, sustained growth.

The Bush administration’s call to arms didn’t persuade Manuel Perez Rocha, a researcher with the Mexican Action Network on Free Trade, an anti-globalization coalition based in Mexico City. “Most Mexicans share the notion that terrorism is a bad thing, but I think extension of trade has nothing to do with combating terrorism,” he said. “We think there is a bit of opportunism here.”

Shortly before leaving for the APEC summit, Mexican President Vicente Fox tried to tie the issues together more firmly by reminding world leaders that they must decide “how we can all contribute on one hand to the fight against terrorism and on the other to the struggle for economic growth--to the struggle for the market.”

In addition to the anti-terrorism declaration, APEC leaders are expected to declare their support for launching the so-called Millennium Round of trade talks when the WTO holds its next meeting, scheduled Nov. 9-13 in Doha, Qatar. But Fox said any new trade talks must address the differences between rich and poor countries and “be conducted on the basis of equity and justice.”

Given the fragile condition of the global economy, trade officials are particularly anxious to avoid a repeat of the disastrous 1999 WTO meeting in Seattle, when trade talks collapsed amid north-south acrimony and street protests.

“The sense of urgency is shared more now,” said Masakazu Toyoda, a senior Japanese trade negotiator. “The important thing is to move things forward.”

The most pressing thing on the Bush administration’s agenda is getting Congress to approve fast-track legislation, which would give the president the authority to negotiate trade pacts that Congress could only accept or reject, not amend. Supporters argue that the president needs fast-track to prove to foreign governments that he can get a new round of trade talks launched. But Democrats oppose the authorization unless it mandates enforceable labor and environmental standards in future trade accords.

The House Ways and Means Committee approved fast-track authority legislation last week, clearing the way for House Republicans to schedule a vote before next month’s WTO meeting. But it’s not clear whether there are enough votes to pass it. Opponents say many Democrats don’t buy the administration’s claim that Bush needs trade-promotion authority to wage war on terrorists.

Some skeptics have labeled the Bush administration’s efforts to tie trade to terrorism opportunistic and even counter-productive, since the anti-terrorism campaign injects security issues and political concerns into a trading system already strained by divisions between the rich and poor.

They say the slowing economy is likely to heighten protectionist pressures, making it harder for WTO members to compromise on contentious issues such as agricultural subsidies and labor standards. These are of particular concern to developing countries such as India, which have opposed launching a new round of trade talks.

“I don’t think Congress is going to let the president give away the store on trade,” said Peter Morici, senior fellow at the Economic Strategy Institute in Washington. “It’s not going to take much in the way of an economic downturn for people to start viewing jobs as precious again, and trade is about jobs.”

But Anupam Srivastava, director of the South Asia program at the University of Georgia’s Center for International Trade and Security, said the Bush administration has softened India’s resistance to the proposed trade round by seeking that government’s help in addressing Third World concerns.

Other players argue that the response to last month’s terrorist attacks should be more equitable global development, not just more free trade. Export-dependent countries in Asia and Latin America have been hit particularly hard by the slowdown in trade caused by heightened security. The United Nations last week drastically reduced its forecast for world growth for 2001 from 2.4% to 1.4%. But its forecast was cut far more severely for Latin America--from 3.1% to just 0.8%. The same was true for South and East Asia, where the forecast was slashed from 4.1% to 1.7%.

Sebastian Edwards, a former World Bank chief economist, said the post-Sept. 11 challenge “goes to the heart of development policy and the whole strategy toward poverty.” Edwards, a professor at UCLA, said obstacles to free trade raised by rich countries have aggravated poverty and undermined economic security.

“Nicaragua, the second-poorest country in the hemisphere, which has the second-highest debt burden in the world, is a very efficient producer of peanuts,” he noted. “But they cannot sell peanuts to the United States. There is an 8,000-ton import quota, and it is filled 10 minutes after it is open. The fact that we allow luxury goods in from advanced countries is good, but it certainly does not help Nicaragua.”

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Iritani reported from Los Angeles, Smith from Mexico City and Vieth from Washington.