By David ArmstrongSan Francisco Chronicle
May 11, 2003
It's payback time in the new, postwar world. They know it in France, a vociferous opponent of the Iraq war, where the Pentagon pulled U.S. aircraft out of next month's Paris Air Show and Secretary of State Colin Powell hinted at trade sanctions. They know it in Singapore, a wartime ally, which signed a free trade agreement in a White House ceremony Tuesday, and in Chile, an Iraq war foe, whose free trade agreement has been pointedly delayed. And they know it in Australia, which dispatched commandos to Iraq and has seen its proposed free trade agreement with Washington put on the fast track and its prime minister feted at President Bush's Texas ranch. International trade has figured prominently in American politics as far back as the early days of the republic and has at times been promoted by military force, such as when Adm. Perry took warships to pry open Japan's closed market in 1853.
Experts say modern U.S. trade policy has been tightly intertwined with this country's political objectives since the terrorist attacks of Sept. 11. Washington increasingly employs free trade agreements -- which lower tariffs and quotas -- as a reward to other countries, and threatens trade sanctions, including higher tariffs and quotas, as a punishment for nations that haven't sided with the United States. "The administration is very sympathetic and appreciative of countries that helped out, and very, very disappointed with certain countries, especially those who opposed it publicly," said Michael Nacht, dean of the Goldman School of Public Policy at UC Berkeley. "This is an administration that uses trade carrots for friends and sticks for foes," Nacht said. In this polarized environment, free trade agreements are a carrot, and their absence can be viewed as a stick, trade experts say. Washington has such pacts with just four countries: Israel, Jordan and North American Free Trade Agreement partners Canada and Mexico. On Friday, President Bush touched on the importance of free trade agreements when he proposed the establishment of a free trade zone in the Middle East within 10 years. Bush said more Middle Eastern countries could be added to the list of countries with bilateral free trade agreements. U.S. trade officials, he noted, will meet with regional leaders next month in Jordan to start the process. The United States is also an active member of the World Trade Organization, which sets global trading rules. But the WTO, which requires all 146 member nations to sign off on new rules, is cumbersome and slow. The United States is turning to bilateral agreements, which are less complex and directly connected to specific trading partners.
U.S. Trade Representative Robert Zoellick discussed in a news conference last week in Europe the tactical advantages of the agreements. "I don't want one country out of 146 in the WTO to create veto power over us. So if a certain country, for a political coalition or some reason, can't move forward .
. . we'll move with those who are willing to move."
Zoellick said U.S. officials were personally disappointed by opposition to the Iraq war from traditional allies. He singled out France, the most implacable opponent of the war, and Germany, noting that as a State Department official a decade ago, he helped the first Bush administration forge Germany's reunification when some European powers were opposed. A key member of George W. Bush's cabinet, Zoellick also criticized Chile, with whom Washington is negotiating a free trade agreement. "I'm disappointed, " he said. "We worked very closely with our Chilean partners. We hoped for their support in a time we felt was very important." Foreign officials downplayed the idea that trade agreements with the United States are anything as crude as a payoff.
Indeed, Singapore, America's 12th-largest trading partner with $33 billion in trade in 2002, opened trade talks with Washington in late 2000, nearly a year before the terrorist attacks on the United States. Talks concluded last November, four months before the start of the U.S.-led war with Iraq. Even so, it was not a done deal. Then came the war, which Singapore strongly supported. On Tuesday, Bush and Singapore Prime Minister Goh Chok Tong signed the free trade pact. The agreement now goes to Congress, where it is expected to pass easily and go into effect by Jan. 1. Singaporean officials said they embrace the agreement chiefly because it will increase trade and investment at a time when their country, like much of East Asia, is struggling with the economic impact of severe acute respiratory syndrome, the lingering effects of the 1997-98 Asian financial crisis and the worldwide financial slump. But Singapore's trade minister, George Yeo, said that he hopes the pact would also serve as a political model, especially for Muslim countries. "It is crucial for the next phase of post-Cold War history that wherever, whenever we can, we lean in favor of the forces in the Islamic world which favor economic development, open trade and modernization," Yeo said in Washington last week.
U.S. officials have underscored the link between security and trade with Singapore. The city-state of 4 million people allows U.S. warships to routinely use its deepwater port. Additionally, Singapore impressed the Bush administration when it foiled an al Qaeda plot to attack U.S. interests, including the embassy there. Bush announced his decision to sign the pact with Singapore in a recent speech at Camp Lejeune, N.C. At the signing, he praised Singapore as "a strong partner in the war on terrorism and a member of the coalition on Iraq." Chile, which concluded negotiations with the United States about the same time Singapore did, has had a different subsequent experience. Chile and the United States were on the verge of signing their trade pact, which would have been Washington's first with a South American country. But the trade deal was put on hold after the rancorous debate in the United Nations Security Council, in which Chile -- supported by a poll showing 85 percent of the Chilean public opposing U.S. military intervention -- refused to back a U.N. resolution authorizing the use of force against Saddam Hussein. "To be absolutely honest, the signing of the agreement has been influenced by our decision at the Security Council," said Andres Bianchi, Chile's ambassador to the United States, by telephone from Washington.
Still, Bianchi believes that the Iraq standoff was a disagreement between friends and that a pact between the United States and Chile, which did $8.8 billion in trade together last year, would send a positive signal to the rest of Latin America. He added that he is cautiously optimistic an agreement could still be signed this summer and put into effect early next year, after bruised U.S. feelings heal a bit. The United States' hardball approach has been criticized by American business groups keen to promote free trade. "Economics should play a guiding role in selection and negotiation of free trade agreements," said John Howard, vice president for international policy and programs at the U.S. Chamber of Commerce. Putting politics in control, he said, can harm trading relationships with longtime partners such as France and Germany and give disproportionate attention to political allies that might not have attractive markets. As an example, Howard cited Morocco, a small, moderate Muslim state proposed as a candidate for a free trade agreement by the Bush administration. Emphasizing the chamber doesn't oppose that agreement, Howard said Egypt and Turkey -- both larger markets -- should get trade pacts before Morocco does. All three nations were critical of the U.S. invasion of Iraq, but administration officials see their leaders as relatively moderate Muslims and thus potential partners. Trade sanctions are the flip side of trade incentives. And here, too, being on the opposite side of the United States in the war against Iraq could have consequences, especially in the short term.
For instance, Powell has threatened Syria -- accused of aiding terrorists and giving sanctuary to officials of Hussein's ousted regime -- with trade sanctions. Powell also hinted that sanctions could be in the offing for France, which led international opposition to the war, but Zoellick said there is no plan to apply sanctions against France. Sanctions or not, French business could suffer under U.S. pressure. Defence News, a defense-business publication, speculated that robust French weapons programs, including its Shaheen cruise missiles, Leclerc tanks and Mirage 2000 jet fighters, will have a tougher time finding markets in Saudi Arabia and the Persian Gulf states, where Washington wields increased influence after its victory in Iraq. Sanctions can be a two-way street, of course. Last week, in a move apparently unrelated to the Iraq war, the European Union -- of which France is a key member -- threatened to slap $4 billion in penalties on selected U.S. goods by fall if Washington doesn't end certain tax breaks for U.S. exporters. The European Union and the United States often joust over trade issues, including government farm subsidies and sales of genetically modified food, which European critics deride as unhealthy "Frankenfood." But the fallout from the Iraq war could exacerbate these already-tense trade relations.
Meanwhile, a long-simmering agreement is coming to a boil for a key U.S. ally and cooling off for another country that didn't enlist in Bush's "coalition of the willing." As the invasion of Iraq began in March, U.S. and Australian officials met in Australia's capital Canberra for the first official talks on a bilateral agreement. More talks are scheduled this week in Honolulu, according to Australian trade spokesman Matt Francis. New Zealand had hoped to join those talks, according to New Zealand's Ministry of Foreign Affairs and Trade. But Prime Minister Helen Clark blasted Washington over the Iraq war, so New Zealand has not been invited to the talks. Francis said the concept of a U.S.-Australia trade pact had been discussed informally for several years. "Australia already has a strong and wide-ranging economic relationship with the U.S.," he said. "This would remove what trade barriers remain and put economic relations on the same basis as politics and security."
However, Australia's active participation in the Iraq war turned the pact from an idea into a program. In a joint press conference with Australian Prime Minister John Howard at his Texas ranch earlier this month, Bush didn't mention trade. He did, however, praise Australia's military muscle. "Together, we've brought a lot of terrorists to justice," Bush said. "And in Iraq, Australian and American forces have stood together once again."
Repercussions for U.S. friends, foes
Whether countries supported or opposed the war in Iraq may affect their standing in trade deals and other business arrangements that the U.S. influences. Here's how some nations are positioned to either gain or lose.
Singapore: A free trade agreement lowering tariffs and quatos, the first with an Asian country, was signed last week and is expected to win approval in Congress.
Jordan: Under a free-trade agreement that's the first with a Muslim country, Jordanian companies are in a good position to get a piece of postwar reconstruction work in Iraq.
Australia: A proposed free trade agreement has been put on the fast track.
Great Britain: British companies are expected to get contracts for reconstruction work in postwar Iraq.
Countries critical of Iraq war:
France: The United States hints at trade sanctions, while the Pentagon withdraws aircraft and senior military brass from Paris Air Show.
Chile: A free trade agreement under negotiation, the first with a South American country, is postponed but still expected to be signed.
New Zealand: Anti-war comments by the prime minister have put a chill on hopes for a free trade agreement.
Syria: The United States has threatened trade sanctions if it continues to support terrorist organizations and shelter former Iraqi officials.
Source: Chronicle research
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