CAN FREE TRADE SAVE NATO?

As uncertainty grows about the role and longevity of NATO, its supporters are looking at new means to preserve as much of the trans-Atlantic partnership as possible. Their eyes have fallen on the notion of a U.S.-European Union free trade zone. European supporters see this as an extension of the economic and political ideals of the European Union. Their American counterparts believe it is a logical step after the North American Free Trade Agreement. All hope that the commercial community would nourish the weakening bonds of the Atlantic alliance.

Often discussed as a possible step to reduce barriers to trade, investment and other services, the idea of an Atlantic free trade area is now becoming part of a grand vision dominated by a political agenda. There is real danger that negotiations for what could be a constructive agreement in the commercial arena will be dominated by people on both sides ready to overlook significant areas of commercial dispute for the sake of preserving a sense of Atlantic community. It is doubtful that a free trade agreement, even a good one, can be a lasting foundation for that. It is also doubtful that either side is as ready for such an agreement as some proponents like to think.Already, there is talk of bypassing troublesome areas to reach an agreement. Agriculture is the obvious one, which amounted to 15 percent of U.S. merchandise exports to the old European Community in 1993. The inability of the GATT to tackle the abuses in agricultural trade have virtually discredited that institution in some circles. The French would love the exclusion, and some other European governments would embrace it. And what of other perennial trouble spots, such as culture and entertainment or aerospace? A free trade agreement that omitted such sectors would be the target of justifiable criticism that would stain any claim to trans-Atlantic harmony.

Supporters of an agreement religiously cite all the statistics on trade and investment between the United States and Europe that suggests a good beginning for negotiation. But some of the most fundamental areas of tension fall outside of the realm of trade statistics. What both sides ultimately want is open market access, and here negotiators have to confront the characteristics of the U.S. and European marketplaces.

A free trade agreement, for example, would conceivably eliminate most "Buy American or European" restrictions. These currently apply in areas of public or government procurement not covered by existing U.S.-EU agreements. Public procurement in the non-defense sector, such as telecommunications or transportation, is not as widespread in the U.S. marketplace as it is in the European Union, and ongoing privatization throughout the EU is reducing its magnitude there. Thus, how greatly would a free trade agreement accelerate the move toward privatization already under way? And this discussion does not even touch on including any parts of the defense sector, certainly the dominant share of U.S. government procurement.

What an agreement cannot easily affect on either side is the preferred relationship that exists between customers and suppliers. For example, the EU has pushed for years the idea - a complete non-starter - that privately owned U.S. telephone companies like the "Baby Bells" should be treated as government entities. This would place them under the procurement code of the GATT and enable the EU to pressure the United States to make them purchase directly from European suppliers. If the EU presses for any version of this formula in negotiations, Washington should reject it.

On the European side some companies fear that aggressive U.S. and Japanese firms will gain a strong advantage in the European marketplace unless the EU gives European companies time to adjust to a more competitive climate. It is obvious that in sectors like electronics or communications, U.S. and Japanese companies are ahead because their technology reflects the demands of very competitive markets.

U.S. companies have had the advantage of serving one big market with single product standards. Their European counterparts have only recently adjusted to single standards in some areas, and in many key sectors, such as telecommunications, must still confront several sets within the EU. Thus, Europe may demand more time to develop fully the characteristics of its marketplace, and corporations will need time to adjust to this new environment.

Sensing this situation, U.S. corporations and government officials want fast progress in negotiations with Europe. But the EU should be cautious in reacting to U.S. initiatives. Leaving longstanding European corporations vulnerable could create a serious source of tension in Atlantic relations. National and regional interests really must govern decisions here as well as the law of the marketplace.

Can commercial agreements that promote free trade be the glue for political alliances? Certainly not. They are often a part, as witnessed in numerous treaties, but the hope of 19th century economic liberalism that free trade would foster global harmony has not borne much fruit. Advocates can fairly claim that maybe it has not been given much of a chance, and the end of the Cold War may provide that opportunity.

The Cold War's end, though, has destroyed the primary reason for the existence of the Atlantic alliance; so far, no equivalent reason has arisen to keep the alliance working as it did before the collapse of the Soviet Union. Rallying around the banner of free trade and a regional agreement will not be enough, either. Without the threat of the Soviet Union or a successor, it is unclear whether Europe's own experiment in freer trade and political community will make the leap into the political-security arena.

That said, should the United States discuss a free trade agreement with Europe? Absolutely. But it should not be inflated with exaggerated promises and then deflated with faulty compromises. If justification for NATO and the Atlantic community of the Cold War years cannot be found through political and historical arguments, it will not be located in the rhetoric of free trade.

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