NAFTA, OTHER REGIONAL BLOCS RAISE QUESTIONS ON TRADE

NAFTA, OTHER REGIONAL BLOCS RAISE QUESTIONS ON TRADE

Thanks to supporters of the North American Free Trade Agreement, this year will be remembered as one of the decade's most significant in the renewed global trend toward trade regionalism.

Yet, with the heat of the U.S. Congress' Nafta debate barely dissipated, larger questions still remain about the direction of U.S. trade policy.Will the United States focus its efforts on expanding Nafta into a hemisphere-wide free-trade bloc, as Asian and European countries struggle to unite their regions? Will the United States step up its attempts at unilaterally managed trade with Japan and the European Community? Or will the United States seek new free-trade agreements with Asian or EC countries or blocs, in competition with the world's two dozen other pending free-trade agreements?

GATT, the global multilateral forum for trade, may set the tone for future U.S. trade agreement actions, if the General Agreement on Tariffs and Trade manages to trumpet an agreement by its self-imposed Dec. 15th deadline. But few countries have been willing to wait patiently for the long-overdue GATT.

This is clear when the world's myriad regional trade blocs are counted and their overlapping memberships and aims are contrasted.

"The list of preferential trading arrangements is formidable. Included in the 23 arrangements identified are 119 countries, accounting for some 82 percent of the world's international trade in goods," said Norman Fieleke, an economist and vice president of the Federal Reserve Bank of Boston, after juxtaposing the world's free-trade agreements (FTAs) in a paper last year. And half a dozen have sprouted up since then.

These agreements include every corner of the world, from the Americas to Oceania, and are proliferating as new nations emerge from the breakup of older ones, as in the case of alliances between the former Soviet republics. But the regional trade activity of the United States, the world's greatest economy, necessarily defines the spirit of much of the rest of the global free-trade activity.

President Clinton bet the ranch on Nafta as a logical, longer-term strategy for economic survival. But the priority he assigns to the follow-up expansion of free trade in the hemisphere, through the Enterprise for the Americas Initiative (EAI), is less clear. The EAI, unveiled by President Bush, promised hemispheric free trade from pole to pole, was initially a form of hemispheric isolationism.

Prior to his election, Mr. Clinton's economic advisers openly questioned the benefits of bringing other Latin American nations into the U.S. free-trade fold when the larger, more powerful economies of Europe and Asia could be approached for shorter-term benefits.

Thus the most basic free-trade question to be answered is whether current regional trade activities are merely aimed at a rapid maximization of economic benefits or are part of a process aimed at global free trade.

U.S. experts who have tracked the waves of regionalism in Europe and the United States this century are concerned that partisan politics again are too strong a force in Washington.

"If America's regionalism is not to turn into a piecemeal, world trading system-fragmenting force, it is necessary to give to it a programmatic, world trade system unifying format and agenda," said Jagdish Bhagwati, the Columbia University professor of economics, in a white paper recently published in a Cambridge University Press collection of essays.

"One possibility is to encourage, not discourage, Japan to line up the Asian countries into an Asian Free Trade Agreement, with the United States lining up the South Americans in the Nafta, on a schedule, say, of 10 years," he wrote in New Dimensions in Regional Integration, a Centre for Economic Policy Research book.

"Then Japan and the United States, the two hubs, would meet and coalesce into a larger FTA at that point, negotiating with the European Community and its associate countries to arrive at the grand finale of multilateral free trade for all in Geneva," Mr. Bhagwati said.

As a former economic adviser to the GATT director general, Mr. Bhagwati long has championed global free trade and cautioned against trade regionalism that erects barriers for nonmembers.

The resolution of the Uruguay Round, riddled with negotiated reductions of sectoral protectionism, is still a major question this year. Indeed, some analysts have suggested that if the Uruguay Round fails, the United States may ease up on world welfare through a multilateral forum and unilaterally concentrate on its own economic well-being.

The United States and Europe are far from the only players in free trade, even if they are the largest. Key regional trade negotiations that are aimed at global free-trade are continuing despite U.S. and E.C. fears for GATT, are progressing in Asia and in Latin America.

In Asia, the six-nation Association of Southeast Asian Nations (Asean) is trying to consolidate its free-trade bloc at the same time that the larger 13- member Asia Pacific Economic Cooperation forum is bidding for closer U.S. trade ties.

Initially formed in 1967, Asean unites several of the so-called dragons, or economic powerhouses of Asia: Singapore, Indonesia, Malaysia, the Philippines, Thailand and Brunei. Asean has opened negotiations with other Asian nations and with some Latin American nations, having overcome earlier hurdles of protectionism. Not surprisingly, some Asean members are at odds with APEC objectives; overlapping layers of trade blocs do not stack up neatly.

In this hemisphere, free trade among the Latin American nations, led by Mexico, is spreading more rapidly, if in a more chaotic fashion than in Asia.

At the same time that Mexico was negotiating Nafta, it began free-trade talks with a dozen or more other countries in Central and South America, and the Caribbean. Like Asean, Mexico has stressed the need for GATT- compatibility.

In charge of all of Mexico's free-trade negotiations except for the Nafta, Pedro Noyola, vice minister of trade and industry, set out at the beginning of the Salinas administration to craft a free-trade deal "with every Latin American country that wants to."

That effort resulted early on in a free-trade agreement with Chile, also touted as the country most likely to sign on to Nafta in accession.

But Mexico also has drafted agreements with Colombia and Venezuela - known as the Group of 3 - with the Central American Common Market, and with a host of other nations.

Mexico recognized the value of being at the center of a hub-and-spokes trade configuration well before Nafta cleared Congress. As such, Mexico's and Southeast Asia's drive for free trade ultimately could lead the dominant economies in their regions - the United States and Japan - to embrace a global plan, despite the low priority the goal seems to have been assigned while GATT flounders.