TRADE ROLE EARNS SATE DEPARTMENT HIGH MARKS

TRADE ROLE EARNS SATE DEPARTMENT HIGH MARKS

In recent years, mentioning the "State Department" to U.S. trade officials or business leaders was likely to bring a shudder.

When trade disputes arose, the department was almost a sure vote against taking any course that might impair strategic or geopolitical relations.State's approach exasperated the Office of the U.S. Trade Representative, the Commerce Department and many U.S.-based multinational corporations.

This is changing.

The pace may not be fast enough for some, but State's former critics concede that trade and other international economic issues are receiving higher priority around Foggy Bottom these days.

Moreover, as U.S.-Soviet tensions ease and as the focus for Eastern Europe shifts more to economics from military strategy, the trend is likely to continue and accelerate in coming years.

"When you are engaged in the task of trying to prevent World War III, which is what has gone on here for the past 40 years, that of course gets a lot of high profile attention . . . (but) because the geopolitical factors have improved to a very large degree, there is a renewed emphasis on economic matters," said Richard T. McCormack, undersecretary for economic and agricultural affairs at State.

State has been particularly involved in two critical areas of U.S. international economic policy: the economic restructuring of Eastern Europe and the ongoing talks with Japan on structural issues which contribute to the persistently wide U.S. trade deficits with Japan.

Officials with Commerce and USTR warmly praised Mr. McCormack and his staff for their role in the structural talks that, so far, have exceeded expectations.

"We would not have ended up with the outcome we did and we would have no hope of gaining a final agreement" without Mr. McCormack's efforts, said one Commerce Department official.

U.S. business leaders have been impressed with State's involvement in the economic side ofthe reforms in Eastern Europe. The department has sought advice from the business community and has provided timely information on the market potential, says William T. Archey, vice president for international at the U.S. Chamber of Commerce.

The interest shown in economic issues is underscored, he said, by a request from Deputy Secretary Lawrence Eagleburger that the chamber survey all 60 of its overseas offices on the economic competence of the U.S. embassies in Eastern Europe.

But like many business officials, Mr. Archey retains some reservations. It will take years, he said, before State fully embraces the notion that trade is a vital component of U.S. national security.

"Over the last 15-20 years, their primary role was to ensure that trade issues never came to the forefront of the policy process . . . Foreign service officers are congenitally incapable of dealing with trade issues," he said.

One senior administration official seconds Mr. Archey's view that it may be difficult for some foreign service officers to break with the policies of the past.

"Obviously State has been actively involved but basically as a naysayer over the past eight years and probably even as far back as the late 1930s," that official said.

The low-water mark for the State Department's credibility with the trade community probably occurred in January 1988 when a senior State official misled reporters by telling them a Japanese proposal to open the construction market "will meet what we want for opening the Japanese market."

Industry and trade agency officials reacted with outrage, pointing out that Tokyo's offer fell far short of U.S. demands. Indeed, it was months before a deal on construction was reached, and the issue remains unresolved two years later.

The abrupt shift in attitude at State is directly linked to the arrival of James A. Baker III as secretary in early 1989. As secretary of the Treasury

from 1985-88, Mr. Baker was perhaps the major player in the global international economic policy scene and his interest in the subject remains keen.

As protecting U.S. economic interests abroad and improving American competitiveness became relatively larger policy concerns, few believed Mr. Baker would be content to sit on the sidelines in any debate on them.

"The landscape has changed. Today economic policy is more important strategically than military policy. For Mr. Baker there are basically two issues today; getting involved in trade or peace in the Middle East. Which would you chose?" asked one senior U.S. trade official.

In fact, given Mr. Baker's powerful connection to the president and his expertise in economics, some administration officials were surprised State did not inject itself into trade policy earlier. Some trade agency officials feared that after Mr. Bush's inauguration, State would muscle in on their turf.

Mr. Baker had other things on his plate, however, such as arms control and Middle East peace talks. Furthermore, State had ceded a lot of trade territory in the past three decades and Commerce and USTR were in no mood to return it.

Despite the greater emphasis given trade by senior State officials, there will continue to be skepticism here about whether economic issues will win a high place in the hearts and minds of the department's bureaucracy.

"There is still a tendency to keep relationships or issues in the context of geopolitics," said Mr. Archey, who strongly supports the change of tack at State.