TRADE SCENE: THE BRAVE NEW BILATERAL WORLD

TRADE SCENE: THE BRAVE NEW BILATERAL WORLD

It's downright scary - the ever-expanding number of studies and talks underway promoting free trade around the world -- bilateral free trade, that is. Take Japan, which until recently shunned bilateralism, relying instead on multilateral negotiating rounds to advance its trade strategy. Now it's negotiating a pact with Singapore, exploring other free trade accords with South Korea, Mexico, Canada, Australia and New Zealand, and about to embark on a study of a potential deal with the 10-nation Association of South East Asian Nations (ASEAN).

For the first time, too, South Korea is considering bilateral free trade pacts, not only with Japan, Chile and Mexico but with Australia and New Zealand, which, for their part, are talking one-on-one free trade with other Asian neighbors.Even China is getting into the act. It has begun examining a possible free trade negotiation with ASEAN, in a bid, some say, to 'dominate' the region. And it is reported ready to study proposals for a North East Asian free trade bloc with Japan and South Korea.

Elsewhere around the globe, the 15-nation European Union is negotiating 15 new free trade pacts, involving, among others, a half-dozen Mid-East countries and Mercosur, the Argentine-Brazil-Paraguay-Uruguay common market. For its part, Mercosur is discussing linking up with the Andean Community, comprising Bolivia, Colombia, Ecuador, Peru and Venezuela.

What's scary about all this is that the United States is not party to any of these initiatives.

This is not a new phenomenon. Of the roughly 130 free trade agreements now in place around the world, the United States is party to two: an accord with Israel and the North American Free Trade Agreement. And the latter, to some extent , is getting undercut by a growing number of pacts Mexico is signing with U.S. competitors.

In sum, complain U.S. business groups, America's exporters are losing billions of dollars a year in sales and stand to lose billions more as foreign free trade areas keep proliferating. The U.S. government is faulted for abdicating its leadership role in world trade forums.

Partly spurring the bilateral explosion have been trade negotiation breakdowns at both the 141-member World Trade Organization and the 21-nation Asia Pacific Economic Cooperation forum. The U.S. government has contributed largely to both setbacks.

But the Bush administration is reacting to U.S. business cries for help. 'We have to get back into this game and take the lead' in shaping the 'international trading order,' it said in a recent policy statement. 'Other countries are writing the rules...as they negotiate without us.'

As part of its broad market-opening strategy, the new administration is emphatically embracing bilateral deals, a switch from the Clinton administration, which after Nafta showed relatively little interest in bilateral trade areas until its closing months in office. The Bush team now says it is 'prepared to pursue a number' of such agreements. 'The message we are sending to other countries is that the United States is willing to negotiate.'

The business community seems encouraged. 'The more bilateral pacts we can secure the better,' says Frank Vargo, National Association of Manufacturers vice president for international economic affairs. Bilateral agreements will help pave the way for much broader trade negotiations at the 141-nation WTO, he and others believe.

So far, however, the Bush administration has taken no new initiative, other than follow through on those two eleventh-hour Clinton decisions to negotiate free trade pacts with Singapore and Chile.

So what's the prospect of the Bush team initiating a slew of new bilateral free trade negotiations? For starters, you can probably write off any bilateral deals with a number of top U.S. trade partners, among them the European Union, Japan and China.

In the mid-1990's, the idea of a U.S.-EU free trade pact was discussed and eventually discarded. It was said to smack of wealthy countries carving out markets for each other at the expense of poorer nations. Besides, then as now, the EU was reluctant to open up its highly protected agricultural markets.

The same kind of issues also argue against any U.S.-Japan free trade agreement, while China, struggling to meet its basic WTO commitments, looks in no condition to negotiate a U.S. free trade deal. South Korea, the sixth biggest U.S. trade partner, has begun 'considering the implications' of a possible free trade area with the U.S., says Jeffrey Schott, an analyst with the Institute for International Economics.

But again, there are basic problems. South Korea's highly protected farmers would lobby hard against a U.S. free trade deal, Schott suggests, while Korea would likely insist that the U.S. reform its antidumping rules - a no-no in Washington. Domestic textile and steel producers already warn that they would strongly oppose a U.S.-Korea free trade initiative.

Still, a number of smaller U.S. trading partners, beyond Singapore and Chile, are interested in U.S. free trade talks. The leaders of seven Central American countries personally raised the idea in April with President Bush, who allowed that it is 'very possible that we'll be able to come to an agreement...'

Perhaps knocking hardest of all on the U.S. free trade door are Australia and New Zealand.

Not only are top Australian and New Zealand officials pressing the Bush administration for free trade bilaterals, they are drawing support for their proposals from congressional and business leaders. 'We're getting a generally good hearing, but so far something short of an agreement,' reports an Australian official.

Once signed, a U.S.-Singapore free trade pact could trigger a rush of requests from other Asian countries, among them the Philippines, Thailand and Malaysia, to negotiate similar accords.

That raises the specter of a Bush administration swamped with bilateral free trade requests and embarrassing diplomatic fallouts, as it picks and chooses among the petitioning countries. Meanwhile, pursuit of an active bilateralism just might divert U.S. officials from the grander goal of a new WTO trade round, worries an American Farm Bureau Federation executive.

There are other potential negatives. A concerted U.S. bilateralism could spur other countries, Japan in particular, to go on bilateral sprees of their own, further compartmentalizing the world trading system. Whether bilateral pacts are a building or stumbling block to a more open global trading system remains unclear, some economists say.

How the Bush administration proceeds over the next few years may help provide an answer to that elusive but important question.