US TRADE ACTIVISM CALLED PERILOUS EMERGING-MARKET DRIVE LIKENED TO MERCANTILISM

US TRADE ACTIVISM CALLED PERILOUS EMERGING-MARKET DRIVE LIKENED TO MERCANTILISM

The Clinton administration's plan to promote trade with the 10 most promising markets around the globe gets a ringing endorsement from the business community. Observers, however, pointing to what they call uncomfortably close ties between the state and the private sector, warn of creeping mercantilism.

Analysts, while swept up in the enthusiasm with which the administration is pursuing its aggressive trade-advocacy program, are beginning to warn that the Big Emerging Markets, or BEMs, initiative may well pose the greatest threat to the new world economic order."The focus (of the administration) on much of the developing world holds an enormous promise and marks a realistic approach to the truly revolutionary changes in the world economy," said Jeffrey Sachs, director of the Harvard Institute for International Development.

But, he said, it all could "come crashing down" if the administration, with its cozy ties to industry and the practice of bullying trading partners into submission, reduces broad international policy to getting contracts for individual companies.

Mr. Sachs also charged that the administration's focus on unilateral enforcement measures in the auto dispute with Japan showed contempt for the rules of international law set by the Uruguay Round trade agreement.

He was one of several dozen speakers at a high-profile conference the U.S. Department of Commerce staged this week to give its trade policy a boost. The conference brought together several hundred business executives, academics and government officials from around the globe to discuss business opportunities in the ever-widening world of market economies.

The figures Washington has marshaled to support its activist policy in the chosen markets are impressive. According to Commerce's data, the BEMs - which comprise half of the world's population and account for a larger share of world output than either Western Europe or North America - are expected to double their share of world imports to 27 percent by the year 2010. U.S. exports to the BEMs reached $159 billion in 1994, about one-third of the total. The BEMS include include Argentina, the six members of the Association of Southeast Asian Nations, Brazil, China, India, Mexico, Poland, South Africa, South Korea and Turkey.

Energy, infrastructure and environmental investment in the rising economies could top $2 trillion within the next decade, Commerce estimates.

To help industry clinch deals in the BEMs, the administration has set up a trade-advocacy center in Washington and commercial centers in the target markets. Dialing the advocacy center could get a company information, market studies, funds to conduct feasibility studies, and even high-level political support. The center boasts that it has already helped to win more than 100 deals worth a total of $30 billion.

"This conference is a watershed in the pursuit of our BEMs mission," Secretary of Commerce Ron Brown said. "This is an unprecedented event, a product of the Clinton administration's deep commitment to profitable partnership between the public and private sectors."

It is this attitude that prompted Mr. Sachs to warn that, by pursuing its aggressive policy, "We would win more contracts, but risk losing something more fragile - the sense of international economy."

Unlike the period of economic growth a century ago that ended in World War I, he said, this time, growing prosperity is accompanied by a sense that universal rules must apply to the global economy. The Uruguay Round agreements, said Mr. Sachs, provide such rules, and from that viewpoint, represent "one of the greatest achievements of all time."

The U.S. willingness "to turn foreign policy to the service of a particular company," and its practice of unilateral retaliation against trading partners, are "enormously corrosive" to economic stability, he said, arguing that the consequence of the United States' "undermining the rule of law would be a dramatic fall into the abyss of mercantilism."

Mr. Sachs was referring to the economic system employed by the European trading superpowers, such as England and Holland, from the 16th to 18th centuries. It was based on the premise that national wealth and power were best served by creating trade surpluses and hoarding gold; the key ingredient was state intervention in the economic life, and frequent commercial wars were among the consequences.

The BEMs initiative breeds no such doubts within the business community. ''We are very enthusiastic about the support we've got from (the Department of Commerce) . . . they have been wonderful for us," said Robert O'Neil, of the engineering firm DeLeuw, Cather & Co., one of a dozen chief executive officers speaking in support of the program.

"There's no level playing field out there, so you have to find the right hill to be on," added his colleague James Lammie of the Parsons Brickerhoff engineering firm. The best way to climb the hill, he said, is with the backing of the U.S. government.

Rodney Gray, chief executive of Enron Global Power and Pipelines, was equally effusive. He said government backing is necessary, especially in the developing economies that still pose political risks. "Frequently, political risk is the only barrier between a project and its financing. You have to manage that risk through influence or diversification," he said.

Mr. Gray expressed the consensus when he said of BEMs: "Doing business there is challenging and, three years from now, it will be very profitable."