A New Kind of Trade War

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That's a long-term project. But Zoellick has sold it as an urgent priority required for economic stimulus and for building a coalition against terrorism. That tack offended several lawmakers, just as the administration prepared for the mid-October Asia-Pacific Economic Cooperation forum and the scheduled WTO talks on Nov. 9-13. "For them to say that this is an emergency, and we need it now, is ridiculous," says Representative Ellen Tauscher, a pro-trade California Democrat who expects to "hold my nose" and vote to grant Bush and Zoellick their wish.

A bipartisan meeting in House Speaker Dennis Hastert's office undercut the short-term stimulus argument. Asked by Representative Dick Armey if trade-promotion authority should be included in the President's economic stimulus package, Federal Reserve Board Chairman Alan Greenspan endorsed the authority in general but said that there would be no immediate stimulative effect. After all, the typical recession ends after 10 months, and most of the big market-opening treaties the U.S. is negotiating are years away.

The recent bilateral treaties with Jordan and Vietnam could bring quicker benefits and have attracted widespread attention as breakthroughs into the Arab world and the land of a former foe. But their dollar value is small: Vietnam and Jordan rank 70th and 98th among U.S. trade partners.

King Abdullah of Jordan visited President Bush in the White House Sept. 28, just in time to discuss cooperation against terror and receive the goodies he had negotiated with the Clinton Administration last year. Jordan is one of the smallest U.S. export markets, taking in just $306 million in U.S. goods last year. But many companies hope to make fresh inroads because duties on industrial and agricultural goods will disappear over the next decade. U.S. wheat and barley growers and telecommunication and pharmaceutical companies are expected to benefit, as are small firms such as Quigley of Doylestown, Pa., maker of Cold-Eeze lozenges; like many companies, it has sought contacts in Jordan but conducted no business there yet. U.S. workers might also benefit as some American companies that manufacture goods for export to the Middle East shift their plants from Europe back home to take advantage of the agreement. The impact will be far more significant for Jordanian exporters of pharmaceuticals and textiles. Pharmaceutical companies--"young but strong," according to one observer--hope to make up on the world stage business lost after the adoption of international intellectual-property conventions. Clothing manufacturer Al-Zay, based in Amman, will export Italian-style men's suits to U.S. department stores.

The U.S. companies moving into Vietnam include those that can help the nation of 80 million people build a reliable, modern infrastructure: makers of equipment for telecommunications, electricity generation, medicine and avionics. Hal Katersky, CEO of InterGlobal, a livestock-wastewater treatment company, says, "We couldn't export there before. We think Vietnam is a great market. We've been there six months, [but] haven't sold anything yet."

Other countries have secured temporary help because of U.S. diplomatic needs. President Megawati Sukarnoputri of Indonesia--a country plagued by violent anti-U.S. rioting since early October--stopped by the White House Sept. 22, when President Bush agreed for one year to lift 5% to 10% tariffs on 11 Indonesian goods, including copper, plywood sheeting, rattan, sorbitol sweetener and tuna. This deal was designed to deliver some help to Indonesia, with minimal impact on U.S.-based industries.

Some Latin American countries are trying to use the new mood in Washington to get trade openings they have sought for years. They want tariff reductions on products ranging from T shirts to footwear, leather goods to sugar. Colombia is struggling to move through Congress an expanded Andean Trade Preferences Act that would establish a graduated duty system, starting with no tariff, for textiles and apparel. "An important number of U.S. buyers shy away from Colombia because of the internal conflict," says Ronald Bakalarz, president of Stanton & Co., a Bogota-based footwear company. "But the more employment we create, the fewer people will feel compelled to join the guerrillas."

In March, Argentina's Finance Minister Domingo Cavallo indicated that his country could seek a bipartisan accord with the U.S., but he quickly backpedaled, calculating that Argentina would have more leverage as a participant in Mercosur, the four-nation South American common market dominated by Brazil. That may have to do, as objections from U.S. and Latin American labor unions and from some industries worried about U.S. competitors could hold up a 34-nation Free Trade Area of the Americas agreement. The project received no mention within President Bush's International Trade Agenda, announced in May, and negotiations shouldn't be completed until 2005.