U.S. looks to Asia in new economic order

U.S. looks to Asia in new economic order

By Jean-Louis Santini

WASHINGTON (AFP): The United States struggled to stay ahead of the pack in 1994 and into the new century by promoting multilateral and regional ties as a buffer to the growing economic might of Europe and Asia.

The keystone of U.S. policy aimed at liberalizing world trade was when the representatives of 124 countries gathered in Geneva at the start of the year to end years of difficult talks by signing the Uruguay Round in the General Agreement on Tariffs and Trade (GATT).

That landmark agreement opened up hitherto protected sectors such as services and agriculture, slashed tariffs by 38 percent and will engender US$200 billion in additional trade worldwide over the next ten years.

On the regional level, the United States was active on two fronts -- Asia and the Americas.

The North American Free Trade Agreement (NAFTA) grouping the United States, Canada and Mexico was born in January and in December at the Summit of Americas in Miami, 34 countries pledged to establish a free trade zone by 2005 stretching from Alaska to Argentina.

The U.S. administration was also a motivating force in the summit of the Asia Pacific Economic Cooperation (APEC) forum in Jakarta when 18 countries including powerhouses Japan and China agreed to set up a free trade zone in the region by 2020.

With 800 million inhabitants, the Americas account for 29 percent ($6.8 trillion) of global industrial production and 17 percent ($1.2 trillion) of world trade.

The APEC countries with 2.08 billion inhabitants account for 52 percent ($12.2 trillion) of world industrial production and 41 percent ($3.1 trillion) of world trade.

This new-found U.S. faith over the last few years in the merits of regionalism reflects the U.S. economy's difficulties in maintaining its leading edge in the world economic system, said Jagdish Bhagwati, an economics professor at Columbia University.

In the three decades that followed the end of World War II, the United States reigned supreme over the world economy, accounting for 50 percent of industrial production and with healthy trade surpluses.

The current situation is a pale shadow, with U.S. industrial production cut back to 25 percent of the whole and with chronically bad trade deficits, notably with Japan and China.

At the same time, the economic and social integration of Western Europe has spawned a giant rival which currently accounts for 40 percent of world trade and 28 percent of industrial production.

The specter of "Fortress Europe" has convinced the United States that it needs to foster its own free trade zones with its own geographic peers.

The end of the Cold War and the dissolution of the Soviet Union also removed a key binding factor in trans-Atlantic ties of the last 50 years.

The same historic developments left an imprint in the Pacific where countries like Japan, reliant on U.S. military muscle, are now less inclined to bend to pressures from Washington to open their domestic markets.

The Clinton administration has made it clear that its priority in Asia is to finally slash its stubborn bilateral trade deficit with Japan, which topped $60 billion in 1993.

These are the barriers forcing the United States to look elsewhere in Asia and in the Americas to redress the situation.

"We are not abandoning our efforts with Japan because we can't allow the world's second-largest economy to have sanctuary markets," said U.S. Trade Representative Mickey Kantor.

"But when we look at the numbers we saw where the action is and it's in our own hemisphere and in Asia outside of Japan," he said.

U.S. exports to Japan are forecast to increase by 70 percent to $88 billion by 2010, but for the rest of Asia the increase will be much bigger at 163 percent to $248 billion.

For Latin America, the growth of U.S. exports will be similarly explosive and are forecast to reach $232 billion in the same period.