Where is U.S. leadership on trade issues?

W. Robert Warne The Korea Herald Asia News Network Seoul

For the past 60 years the U.S. has advocated trade liberalization to boost competitiveness, productivity and economic growth. Trade has been the driver of global economic growth and has expanded twice as fast as world economic growth.

Intensified integration and globalization have accelerated this process. The Bush administration announced early on that it would continue to promote trade expansion through a process of "competitive liberalization": support for global talks, regional initiatives and bilateral free trade agreements.

This commitment now seems in jeopardy as the World Trade Organization%ms ministerial trade meeting ended in failure. The WTO Appellate Board found that U.S. safeguards to protect itself against steel imports violated trade rules. Additionally, prospects are uncertain for this week's crucial meeting to move forward the 34-nation Free Trade Agreement of the Americas (FTAA).

As the largest economy with the largest amount of trade, the U.S. has become the natural leader, along with the EU, in driving forward trade liberalization and economic growth. Indeed, because of sluggish growth in other major economies, the U.S. economy is seen as the single engine keeping the battered global economy in flight. This role intensifies the need for U.S. economic leadership.

Instead, the U.S. recently seems to be turning toward protectionism, and a key test will be how it responds to the WTO decision. It could revoke its safeguard tariffs ranging up to 30 percent on selected steel products imposed in March 2002. But if it opts to ignore the decision, the U.S. faces threatened retaliation from a number of steel exporters, including South Korea. A trade war would likely result, hurting not only prospects of renewing the beleaguered Doha trade round but diminishing the rule-based, successful WTO system.

A similar test is underway at Miami in the FTAA talks. The U.S. aims to integrate the Western Hemisphere into a market of 800 million people. Ministers aim to decide on a detailed framework to complete negotiations by early 2005 and thereby create a free trade agreement throughout the Americas.

Like the WTO talks, agriculture is one of the key issues. Brazil and others are pressing for liberalization of farm products now. U.S. officials say the U.S. is ready to cut subsidies significantly, eliminate export subsidies and reduce tariffs. Such changes, however, would be linked to the WTO talks, not to the FTAA. Thus, this regional initiative may falter over the lack of global progress.

In the meantime, the U.S. is pressing ahead with bilateral initiatives such as proposed free trade agreements with Australia, Thailand and Morocco. It is also well along in negotiating an FTA with the Central American Common Market and the Dominican Republic.

Should Brazil and others balk in Miami, the U.S. is considering launching FTAs with Colombia, Peru and perhaps other Andean countries to isolate Brazil and other recalcitrants. This would likely cause the negotiations to spiral down into acrimony.

Additionally, bilateral agreements create trade distortions, anger third countries which are left out and complicate the global liberalization process. It would serve everyone's interests, including Korea's, to put priority on the global trade round as this would gain the greatest benefits and impetus for economic growth.

The writer is the former president of the Korea Economic Institute of America and a visiting professor at the Graduate School of International Studies at Korea University.