Trade concessions during war on terrorism could hurt some industries

More tough choices ahead

Posted: Sunday, November 04, 2001

WASHINGTON -- President Bush faces tough choices on trade as he works to harness an unruly coalition of industrial powers and hesitant Islamic supporters. Russian steel, Pakistani textiles and Indian pharmaceuticals could wind up as unintended beneficiaries of the U.S.-led war on terrorism.

Bush will have to decide, in some instances, between rewarding important allies and protecting domestic industries. With the U.S. economy probably in recession, some of his prospective moves already are drawing congressional fire.

American textile workers ''must not be made pawns in efforts to build an international coalition,'' wrote Sens. Jesse Helms, R-N.C., and Ernest F. Hollings, D-S.C. They were complaining about a likely cut of U.S. tariffs on Pakistani textiles and apparel.

Hollings, chairman of the Senate Commerce Committee, and Helms, the senior Republican on the Foreign Relations Committee, both represent major textile states. The industry has lost an estimated 60,000 jobs in the past 12 months.

Pakistan's textile industry, which employs 3.5 million people, also had a sharp decline. Clothing manufacturers in the West have looked to other suppliers as a result of the U.S. air attacks in neighboring Afghanistan.

Pakistan's support for that campaign is deemed as crucial by the Bush administration. The United States has announced new trade and debt-relief benefits and lifted penalties imposed in 1998 after Pakistan's nuclear tests.

Bush must soon act on a recommendation by the U.S. International Trade Commission to place new restrictions on steel imports to protect battered U.S. steel companies.

Raising U.S. duties would anger major steel-producing allies -- including two important new friends, Russia and Kazakstan, and older allies such as the European Union and South Korea.

Kazakstan is a strategic Muslim state in Central Asia. Russia may turn out to be America's most important long-term ally in the anti-terror campaign.

Administration officials have sounded out congressional leaders on granting permanent preferential trade treatment to Russia, Kazakstan and the other former Soviet republics of Ukraine, Tajikistan, Moldova, Armenia and Azerbaijan.

The United States also might support efforts by Russia to join the World Trade Organization, administration officials said. An announcement could come later this month when Russian President Vladimir Putin visits Bush.

''This is like during the Cold War, when we did a lot of things economically as well as politically for countries that we thought were on our side,'' said James Steinberg, a former deputy national security adviser. ''I think we will have to face those trade-offs.''

India, another front-line ally, is pressing for U.S. approval to break patents held by big drug companies so it can provide inexpensive generic drugs to its mostly poor population. South Africa and Thailand are making similar demands.

Adding impetus to the move are the anthrax scare and U.S. attempts to obtain low-cost supplies of antibiotics.

Other anti-terrorism allies are seeking lower U.S. subsidies for American farm products. Also, any break on textiles given Pakistan would embolden other Third World nations to press for the same.

These issues are sure to come up when trade ministers from 142 nations meet Nov. 9-13 in Qatar.

''American trade policy-makers are caught in a cross fire between protectionist demands from Congress and demands from our trading partners that we be more willing to open our markets if we're insisting that they open theirs,'' said Brink Lindsey, an economist with the Cato Institute.

A high-stakes bargaining chip is Bush's request for authority to negotiate trade agreements that Congress can approve or reject but cannot amend -- an important power that expired in 1994.

Some lawmakers from textile states might withhold their support if Bush rewards Pakistan too generously.

Rep. Cass Ballenger, R-N.C., whose district depends heavily on textiles, is one of those whose support -- and understanding -- Bush is seeking.

But after a recent trip to the White House, Ballenger said he was not sure.

''My decision depends on how much it helps the workers and industries of my congressional district,'' he said. ''Our economy is in a slump, and my district's manufacturing base is among the hardest hit.''

Tom Raum has covered Washington for The Associated Press since 1973, including five presidencies.



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