NAFTA still on trial
THE cause of free trade gained a victory yesterday. United States President Bill Clinton's surprisingly strong 234-200 vote win in the House of Representatives on the North American Free Trade Agreement (NAFTA) should, at first sight, be as welcome inAsia as in the US. It seems to confirm the president's - if not his party's - commitment to free trade rather than protectionism as the way to bring new growth to the American economy. And growth for the US economy means more opportunities for its trading partners.
The win bolsters Mr Clinton's credibility in his dealings with the Asia-Pacific Economic Co-operation (APEC) forum in Seattle this week. It also bodes better for the future extension of China's Most Favoured Nation (MFN) trading status than the remarks of his Secretary of State Warren Christopher to Chinese Foreign Minister Qian Qichen earlier in the week.
But, like many Americans, many Asian countries will be deeply suspicious. The treaty's domestic opponents fear jobs will be lost to Mexico; they argue that the pact will help big business and the Mexican economy at the expense of American jobs. Asian critics fear their exports will be squeezed out of the US market by Mexican goods.
Worse still, the treaty may be used as an excuse for raising trade and investment barriers against Asia, even in sectors where Mexico is no direct threat. Free trade is a good thing but it must be free between all nations. Regional integration - fencing off a free trade area - at the expense of the global economy is a danger to prosperity.
Much depends on the effect of the concessions Mr Clinton has been forced to make over the past week in his frantic wooing of congressional support. French, Japanese and Korean farmers alike will be furious at Washington's hypocrisy in providing its own farm states with protection against Canadian wheat and Mexican citrus, while demanding the rest of the world cut subsidies to agriculture.
Mr Clinton's tactics have tarnished the treaty. Although stock markets generally rose on the news of the vote, the euphoria was muted by fears that the worldwide knock-on benefits of renewed North American growth may be sharply delayed by additional barriers to trade with Asia.
Asia will welcome Mr Clinton's commitment to free trade and the general signal coming from the US that the protectionists are still on the back foot. But it will want to see that commitment in action before raising a full-throated hurrah for NAFTA.
