1995-96: REVIEW AND OUTLOOK : The Trickiness of Trade : U.S. Execs Fear Issues Could Ignite in an Atmosphere of Election Politics

U.S. executives worried about selling earthmovers and airplanes to China, buying oil and gas from Nigeria or assembling cars and televisions along the Mexican border will be looking much closer to home for help on their 1996 wish list.

That’s because the most outspoken opponents of unfettered U.S. economic expansion are home-grown. And these congressional critics, environmentalists and human rights advocates are gearing up to attack the Clinton administration’s trade policies with greater gusto in the months leading up to November’s election.

By comparison, the global future looks much more predictable in strictly economic terms, with projections of a modest overall expansion based on dynamic gains in some parts of the world--such as India and China--to offset continued sluggishness in the industrialized world.

What business leaders fear is that issues as diverse as high-tech piracy in China, the human rights record of the Nigerian government and the threat to American jobs from low-cost foreign labor could ignite in the explosive atmosphere of a U.S. presidential election campaign, increasing pressure for economic sanctions or other actions that would threaten their trading relationships.

On Capitol Hill, the hot-button issues include a controversial measure giving the Clinton administration “fast-track” authority to negotiate trade agreements, unhappiness with the 2-year-old North American Free Trade Agreement, expanded trade benefits for Vietnam, and the emergence of an increasingly vocal pro-Taiwan, anti-China lobby.

Clinton’s presidential opponents have already started sounding the alarm, with Senate Majority Leader Bob Dole (R-Kan.) attacking the “haphazard rush to sign more trade deals” and conservative commentator Pat Buchanan urging the adoption of huge tariffs to slow the flow of goods from Japan and China.

Recent polls show Americans increasingly concerned that their expanding participation in the global economy is depressing wages and accelerating the shift of jobs overseas.

“There’s almost no way to avoid these issues now,” said Lori Wallach, director of Public Citizen’s Global Trade Watch, a Washington-based citizens advocacy group. “Is it an anti-NAFTA theme? Is it an anti-free-trade theme? I’m not sure.”

These sentiments have U.S. executives, particularly those venturing into the fast-growing, but often politically unstable, markets of Latin America and Asia nervously monitoring Capitol Hill and the White House for early warning signs of trouble ahead.

“We foresee a year in which enormous vigilance will be needed to prevent small disputes and disagreements and small political brush fires from spreading and turning into a much more dangerous conflagration,” said Robert Kapp, president of the Washington-based U.S.-China Business Council, which represents the nation’s largest traders.

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Over the last three years, the Clinton administration has earned high marks from U.S. business leaders for promoting trade as a key driver of the U.S. economy and working to remove obstacles that impeded the movement of goods and capital across borders.

The president himself has emerged as a cheerleader for U.S. companies abroad, personally lobbying foreign leaders to buy U.S. airplanes, convening the first-ever economic summit of top Asian leaders, and championing the trade pact that united the Mexico, Canada and the United States in the largest free-trade zone in the world.

It is a record Clinton’s supporters have promoted zealously. U.S. Trade Representative Mickey Kantor boasted recently that the president’s conviction that “future prosperity depends on our ability to compete and win in the global economy” has already led to the signing of 175 trade agreements.

But others have accused the Clinton administration of selling out the world’s environment, foreign dissidents and U.S. workers in its rush to convert former communist enemies to capitalism and carve out a larger share of the world economy for U.S. corporations.

And in recent months, these critics have won a few high-profile battles. They include the Clinton administration’s recommendation against Export-Import Bank funding for projects associated with China’s controversial Three Gorges Dam and the decision by the Overseas Private Investment Corp. to cancel insurance for a U.S. gold mine in Indonesia.

A key concern for the Democratic Party is preventing the erosion of its traditional voting blocs in the environmental and labor communities, whose chief target is NAFTA.

Public Citizen has fought expansion of that agreement and is pushing a bill that would require U.S. agencies to measure NAFTA’s effect on the U.S. and Mexican economies, health and environment. The bill would force the cancellation of congressional authority for NAFTA should U.S. officials uncover adverse effects that could not be undone.

Washington observers said the White House is divided over just how vigorously to fly the free-trade flag in the coming months, being torn between those who believe Clinton’s free-trade policies are an economic success story and evidence that a growing number of Americans--especially Democrats--blame their economic ills on trade and immigration.

Trade expertise would be brought into the campaign fold if Kantor, the Los Angeles lawyer who oversaw Clinton’s 1992 campaign, is tapped for that role again this year. So far, Kantor has brushed aside all questions about his plans.

U.S. business leaders point out that the globalization of the U.S. economy leaves them vulnerable on many fronts, among them in regard to this country’s on-again, off-again relations with Japan and China, the campaign to impose economic sanctions against Nigeria for the November execution of activist Ken Saro-Wiwa, and opposition to granting special trade benefits to Vietnam, whose leaders are accused of practicing political repression.

Most worrisome is China. U.S. traders fear getting caught on the firing line if Congress follows through on its pledge to invite the winner of Taiwan’s March election, most likely President Lee Teng-hui, to visit the United States. Last summer, China’s communist leaders cut U.S. firms out of several lucrative deals after the Clinton administration allowed political archrival Lee into the United States.

“If anything is done that challenges the one-China policy, there are going to be severe commercial repercussions,” warned William Lane, a Washington lobbyist for Caterpillar Inc.

Transpacific relations are also vulnerable to concerns about China’s expanding trade surplus and about political repression, including the 14-year jail term handed to dissident Wei Jingsheng in December. China’s pledge to lower tariffs and crack down on high-tech piracy are being closely examined as part of its bid to gain entry to the World Trade Organization.

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Likely to recede from its customary high visibility this year is the U.S.-Japan economic relationship. Both sides have tried to cool the rhetoric after a string of hostile faceoffs that began with last summer’s auto trade feud, continued through the Daiwa banking debacle and surfaced again after a brutal attack on a 12-year-old Okinawan girl by U.S. servicemen.

One exception could be the U.S.-Japan Semiconductor Agreement, whose success in opening the market to foreign manufacturers has made it a centerpiece of the Clinton administration’s “results-oriented” trade strategy. U.S. semiconductor companies want to renew the agreement, which includes a target of a 20% market share for foreign companies. The Japanese strongly oppose numerical targets.

Political analysts said it is far too early to predict which issues might strike a sympathetic chord with voters easily swayed by the nightly TV news, slick advertising and the condition of their pocketbooks.

“I would be suspicious of anyone making a [prediction] now, especially given the volatility of foreign policy and the perceived weakness of the president in that arena,” said Bill Zimmerman, a Democratic consultant based in Santa Monica.

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The World Ahead

Continued sluggishness in Germany and Japan, two of the world’s biggest economies, will limit the global economy to a modest expansion in 1996, although there will be bright spots in Latin America and Asia, analysts say. Meanwhile, business and political leaders worldwide will wrestle with a plethora of economic and trade issues. Some 1996 hot spots:

* China: Human rights, pollution, high-tech piracy issues crimp China’s efforts to join the World Trade Organization.

* Taiwan: Markets, investors fret about China’s reaction to the March presidential election.

* Hong Kong: Business edgy as colony enters final stretch before China takes over in 1997.

* Japan: Government ups spending to boost sluggish economy, banks dig out from bad-loan hangover.

* India: American hawkers of energy, fried chicken and snack foods battle political infighting and national pride.

* United States: Beltway politics and Americans’ job insecurity make trade “toughness” a presidential campaign bragging point.

* Europe: Government leaders race against deadline to meet tough criteria to issue the “euro,” the proposed European currency, and mount an aggressive bid to expand trade ties with Latin America and Asia.

* Germany: Soaring mark squeezes manufacturers, sparking cutbacks that trigger labor unrest.

* Mexico: Government seeks foreign investment to pull economy out of “tequila hangover,” quell angry backlash from consumers hit by peso devaluation.

* Brazil, Argentina: Government officials seek to pursue feer trade with U.S., Canada and Mexico without destabilizing their domestic economies.

* Chile: Officials face long odds in the U.S. Congress in their country’s campaign to join the North American Free Trade Agreement.

* South Korea: U.S. manufacturers demand access to country’s protected consumer market; government tries to preserve economic momentum in the face of corruption indictments against a leading industrialist.

* South Africa: Government officials step up their liberalization to win back foreign investors that fled during the apartheid regime.

* Nigeria: Western countries debate economic measures, including an oil embargo, to punish the government for execution of human rights activists.