WASHINGTON, D.C. – America could consolidate its military victory in Iraq by signing a free-trade agreement with a post-Saddam government, but first, the traditional U.S. approach to such deals will need a dramatic overhaul.

Since Sept. 11, the Bush administration has tried to promote both U.S. strategic and economic interests by seeking free trade agreements with many of the world’s poorest countries. The idea is to provide their people with economic opportunity and thus reduce the appeal of extremist groups like al-Qaida.

Although reasonable in theory, this approach has been foolhardy in practice. The Sept. 11 attackers were overwhelmingly middle-class Arabs. Moreover, global terrorism has not emanated from the vast majority of third world countries. So much for the link between poverty and terrorism.

Moreover, America’s indiscriminate approach to trade liberalization will simply plunge candidates for new free trade deals, like Morocco, Central America, and sub-Saharan Africa, into a beggar-thy-neighbor competition for U.S. consumers with poor countries that already saturate the U.S. market with labor-intensive goods – like Mexico, Vietnam, and especially China.

At the same time, because huge labor surpluses in the third world are keeping wages low, these countries can’t possibly become major customers for American-made products for decades. Thus the U.S. trade deficits and U.S. international debts have continued their dangerous growth.

Iraq’s top economic priority is re-starting its oil exports, which have always comprised nearly all of its exports. Oil exports face no significant U.S. trade barriers, so a free trade agreement would not enhance Iraqi revenue streams.

A meaningful free trade agreement – one that granted the United States and Iraq exclusive advantages in bilateral commerce – could ensure that companies from America and other coalition countries dominate Iraq’s oil production and reconstruction.

The United States and its real allies deserve to benefit from such preferences. And most economic fruits of victory should be denied to obstructionist countries like France, Germany, and Russia.

But the Iraq coalition also has a major interest in avoiding the appearance of imperialism and even heavy-handedness. Thus awarding long-term oil and infrastructure contracts should be left entirely to a new democratic Iraqi government, which would undoubtedly seek to reward its proven friends like the Americans, British, and Australians.

U.S. officials must have the authority to reapportion U.S. imports between Iraq and other countries receiving strategic trade preferences when necessary. The United States must also retain the right to reduce total imports in various industries or on an economy-wide basis if domestic industries begin to suffer.

Alan Tonelson, a columnist for the Tradealert.org web site, is a Research Fellow at the U.S. Business and Industry Council Educational Foundation.

A truly pragmatic U.S.-Iraq free trade agreement could help Iraq become an economic and political model for the entire Middle East. This new approach, however, will also require fundamentally rewriting previous U.S. trade agreements from NAFTA to the World Trade Organization charter.

Otherwise, Washington will continue selling false trade promises to Iraq and the rest of the third world. And an already sluggish American economy will weaken further.



ABOUT THE WRITER

Alan Tonelson, a columnist for the Tradealert.org web site, is a Research Fellow at the U.S. Business and Industry Council Educational Foundation. Knight Ridder/Tribune or its editors.



(c) 2003 Alan Tonelson,

Distributed by Knight Ridder/Tribune Information Services

AP-NY-05-08-03 1302EDT



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