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Remember Nafta? Well, Here Comes Tafta (Int'l Edition)


International -- Intl' Business: TRADE

REMEMBER NAFTA? WELL, HERE COMES TAFTA (int'l edition)

Since the end of the cold war, policy heavies in Europe and the U.S. have been searching for a way to breathe new life into transatlantic relations. Suddenly, they've come up with an idea. Politicians are buzzing about the possibility of opening talks on a transatlantic free trade agreement. Brace yourself for TAFTA, son of NAFTA.

It may never get beyond a free-traders' pipe dream, but the list of TAFTA supporters is growing daily-- from pols in Canada, Germany, France, and Britain to U.S. labor leader Lane Kirkland. The new trade pact could open sensitive markets like telecommunications, airlines, financial services, and entertainment. No one agrees exactly what form TAFTA would take. But there's widespread agreement on one point: It's worth trying. "It's a very powerful idea," says Stuart E. Eizenstat, U.S. Ambassador to the European Union.

TAFTA's origins are uncertain. The Germans claim Daimler Benz CEO Edzard Reuter first publicly spoke of a free-trade zone between North America and the European Union a year ago. About the same time, British Defense Minister Malcolm Rifkind floated the idea of replacing NATO with an institution that would bind the allies together economically and militarily.

IT'S A SMALL WORLD. Earlier this year, Canadian Prime Minister Jean Chretien also brought up the idea in Paris, where it's sure to be controversial. Yet he found a receptive ear in French Foreign Minister Alain Juppe, who weighed in with his "transatlantic charter" on economic and security issues.

What started as idealistic musing has snowballed into a movement. Gaullist Presidential candidate Jacques Chirac added Juppe's idea to his campaign rhetoric. British Prime Minister John Major advocated TAFTA when he met President Clinton in April. Then, German Foreign Minister Klaus Kinkel pushed it in an Apr. 19 speech in Chicago.

The only cool reception so far has been at the White House, which is busy expanding NAFTA and forging a blueprint for free trade with Asia. Even there, though, signs are emerging that TAFTA is gaining a voice. Departing for a European swing on Apr. 21, Commerce Under Secretary Jeffrey E. Garten said he'll be seeking a deeper transatlantic relationship while prying open European power generation, telecommunication, and aerospace markets. Says Garten: "We risk drifting apart. That would be a tragedy."

So what next? The subject is likely to come up at a high-level meeting of Organization for Economic Cooperation & Development officials in Paris later in May, and at other U.S.-EU and Group of Seven meetings this summer. Even for talks to get under way, numerous obstacles must be overcome. The French, for example, are unlikely to agree to talks unless two sensitive areas--agriculture and entertainment--are off the table.

If negotiators ever start work on the nitty gritty, the enormity of the task will be obvious. The easiest job will be chipping away at remaining tariffs in Europe and the U.S., on products ranging from memory chips to steel. Then they'll attack restrictions on financial services. Telecommunications companies will want equal access to each other's markets. Airlines will want open skies.

Trade negotiators also will have to end quotas on farm produce and textiles. The U.S. entertainment industry will want to quash EU rules requiring broadcasters to have at least 51% European content. As each subsidy, quota, or tariff is struck down, a sheltered industry on the other side will be hurt.

Some momentum for TAFTA is already building. To get the ball rolling, the Germans favor an "early warning system" to deal with trade disputes before they blow up, such as last month's fishing war between Spain and Canada. Britain wants an interim agreement on financial services.

There are still those, however, who voice caution. Setting up a Fortress West may not be a great idea when Asia and Latin America are the world's fastest-growing markets. And getting a workable agreement may be impossible. Says Raymond G.H. Seitz, former U.S. Ambassador to Britain and now a director of four British companies: "It all sounds great sitting around with a glass of port late in the evening." But turning talk into a treaty will take tremendous diplomacy and years of work.By Paula Dwyer in London, with Amy Borrus in Washington and Linda Bernier in Brussels


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