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Bush's Free-Trade Diplomacy Has Corporate America Steaming

The Bush Administration has a new weapon in the war against terrorism: offering free-trade deals to allies from Australia and Morocco to the tiny Persian Gulf emirate of Bahrain. But the GOP's business allies aren't impressed. They complain that such grand diplomacy makes for poor trade policy. Sensing a way to mend frayed ties to well-heeled business groups, Democrats are taking up their cause.

This fall, the Administration intends to start talks on a deal with Bahrain, which supported the Iraq invasion and hosts the U.S. Navy's Fifth Fleet. And on June 23, President Bush dispatched U.S. Trade Representative Robert B. Zoellick to the Middle East to kick off a 10-year drive for a regional free-trade zone, pointedly excluding unfriendly Iran and Syria. The idea is to reward friends, enhance economies, and spread the free-market gospel.

That's nice, says Big Biz, but what about the bottom line? Two-way trade between the U.S. and Bahrain was a mere $800 million last year, about what the U.S. and Canada ship to each other every 18 hours. "Now that we've given trade such a high economic priority, we shouldn't be using trade to promote other objectives," says Calman J. Cohen, president of the Emergency Committee for American Trade, which represents the largest U.S. exporters. The National Association of Manufacturers, the U.S. Chamber of Commerce, and the Business Roundtable are also dismayed.

Corporate America has a point. Zoellick's 135 negotiators are already spread so thinly among big multinational talks that the agency is considering teleconferences. Free-trade pacts with individual countries require months of tedious negotiations and, in the case of developing nations, a rewrite of each country's intellectual-property and investment laws -- further distracting the USTR. The deal with Chile, for example, runs to 800 pages and took more than two years to complete.

Business fears that the battle to win fast-track negotiating authority for the President will have all been for naught if the Bushies don't concentrate on high-value partners. "Now, we're going to have more negotiators working on little Bahrain than on talks with China," says Howard F. Rosen, former executive director of the Competitiveness Policy Council, a Washington think tank.

Dems are relishing the chance to be more pro-business than the GOP as they demand a shift in Administration priorities. "You need to get the most bang for your buck, and there are countries with much greater economic potential" than Morocco or Bahrain, says Max Baucus (Mont.), senior Democrat on the Senate Finance Committee. He has called for a General Accounting Office investigation into negotiating priorities.

Business groups are drawing up their own wish list for free-trade deals, focusing on countries such as Thailand and Taiwan. Not only do those two together already buy $24 billion in American goods, but U.S. corporations are eager to build plants there to export throughout Asia. Investment guarantees typically built into a free-trade deal would speed that process.

To appease business constituents, the Administration is apparently willing to jump Thailand to the head of its list. But it won't concede that it has misplaced priorities. "We are not pushing better opportunities aside," insists USTR General Counsel John Veroneau. "Trade agreements also promote the rule of law and the political stability that reinforce U.S. national security goals." Maybe. But with manufacturing in a three-year slump, Corporate America would rather have its needs -- not diplomacy -- as trade strategy's Job One. As battered Environmental Protection Agency head Christine Todd Whitman heads for the exit, the White House is having trouble filling her job. With swing voters so vital to the looming election, a polarizing James Watt type wouldn't suit Bush political maestro Karl Rove. On the other hand, conservatives are primed to oppose another moderate for EPA, since they considered Whitman a Democrat in expensive sheep's clothing.

A possible solution: Appoint a genial politician who visits parks yet deregulates with a fervor that pleases pro-growth Westerners and U.S. industry. That may be why the name of Idaho Governor Dirk Kempthorne is being floated. In his six years in the Senate in the '90s, Kempthorne sided with enviros only once in 71 votes. But both Kempthorne's detractors and boosters say the governor is a superb communicator. "He's the best I've ever tested," says Frank I. Luntz, a GOP pollster whose memos on language have helped Republicans shift from angry Newt-speak to Bushian compassion-chatter. "In focus groups, people said that he looked like Paul Newman and talked like Robert Redford."

Another boon for Kempthorne: As a Senate alum, he's likely to win confirmation, particularly because he sat on the panel that will vet him. But whomever is tapped, Democratic Presidential hopefuls -- such as Senators John Kerry (Mass.), John Edwards (N.C.), and Joseph I. Lieberman (Conn.) -- are likely to use the appointment to attack Bush's enviro policies.

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