How China threatens America: and what can be done.

• Author: Mastel, Greg

The political debate in Washington can often be accused of missing the most important issues, but rarely are there two more dramatic illustrations of this tendency than the current international trade debates on the Central American Free Trade Agreement (CAFTA) and China.

The congressional debate on CAFTA has all the hallmarks of a NAFTA Round II debate with the traditional face-off between protectionists and free traders. On one side stand organized labor and industries seeking continued protection, on the other, free traders, global businesses, and internationalists. The battle will be fought over trade with five Central American countries and the Dominican Republic--none of which are particularly large U.S. trading partners and collectively seem to represent both little threat and limited opportunities for the U.S. economy. While this tired debate plays out, the United States and its allies face the growing threat of seeing critical Asian markets close to them because of new free trade agreements to which the United States is not a party.

All eyes are increasingly on China's position as a potential military threat to the United States, a complex element in efforts to control North Korea, and a source of the U.S. trade deficit. Twenty years hence, however, it is quite possible that the real threat to U.S. interests will be an Asian trading bloc built around China, which limits U.S. access to critical Asian markets.

THE FTA CRAZE

The United States has been on an aggressive campaign to build new FTA partners in recent years. FTAs with Jordan, Singapore, and Chile were launched by President Clinton and wrapped up by the Bush Administration. The Bush Administration has picked up the pace; in addition to CAFTA, FTAs have been struck with Australia, Morocco, and Bahrain. Talks are underway or contemplated with South Africa, Panama, the Andean countries, Thailand, and several small Middle Eastern countries. As should be apparent from the list, many of the recent FTA partners--with the exception of Australia--seem to be chosen more for geopolitical importance than because of economic significance.

The United States is not alone in pursuing FTAs. Europe has been pursuing a similar course for years--though many of their FTAs conveniently exclude most agriculture products. But many other countries, including Chile, Mexico, and Singapore, have been on FTA campaigns of their own resulting in a plethora of FTAs. All told, the World Trade Organization...