National Security and Economic Policy

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxxxxxx>]

The attached NY Times report details the attempt by Bush II to restructure
economic and trade policy under the supervision of foreign/security
policy.    After the end of the Cold War, there emerged an trend to detach
economic and trade policies from political/security concerns. The
ascendance of economic/trade policy institutions independent of security
policy institutions has occurred in parallel in all countries.  This trend
appears to be coming to an end.  International trade and economic policies
will now be subordinated to national security policies.  A new Cold War is
now concentrating on economic/trade struggles, instead of East-West, it
would be mostly North-South, with conflicts also between former allies
such as the US, EU and Japan, and governmental structure will be
restructured to deal effectively with the new situation.
This trend, building for some years, became officially recognized after
Seattle.  Economic nationalism and trade protectionism is now on the
rise.  The impact of this trend is momentous and ominous. If trade and
economics are national security issues, the failure to resolve them will
lead to war, as it did in twice last century.
Trade, by definition, is based on mutually balanced weaknesses.  Mutual
strength leads only to war, and unequal strength leads to conquest of the
weak.

Henry C.K. Liu

January 6, 2001

Bush Seeking to Overhaul Policy Making

By JOSEPH KAHN and FRANK BRUNI

WASHINGTON, Jan. 5
 ? President-elect George W. Bush is considering ways to overhaul economic
policy making in his administration, with advisers debating whether to
strip the trade representative's office of cabinet rank and eliminate a
powerful White House council that oversees foreign and domestic economic
policy.

The possible switch from the Clinton administration's approach to economic
affairs comes as Richard W. Fisher, a Democrat who is President Clinton's
deputy trade representative, has become the leading candidate to fill the
top trade post under Mr. Bush.

Robert B. Zoellick (see my recent e-mail on Zoellick), a former State
Department official and longtime aide to James A. Baker III, the former
secretary of state, is also a contender for the trade post but is also
being considered for the No. 2 job at the Treasury Department, people
involved in the Bush transition said.

Some Bush advisers say that Mr. Fisher now has an edge for the post, in
part because Mr. Bush intends to downgrade the position and because Mr.
Zoellick has an expansive vision of the trade representative's role in
making foreign policy.

Others say there has been no firm decision to strip the trade office of
its cabinet rank and that Mr. Zoellick, who played a high-profile role
during Mr. Bush's election campaign and the Florida recount, is still a
front-runner for the job.

The debate about the trade post comes as Mr. Bush also leans toward
eliminating the National Economic Council, a White House body Mr. Clinton
created to coordinate domestic and foreign economic policy. The first
person to hold that post under Mr. Clinton was Robert E. Rubin, who later
became Treasury secretary.

Elimination of the council would probably leave Lawrence B. Lindsey, Mr.
Bush's top economic adviser, with less bureaucratic sway over how cabinet
departments conduct both domestic and foreign economic policy, a move
consistent with what several top advisers described as Mr. Bush's
objective of creating a relatively small but powerful cabinet vested with
extensive executive authority.

"Bush is going back to the Eisenhower- type cabinet, where it's more like
a board of directors," one adviser said. "He wants a small, workable
cabinet. In the Clinton years, you literally couldn't fit the cabinet
around a table."

There is no question that economic matters are high on Mr. Bush's agenda.
He campaigned on a promise to reduce taxes and revamp Social Security, and
indications that the United States and global economies are slowing have
put economic policy front and center during the transition. Moreover, Mr.
Bush intends to push to broaden the North American Free Trade Agreement
across the Americas and to keep trade expansion as a crucial component of
his foreign policy.

Yet while President Clinton moved early in his first term to install
powerful Capitol Hill and Wall Street economic leaders in positions that
were given wide bureaucratic authority, Mr. Bush has so far left uncertain
whether his White House advisers and policy experts, the Treasury or
Commerce Departments or even the State Department or the National Security
Council will take the lead on economic affairs.

Mr. Bush is still considering what to do about the National Economic
Council and whom to name to the trade job, said Ari Fleischer, a spokesman
for Mr. Bush. "The focus is on collegiality of approach," he said, but
declined to say more about the matter.

Two Bush advisers who asked to remain anonymous said the president-elect
intended to give Donald L. Evans, his campaign chairman and personal
friend who is designated to become commerce secretary, a larger role in
setting trade policy than the commerce secretary has had in recent
administrations.

Enhancing Mr. Evans's role is one reason Mr. Bush is considering denying
cabinet status to the trade representative. The trade representative, who
runs the executive branch agency charged with negotiating trade agreements
and coordinating trade policy with Congress, has carried cabinet rank
since 1976.

The Commerce Department also has a statutory role in trade. It promotes
American corporations overseas and helps enforce trade laws. But most
recent commerce secretaries have not had a decisive role in overall trade
strategy or economic foreign policy.

Though President Richard M. Nixon once sought to have Maurice Stans, his
commerce secretary, take the lead on trade, the effort failed in part
because Congress had designated the trade representative's office as the
responsible body for negotiating trade agreements. Commerce also
represents the interests of corporations, which often seek protection from
imports.

"If you had Commerce in charge, it would probably be more
corporate-focused, and that would raise a concern that the U.S. would be
less oriented toward free trade," said Robert Hormats, a Goldman, Sachs
managing director. "The critical point would be sending a clear signal
that the goal is still trade expansion."

Condoleezza Rice, the Russia expert whom Mr. Bush designated as his
national security adviser, has also pushed to downgrade the trade job,
Bush advisers said. Though Ms. Rice has a tight bond with Mr. Bush, the
president-elect decided not to give her cabinet rank. Ms. Rice views
economic policy abroad as part of her portfolio and would prefer that the
trade representative not outrank her, these advisers said.

Ms. Rice's role in coordinating foreign economic relations and trade
policy is also likely to be highlighted if the National Economic Council
is discontinued. Mr. Clinton created the council to make sure that
economic matters did not get subordinated to security concerns in setting
foreign policy.

"There's no one right way to do it," said Fred Bergsten, president of the
Institute for International Economics who served as a White House economic
official in the Nixon administration. "But the practical problem is that
the N.S.C. has so many security concerns that the economic matters tend to
get downgraded," he added, referring to the National Security Council

A final decision on how to structure the economic team will probably
affect whomever Mr. Bush chooses as his chief trade negotiator, a position
that had more importance under Mr. Clinton than in other administrations.

The selection of Mr. Fisher, who currently focuses on trade issues
involving Asia and serves as No. 2 to Charlene Barshefsky, Mr. Clinton's
trade representative, would add a second Democrat to the senior ranks of
the Bush administration.

Some Bush advisers also say that Mr. Fisher would send a bipartisan signal
to Congress, which is sharply divided about the wisdom of expanding trade
with foreign nations and has veto power over trade agreements. He is also
seen as less likely to object if Mr. Bush decides to reduce the office's
status.

Mr. Zoellick, the other leading candidate for the trade job, was a foreign
policy wunderkind under Mr. Baker. He helped design and carry out United
States policy on German reunification a decade ago. He also helped start
Nafta negotiations from his post in the State Department.

But Mr. Zoellick is seen by some Bush advisers as wanting to use the trade
representative's office as a platform for putting economic affairs front
and center in United States foreign relations. That ambition conflicts
with Ms. Rice's goal of coordinating economic foreign policy in her
domain.

Moreover, Gen. Colin L. Powell, the secretary of state-designate, while
not an economic expert, has expressed more interest in economic and trade
matters than the current secretary of state, Madeleine K. Albright. Mr.
Powell helped push Nafta through Congress early in the Clinton
administration.