US: Bush May Use Trade Pacts for Iraq Leverage

Maybe it's just a coincidence that the Commerce Department announced
decisions in recent days to confer "market-based-economy"
status on Bulgaria and Romania, two Eastern European countries that support
President Bush's tough stance on Iraq.

And maybe a letter sent this week by a top House Republican to Chile's
president, exhorting him to bring his reluctant government behind the
U.S. position at the United Nations, has nothing to do with Chile's free-trade
agreement pending in Congress.

But as those cases suggest, evidence is mounting that the Bush
administration and some of its key congressional allies are prepared to
use trade concessions for purposes of gaining leverage as diplomatic
wrangling over Iraq grows more heated.

Until recently, Washington prided itself on avoiding the use of economic
pressure to secure cooperation from foreign countries, with presidential
spokesman Ari Fleischer declaring that "no quid pro quos" were
being offered. One exception was the U.S. proposal to give Turkey a
multibillion-dollar aid and trade package, justified as compensation for
the losses the Turkish economy would probably incur from a war in Iraq.
That deal is in limbo because Turkey's parliament rejected a bill that
would have allowed U.S. troops to attack Iraq from Turkish soil.

Now it appears that trade carrots and sticks are being wielded -- albeit
subtly -- in an indication that feelings run so deep on Iraq in some
quarters in Washington that rifts on the issue may well affect economic
ties.

A prime example is a letter that Rep. Henry J. Hyde (R-Ill.), chairman of
the House Committee on International Relations, sent to Chilean President
Ricardo Lagos, whose nation is one of the Security Council members
balking at a resolution paving the way for war. The letter, dated March 10, makes no explicit mention of the U.S.-Chile free-trade agreement, which U.S.
and Chilean trade negotiators struck in December and still needs to be
ratified by Congress. But the inference is clear.

"Our two nations are on the cusp of a new relationship based on
mutual respect and shared aspirations for a better life for all Americans and
Chileans," Hyde wrote. "Mr. President, your strong and
unequivocal support on this upcoming [U.N.] vote is vitally important. . . . We should not let the continued deceptions of Saddam Hussein divide us."

Asked if the letter is meant to suggest that congressional approval of
the trade deal might get hung up if Chile fails to come around, a Hyde aide
said that wasn't the intention. "I would be reluctant to draw a
connection between this letter and pending trade matters," he said. "This
letter really is intended to express to the government of Chile just how
important the situation in Iraq is to the legislative branch."

Congress and the White House may find it difficult to tinker much with
the vote on the Chile trade deal because its timing is dictated by law. But
trade experts said the Hyde letter is a more substantive use of pressure
than the bluster some politicians have hurled about boycotts and
sanctions against French and German products.

"This is Chile's number one issue with us . . . and the
administration would be foolish not to use it," said Greg Mastel, chief
international trade adviser at D.C. law firm Miller & Chevalier. "I'm not sure
the administration would take it so far [as to delay a vote]. But I'm sure
they don't mind that the concept might be floating around in the heads of the
Chileans."

A White House official, speaking on the condition of anonymity, said
"we see no connection" between the Chile trade pact and Iraq. But Claire
Buchan, a White House spokeswoman, declined to respond directly when
asked whether countries' refusal to support Washington on Iraq might lead to
repercussions in trade and other economic areas. "The president
approaches this as a matter of principle and is hopeful that members of the Security Council will vote to disarm Saddam Hussein," she said.

Russia, which has said it may veto the U.S.-backed resolution, has been
the target of more overt warnings from Washington about possible economic
fallout, including an interview in a Russian newspaper this week in which
U.S. Ambassador Alexander Vershbow admonished Moscow to "carefully
weigh all the consequences."

On Thursday a senior U.S. diplomat in Moscow sought to calm the furor
stoked by Vershbow's remarks, saying: "We are not making any
threats. . . .
The leadership on both sides wants to minimize any damage, but you can't
completely isolate the wider relationship from any spillover."

For Bulgaria and Romania, receiving Commerce Department designation as
market-based economies was welcome because it means the former communist
states will have an easier time attracting foreign investment and
defending themselves against complaints that they are "dumping" goods
into the U.S. market -- that is, selling at unfairly low prices. The announcements followed a trip to those nations from Feb. 27 to March 1 by Commerce Secretary Donald L. Evans, billed by the administration as demonstrating "America's support and appreciation to these countries as part of
the Administration's ongoing effort to pursue peace and diplomacy
abroad."

Trevor Francis, a Commerce spokesman, disputed any link between the
decision and the support given to Bush by Bulgaria, a Security Council
member, and Romania. "This is a quasi-judicial process, which takes
six to nine months. It isn't at the whim of an elected official," he said.
But the U.S. decision on Romania is at odds with that of the European Union,
which has not awarded the country similar status.

Washington Post correspondent Sharon LaFraniere contributed to this
report from Moscow.

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