Leaving Russia Out in the Cold On Free Trade

MIAMI -- As the sun kissed the white sand of the Miami beaches and the palm trees danced in a gentle offshore breeze, President Bill Clinton held out a spellbinding prospect to his Latin American neighbors -- an offer they couldn't refuse.


Together they could build a new free trade bloc to cover the entire hemisphere from Alaska to Argentina, some 850 million people united in borderless commerce and investment, all happy consumers in the world's biggest market. By the time this new Free Trade Association of the Americas was complete in 2005, Clinton went on, this would be a market of $13 trillion.


Only a month earlier, on the sun-kissed islands of Indonesia, with identical palm trees dancing in a very similar offshore breeze, Clinton made an almost interchangeable speech about an Asia-Pacific Free Trade Area, to be in place by the year 2020. The Asia club would command, Clinton said, half of the world's wealth and productive capacity.


Without palm trees or beaches, but in conference rooms in Washington and Brussels, the first exploratory drafts are being composed for a new NAFTA, a North Atlantic Free Trade Association aimed at yet another super-regional group of European Community and the North American economies. This is still in the planning stages, but after the weekend EU summit in Essen, which agreed to launch talks with the various Latin American free trade areas, the plans are advancing fast.


All of these free trade regions have two important elements in common. First, the United States is at the heart of each one. Second, Russia has no place in any of them, even though the geography of Siberia would seem to give Russia an almost automatic right of entry into the Asia-Pacific zone. In this new world in which geo-politics are replaced by geo-economics, the United States is locking itself into the great international institutions of the next century. And Russia is being locked out.


This may or may not be a bad thing. The current fashion for free trade and free market economics is something of a gamble, whose long-term results have yet to be seen. Free trade may boost imports and exports and lead to a larger economic pie, but it divides that pie in ways that disproportionately benefit the wealthy, the educated, the skilled and the adaptable. It exacerbates the disparity which has been marked in the United States since 1972 between the incomes of those with a high school diploma or less and those with college degrees.


"There is a centrifugal force, splitting the workforce, a historical shift of the balance of industrial and social power towards people with skills," says Labor Secretary Robert Reich, who used to write books on all this as a Harvard academic.


That growing gap between rich and poor, between those with the skills to profit from the global economy and those who become its victims, is a classic hallmark of Third World economies. It is also a striking feature of the new Russia. In short, Russia is getting the worst of all worlds: all the social disadvantages of the new global economy, without gaining the benefits of membership in any of the new trading blocks.


This is destabilizing and dangerous, and it carries a warning for Russian diplomats and decision-makers. Their current obsession with Bosnia, NATO and Chechnya is becoming irrelevant and anachronistic compared to the need to ensure Russian access to the big new trading clubs of the global economy.