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DON’T USE FREE TRADE ZONES TO EXCLUDE THOSE OUTSIDE

SHARE DON’T USE FREE TRADE ZONES TO EXCLUDE THOSE OUTSIDE

Although the 12 nations that make up the European Community will not be integrated into a single, unobstructed, free-trade market until the end of 1992, the EC, as it is known, already is reaching out to expand its horizons. In the process, it may become an even more formidable U.S. competitor.

In an pact signed this week by senior ministers from all the countries involved, the 12-nation EC and the seven neighboring members of the European Free Trade Association, or EFTA, agreed to create a free trade zone stretching from the Arctic to the Mediterranean.It will be known as the European Economic Area. Inside that zone, all trade barriers, all tariffs and all border restraints will be dropped. The area will include 380 million people, a market 50 percent larger than the United States in terms of population.

The 12 nations of the EC - Belgium, Britain, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain - already are creating a single trading bloc that shares everything except a common government and common currency.

The countries of EFTA - Austria, Finland, Iceland, Liechtenstein, Norway, Sweden, Switzerland - will be allowed all the same privileges, although some transportation, fishing, economic and environmental concerns will still have to be worked out.

Essentially, the seven will become just like EC members, except they will not be represented on the European Parliament, an advisory body for the EC. However, having taken the first step, the next logical move is for them to apply for formal membership in the EC. Some have already done that.

In addition, some former East bloc nations would like to join, but their economies are too shaky at the moment. Further EC expansion to the east, however, seems to be only a matter of time.

For the United States, this evolving EC entity represents a major challenge in the world market. While the EC is dropping internal barriers to its members, some external obstacles have been raised against outsiders like Americans. The United States already has been involved in disputes over agriculture and other trade issues with the EC.

While the expansion of a free trade zone over more of Europe is welcome, the United States must make sure that it is not being put at a serious disadvantage in the global marketplace.

One response is to push ahead with a counter-weight, namely the North American free trade agreement being negotiated by Canada, the United States and Mexico. While the total population in that area is smaller than the European zone - 360 million to 380 million - the economic clout is larger - a gross domestic product of $6 trillion compared to $3.4 trillion.

And while free trade zones should make it easier for immediate neighbors to do business with each other, they should not be allowed to become protectionist blocs that seek to exclude from the market those who are not members.