US offers trade deals for allegiance

20 September 2001

The Bush Administration in the US is making aggressive use of economic measures, including trade deals and threats of sanctions, in a "carrot and stick" approach to winning key international support in its war on terrorism. The US President, Mr George Bush, will today offer Indonesia's President, Mrs Megawati Soekarnoputri, a new trade agreement, in part a reward for Jakarta's offer to co-operate against terrorism. The US regards Indonesia, the world's most populous Muslim country, to be important for the cohesion of Western and Islamic States in its anti-terrorist coalition.

"Our counter-offensive has to have economic, political and security dimensions - and trade is obviously part of that," the US Trade Representative, Mr Bob Zoellick, said yesterday. International support for the US campaign continues to grow. The UN Security Council and France's President, Mr Jacques Chirac, separately expressed strong support for the goals of the emerging US-led coalition against terrorism. "We are naturally prepared to work in complete solidarity with the United States and do everything that is necessary, in consultation with them, to reach this target, which is the elimination of terrorism," Mr Chirac said.

The Security Council's president, France's Mr Jean-David Levitte, read a statement calling on Afghanistan's Taliban regime to hand over terrorist mastermind Osama bin Laden "immediately and unconditionally".

President Bush's rallying of support came as volatility on financial markets eased as traders waited on indications about any US military response to last week's terrorist attacks and more direction from Wall Street last night. Asian markets finished yesterday higher, led by a 2.7 per cent rise in Japan's Nikkei Index. The Australian sharemarket rose 0.9 per cent, but concerns about the impact of slower world growth on Australia sent the Australian dollar tumbling to dip below US49�. Early European trading last night was mixed.

China's embassy in Washington emphasised that any action against terrorists had to be under the aegis of the UN Security Council, and said it should be based on solid evidence, with specific targets, and minimal loss of life to innocent civilians. But, critically, the embassy official, Mr He Yafei, said China did not oppose military action. China is a permanent member of the Security Council and has power of veto.

The Indonesian President, Mrs Megawati Soekarnoputri, was to arrive in Washington overnight (Australian time) for her first meeting with Mr Bush. "One of the things [Mr Bush] will be talking about ... is some ways that we may be able to open up our markets to help her succeed with growth," Mr Zoellick said. Mrs Megawati has said she was shocked by the attacks on New York and Washington, and stated that they "underline the need for international co-operation to fight terrorism in which Indonesia is prepared to co-operate". But in Indonesia yesterday, extremist Muslim groups warned Mrs Megawati against doing deals with the US.

Mr Zoellick emphasised rewarding co-operative countries. He said the Bush Administration would seek swift Congressional agreement for a free- trade agreement with another Muslim ally, Jordan. He said he would work on arrangements to bring Russia, another important counter-terrorism ally, into the World Trade Organisation, and welcomed the final agreements to bring China and Taiwan into the global trade rule-making body.

The day before the attacks on the US, Australia's Prime Minister, Mr John Howard, sought the US President's commitment to negotiate a bilateral free-trade agreement. The US said it could not commit immediately, and asked the two countries' trade ministers to pursue the idea later in the year. The US Secretary of State, Mr Colin Powell, has hinted that Pakistan might receive economic rewards in return for its help in pressing Afghanistan to hand over the fugitive terrorist leader, Osama bin Laden. Pakistan is labouring under US economic sanctions as punishment for conducting nuclear tests.

But another Cabinet member, the Commerce Secretary, Mr Donald Evans, put the stress on punishing unco-operative nations. "If they don't want to co-operate and don't want to be on our side, there are ... measures we can take, sanctions or other kinds of barriers to our markets here." He did not name particular States. The President's spokesman, Mr Ari Fleischer, bluntly stated the overall US thinking for winning nations' co- operation in its campaign against terrorism: "The approach of the Government will involve both a carrot and a stick. And in different nations, the carrot may be bigger, in other nations the stick may be bigger."

In another development, the US Defense Secretary, Mr Donald Rumsfeld, suggested the US might target more than one country for harbouring terrorists. In the major policy change to emerge from this crisis, Mr Bush has said the US would not distinguish between terrorists and the countries that harbour them. Asked whether he had evidence of support for last week's attacks in America, Mr Rumsfeld said, in part: "I mean, I know a lot, and what I have said, as clearly as I know how, is that States are supporting these people."

Peter Hartcher, in Washington.
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