Estonia lukewarm on trade group idea

The Heritage Foundation, a U.S. think tank, is lobbying President George W. Bush to establish a global free trade association, a voluntary free-trade association of 11 nations that would include Estonia.

The idea was first proposed in 2001 following the release of the "Index of Economic Freedom," a Heritage Foundation and The Wall Street Journal publication. In it, Estonia, the United States, Ireland, the Netherlands and Luxembourg tied for fourth place behind Hong Kong, Singapore and New Zealand among 156 world economies.

Estonia scored well on factors such as loosened restrictions on banks, limited trade barriers, openness to foreign investment and few price controls.

Latvia scored low because of corruption and a slow rate of privatization. Lithuania also was left off the list mostly because of delays in privatization.

A free trade association would not compete with the World Trade Organization or regional trade agreements like the North American Free Trade Agreement but would be an alternative at a time when the advance of global free trade has stalled, according to the Heritage Foundation.

To become members, countries would only need a firm commitment to protecting basic economic freedoms in trade policy, capital investment, property rights and regulation.

Eleven countries would qualify, including Chile, the Czech Republic, Denmark, Estonia, Hong Kong, Ireland, Luxembourg, New Zealand, Singapore, the United Kingdom. and the United States.

Another 26 countries need only modest reductions in regulatory burdens they place on businesses.

The 11 potential candidates account for nearly one-third of the world's gross domestic product.

For Gerald P. O'Driscoll Jr., director of the Heritage Foundation's Center for International Trade and Economics, the prospect of gaining full access to such a massive market should be enough to tempt other countries to loosen regulatory reins in their own economies.

"For nations that want to avoid being swallowed whole by the European Union, the logical alternative is (this association)," he said, referring to smaller countries like Denmark, Estonia and Ireland. "They will be forced to accept intrusive EU regulation, which undoes much of the good that they have accomplished by liberalizing their economies."

Lea Kroonmann, head of the state funded Estonian Trade Promotion Agency, said that the EU market covers the needs of Estonian exporters and there was no need to join any other associations. "Estonia is a very small country," she said. "The EU market alone would be enough for us.

"Very few companies are looking for export opportunities in Asia or the United States."

Tambet Made, chairman of the Estonian Trade Council, agrees. "There are no limitations for trading with these potential members at present," said Made. "It will become advantageous for Estonia only if its biggest trading partners, like Russia for example, join.

Other officials said inclusion in the GFTA was an honor, but that the EU and the WTO were the highest priorities for the country.