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Insider : An Appointment at State May Signal Trouble at Treasury : By naming Robert B. Zoellick, Secretary of State Baker is signaling his desire for a greater role in economic policy.

May 14, 1991|NORMAN KEMPSTER | TIMES STAFF WRITER

WASHINGTON — He is, they say, one lobe of Jim Baker's brain--the consummate inside strategist who provides the ideas and intellectual underpinning for the programs that James A. Baker III has advanced, first as secretary of the Treasury and now as secretary of state.

So the nomination of Robert B. Zoellick to be undersecretary of state for economic affairs has caused Washington insiders to take notice. A job that has been something of a bureaucratic backwater is about to become much more important.

"This appointment reflects the fact that economic issues and political issues are increasingly interlinked," says Robert D. Hormats, a former State Department economic policy-maker who is now chairman of Goldman Sachs International. "Zoellick is a good guy for blending the two together. It underscores the reality that more and more, geo-economic issues are going to compete with geopolitical issues as the driving force in international relations."

Hormats says the appointment will give a higher profile both to Zoellick and to the job he has been picked to fill.

Officials say it also signals that Baker, after about nine months of single-minded concentration on the Persian Gulf and the Middle East, is about to refocus his own attention to the political-economic relationship between the United States and Japan, Western Europe and the rest of the industrialized world.

Zoellick, whose nomination was confirmed by the Senate last week, will also retain the post of State Department counselor, in effect a top personal aide to Baker with a broad mandate that includes just about any sort of job that Baker wants done.

A senior State Department official said that Zoellick's primary task will be to "integrate economic policy into foreign policy generally." The official added that Zoellick's other post of department counselor is elastic enough to permit him to range into almost all facets of political-economic policy.

Zoellick, 37, joined Baker's team in 1985 at the Treasury Department and has been on it ever since, migrating with Baker to President Bush's campaign organization (as issues director) and then to the State Department.

A magna cum laude graduate of Harvard Law School, Zoellick practiced law in Washington and held top staff jobs at the Federal National Mortgage Assn. and the Justice Department before accepting the Treasury post.

At Treasury, Zoellick was, in effect, Baker's chief of staff on most international and many domestic issues. At the State Department, he was the U.S. representative on the high-level six-nation staff committee that hammered out the details of German reunification, a process for which Baker and the foreign ministers of the Soviet Union, Britain, France and the two preunification German states ultimately claimed credit.

On the surface, Zoellick's new job would seem to be a very low-profile post. He will have only a small staff of his own and virtually no jurisdiction over anybody else's. The man whom Zoellick is replacing is Richard T. McCormack, who never became very widely known.

But it is clear that Baker wants to change that. There is growing evidence that the secretary of state wants to put his own stamp on international economic policy, an area which is now primarily the prerogative of the Treasury Department.

In recent years, secretaries of state have generally followed a gentleman's agreement to leave international economics to the Treasury. The practice dates back to the days when Henry Kissinger was at the State Department. Treasury secretaries John B. Connally and George P. Shultz chafed under Kissinger's attempts to set policy in what they considered their sphere of influence.

When Shultz became Secretary of State, he left about 98% of that trade and economic area to Treasury Secretary Donald T. Regan, although he often had strong disagreements with Regan. When Baker succeeded Regan, he became the beneficiary of Shultz's restraint. As secretary of state, Baker has followed the same policy--until now.

What brought Baker back onto the scene, senior policy-makers say, is that he has come to the conclusion that the current Treasury secretary, Nicholas F. Brady, is badly off the track.

These officials say Brady has botched the Third World debt policy that Baker put in place, settled for too little U.S. participation in the new European Bank for Reconstruction and Development and failed to follow through with Baker's program to turn the Group of Seven, an organization of finance ministers and central bankers of the United States and its six largest economic allies, into a potent force.

For instance, the United States had been expected to contribute 12% of the capital--and get 12% of the voting strength--of the new bank established to finance Eastern Europe's conversion from communism to a market economy. Brady accepted an 8% U.S. share, although President Bush later ordered him to insist on at least 10%.

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