Much is uncertain but there are also many certainties after the disgusting bombing of trains in Madrid on Thursday. Sept. 11, 2001 has shaped much in the past two and a half years, including economically. March 11 will have its economic impact as well as its political one.

Those first impacts can be seen now. The emergency services and the hospitals will be working flat out. The repair and rebuilding of railway stations will begin. The insurance companies will make their estimates. Some tourists will reconsider their plans and stay away from Spain. European stock markets, having had their biggest fall in more than a year, will tread more warily. Business confidence may wobble. All these are part of the immediate costs, the worst of them the human ones.

But these initial costs are not the only ones. Many economists thought Sept. 11 would send the already weak U.S. economy into recession. But its main economic impact was not so much the immediate and most noticeable one: the closing down of the U.S. stock exchange and of much air travel in the United States. The economy's bounce back was strong. It was precisely in the fourth quarter of 2001 that the economy lifted itself out of recession. Catastrophic tragedy can be positive for economic growth. Reconstruction spending creates jobs and demand for goods and services. But the costs of terrorism must be counted over time. Those of Sep. 11 have been great and go on being accumulated.

We live in a world shaped by that day two and a half years ago. Two wars have followed it, one in Afghanistan, one in Iraq. For all the flouting of United Nations resolutions by the former Iraqi dictator, Saddam Hussein, it is unlikely the invasion of Iraq would have gone ahead had September 11 not happened. The popular support for war in the United States would not have been there. Now soldiers and civilians form many countries have died violent deaths.

As a result of these wars and of other spending on security in the United States, U.S. defense spending has soared. According to the Congressional Budget Office, defense spending in the United States amounted to $306 billion in the 2001 budget year, a sum equivalent to 3.0 percent of U.S. gross domestic product. In the 2003 budget year, defense spending amounted to $404.9 billion, or 3.7 percent of GDP, an increase in just two years of almost $99 billion and equivalent to an annual average increase in each of those tow years of 15 percent.

The Senate has just approved the federal government budget for the 2005 fiscal year. In it President George W. Bush has been granted a defense budget of $421 billion, but he is expected in the course of the year to request a substantial additional sum, probably about $50 billion, to fund the continuing U.S. presence in Afghanistan and Iraq. Homeland security, a new department, will require spending of about another $25 billion on top of that.

The rise in defense spending has played a big part in the extraordinary half trillion dollar deterioration in the U.S. fiscal position in two years: from a surplus of $127.4 billion in 2001 to a deficit projected by the CBO in the current, 2004 budget year, to rise to $477 billion.

Terrorism and the U.S. response to it has not only caused many lives to be lost, it has given Americans a bill for defense spending that must be paid over time -- and which at present is being paid in rising government debt. The bill will fall to future generations.

And there are still other costs of Sept. 11 and the response to it. The United States fell out with "old Europe," as Defense Secretary Donald Rumsfeld put it, referring mainly to France and Germany. In the canteens of the U.S. Congress, French fries became freedom fries. Many Americans said they would not go to France nor consume French products. German products, too, were to be shunned. And asked to name a German brand, many Americans said "Heineken," which is a Dutch beer. Hostility, like terrorism, may be indiscriminate. Enmity was created between countries that had been, if not intimate, at least cordial.

As a result of Sept. 11, the United States has become wary of the rest of the world.

And now, as the U.S. presidential election campaign unfurls grubbily before us, we find that one of its strongest leitmotifs is protectionism.

February 1, in Georgetown, South Carolina, Senator John Edwards, a then-contender for the Democrat nomination, called the NAFTA, the free trade agreement with Mexico and Canada, "a punch in the gut for small towns like Georgetown." That is why, Edwards went on, he "disagreed with a lot of people in Washington and opposed NAFTA, fast track, and the Caribbean trade deal."

But what about all the jobs gained in exports to Mexico, Canada, the Caribbean and other countries? Edwards' approach on trade is populist. It is as though you can shut out the goods and services of other countries without losing the millions of U.S. jobs that depend on exporting to other countries. This is nothing but unwise policy-making: xenophobia and protectionism that may have been fanned by Sept. 11.

And what of John Kerry?

"Some nations have consistently violated agreements by the World Trade Organization," the Kerry Web site says. Ah yes, all those foreigners who are putting one over U.S. workers -- whom Bush fails to defend.

"Everybody knows what happened in this valley with respect to steel," Kerry said in Ohio on Feb. 24, "The guts were torn out of it." But what is Bush's record on steel? In 2001 he defied WTO rules by raising steel tariffs in order to protect the U.S. steel industry. And every U.S. consumer and user of steel paid the price.

And had Bush not heeded a WTO ruling at the end of last year, the United States would have faced billions of dollars of sanctions on its exports by trade partners. So what does Kerry suggest? That the United States should break trade laws?

Does Kerry want a trade war that would impoverish all? Don't we have enough wars already?

All this has produced an unlikely turnaround in Bush: from a president who has failed miserably at promoting free trade to one that defends it. "There are economic isolationists in our country who believe we should separate ourselves from the rest of the world by raising up barriers and closing off markets. They're wrong," said Bush on Tuesday, referring, no doubt, to Kerry--and finding a wisdom that had previously evaded him during his presidency.

It is a dangerous battle-ground in many regards. The protectionist mood in the United States is strong. That is not just because unemployment has risen in the past three years--from decade-long lows--but also because isolationism appeals in a country wounded by Sept. 11.

We do not know if March 11 was the work of al-Qaida or not. What we do know is that we should beware. Terrorism must be fought and beaten. But if its victims become xenophobic, fight among themselves and do harm to their own prosperity, aren't the terrorists just being given one ugly victory more?

Global View is a weekly freelance column reflecting on issues of importance for the global economy. Comments to [email protected]

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