World Trade System at Crossroads

TRADE wars. Political rifts between allies. A trend to regional trading blocs. More economic trouble for the newly-free East European nations. These, say experts, could be some of the consequences should negotiators from 105 countries, convening in Brussels today, fail to hammer out an agreement regulating 15 sectors of international commerce. The stakes for these talks, the most ambitious of all eight post-World War II rounds of trade negotiations under the auspices of the General Agreement on Tariffs and Trade (GATT), are considered huge.

Launched in 1986 in Punta del Este, a beach resort in Uruguay, the negotiations have become more acrimonious as they move toward conclusion. Participants fear that disputes over the reform of world farm trade will prevent a deal.

Optimists put the chances for a successful round at 50 percent. Others are less sanguine. ``I think the prospects for success are one in four,'' says William Brock, the US Trade Representative from 1981-85 and an official advisor to US Trade Representative Carla Hills. ``The reason I'm that optimistic,'' he laughs, ``is that even if there is a 50 to 75 percent success rate - that is, we achieve a 20 percent cut in tariffs - world trade will increase by $200 billion. In a [US] recession, you'll take anything.''

Mr. Brock says ``world trade is the single most important ingredient for recovery. If the GATT talks collapse, then the financial markets will give a strong signal of disapproval.'' If an agreement is reached by the trade ministers in Brussels, the international financial community can expect an increase in business and investment by the first quarter of 1991, says Brock. ``It's really so much psychology. If an agreement is produced, people feel good about the economy.''

Alan Oxley, a former GATT official and author of ``The Challenge of Free Trade,'' says, ``A functioning, global, liberal trade system is needed now more than at any time since the GATT system was set up in 1948.'' He fears the emergence of trading blocs will further isolate would-be trading partners, and enhance national or communal protectionist policies.

The evolution of a single European market has triggered regional interest in protected markets, he says. These include the newly industrialized and developing countries in Asia, a hemispheric-wide US trade initiative stretching from Canada to the tip of South America, and mutual agreements in the Maghreb countries of North Africa.

On the contentious farm issue, many US farmers sympathize with French and German farmers who strongly oppose free access to their markets and an end to domestic support programs. The Bush Administration, however, is trying to chip away at European agricultural subsidies. Developing countries that can ill-afford subsidies would welcome their reduction.

US free trade advocates say success in this round, which has an intended goal of an ``open, durable, and viable'' agreement, will be measured by a $4 trillion boost in world economic output over 10 years. Failure to reach an accord will badly hurt the developing world, and the newly reforming economies of Eastern Europe, which desperately need increased access to markets to spur economic growth.