Future of World Trade Talks: Traditional vs. `New-Age' Form
Some say collapse is temporary setback; others say GATT is outmoded
WHEN international trade talks collapsed in Brussels last week, a small wave of concern rippled onto the shores of the United States. Large business groups voiced concern. Agriculture groups applauded - either because the US didn't back down or because they didn't want an agreement anyway.
But the breakdown has not caused Americans to do much soul-searching - or to pressure the government to go back to the bargaining table. Instead, two distinct versions of the future of world trade have begun to emerge in concrete form - the traditional and the new-age.
According to the traditional view, the collapse of talks is a temporary setback for GATT (General Agreement on Tariffs and Trade).
``I don't believe we are going to see a non-GATT world emerge from this,'' says R. K. Morris, director of international trade for the National Association of Manufacturers. GATT may be weakened, but only until nations settle their differences and further the GATT vision of all nations trading under a single set of rules.
The new-age view holds that GATT, created after World War II, is outmoded.
``What we have seen is the closing of a chapter,'' says Bob Bergland, agriculture secretary under President Carter. GATT served the world well in the postwar era. But ``it has outlived its usefulness. ... I think we are seeing the emergence of powerful economic trading blocs.''
Under this scenario, the European Community (EC) would create a trading bloc with Eastern Europe. Japan and the Pacific Rim nations would form another. North and South America would create a third. Trade within these blocs would flow easily; between blocs it would be restricted by high and complex trade barriers.
These theories are not new. But they are creating a curious stand-pat position as they gain currency among US interest groups.
Since many GATT supporters generally are optimistic about an eventual agreement, they are putting little pressure on the Bush administration to go back to the negotiating table and compromise. Since GATT detractors are already looking forward to a new system, they are disinclined to urge a more conciliatory approach.
This lack of initiative is most noticeable in agriculture.
Since this round of the GATT talks began in Uruguay four years ago, the US has taken a hard line against agricultural subsidies. The stance ran directly counter to the EC, which along with Japan heavily subsidizes its farmers. Agriculture became a source of increasing friction between the US and EC.
Last week's talks in Brussels were supposed to wrap up the four-year negotiating round. Negotiators were close to agreements in nearly all 15 areas, lowering trade barriers in service industries, textiles, and others while increasing the protection of patent and other intellectual property rights.
THE talks foundered because the EC would not give in to US demands for far-reaching cuts in farm subsidies.
In the wake of the failed talks, the conservative American Farm Bureau Federation has backed the administration stance, saying no GATT agreement was better than one with only weak agricultural reforms.
Liberal agricultural groups don't like the idea of reducing farm subsidies, so the collapse of GATT is not a bad outcome for them. Politically, the pressure will be on Congress to move to increase subsidies to US farmers since the EC has not backed down, says Rep. Dan Glickman (D) of Kansas, a large wheat-growing state.
The new 1990 farm legislation includes provisions that would boost the US export subsidy program by $1 billion a year should GATT fail. The provision would take effect in mid-1992, but Representative Glickman says Congress will act sooner than that with some form of increased subsidy.
Even conservative farm analysts are starting to support the idea of retaliatory export subsidies to try to bring the Europeans in line. ``What I am saying to you really pains me,'' says William Lesher, an agricultural consultant and former US Department of Agriculture official. But ``if the rest of the world isn't going along with us ... you end up saying we are going to have to do something.''
Even non-agricultural groups are not backing away from the administration so far.
The National Association of Manufacturers is trying to organize a meeting of its manufacturing counterparts in Europe and Japan to pressure the governments back to the governing table. But agriculture reform has to be part of an agreement, Mr. Morris says, because developing and food-exporting nations won't go along without one.
On Tuesday, the United States Council for International Business asked its European and Japanese counterparts to pressure their governments on farm subsidies.
Even big exporters such as US computer and telecommunications companies are urging agricultural reform.
``It's bigger than agriculture,'' says Ed Black, vice president and general counsel of the Computer and Communications Industry Association. The concessions on agriculture could induce developing nations to protect US computer patents, for example.
``You really did get the sense that everyone else was willing to bite their own political bullet and put the stuff on the table. The Europeans decided not to,'' he says.