Europeans Brace As the US Congress Votes on Trade Deal

OFFICIALS across Europe are awaiting the US Congress' vote tomorrow on the North American Free Trade Agreement with a mixture of anticipation and trepidation.

Congressional approval of NAFTA could serve as a catalyst for Europe's recovery from a tenacious recession. But a rejection of the pact could set off a chain reaction across the Europe possibly culminating in trade wars and political instability.

Officials on both sides of the Atlantic link NAFTA's fate to that of the General Agreement on Tariffs and Trade, a pact that aims to lower trade barriers worldwide. Negotiators are working to beat a Dec. 15 deadline to conclude the Uruguay Round of GATT talks, with the main sticking point being a dispute between the United States and France over agricultural and cultural imports.

Passage of NAFTA, some officials say, would put pressure on France to soften its seemingly uncompromising GATT stance on protecting its farmers, paving the way for the close political and economic integration envisaged by the Maastricht Treaty on European unity, which took effect Nov. 1.

``If NAFTA fails in Washington, the protectionists in Paris and Tokyo will see little reason to make unpopular decisions and plead for open borders,'' the German weekly Die Zeit argued in a Nov. 12 editorial. ``That could mark the beginning of the end of GATT.''

The NAFTA vote comes at a time when Europe is struggling to pull out of a dogged economic downturn. Although unemployment seems set to climb above already high levels in many European Community Bnations, some experts say there are reasons for optimism about a slow recovery.

EC forecasts, released last week, say the economies of the 12 EC member states could grow 1.3 percent in 1994 and up to 2.1 percent in 1995. The EC economies are projected to contract by 0.4 percent this year. But EC Economics Commissioner Henning Christophersen says those figures are based on the successful negotiation of the GATT Uruguay Round. ``Without a GATT agreement, it will have a depressive effect on thinking in many quarters of the Community,'' he says.

Peter Sutherland, the director-general of GATT, suggested at a Paris conference last week that if the global pact was not approved, a ``boiling over'' of protectionism could occur, resulting in trade wars. That would be bad news for nations, such as Germany, that are counting on exports to drive their economic recovery. A breakdown in GATT also could have disastrous consequences for former communist Eastern European nations trying to make the transition to a market economy.

Recent elections in several former Soviet-bloc states show that patience for market reforms is strained, as people have seen their living standards drop. Continued disarray in Western Europe could make the market transition even more difficult in the East, which, in turn, could spark unrest.

``In the short-run there would be negative consequences for trade, in the medium-term for the growth of the world economy, and in the long-term it may even destabilize the world politically,'' says Vladimir Dlouhy, trade minister of the Czech Republic.