Trade in Trouble

September 20, 1990

At the Houston economic summit in July, President Bush and the six other leaders of the largest industrial democracies vowed they would make "the difficult political decisions" to push through a new international trade agreement this year. They said they would instruct their representatives "to agree on the complete profile of the final package" at late-July negotiations under the General Agreement on Tariffs and Trade.

Well, that meeting was held a fortnight later in Geneva, and it was a flop. With only eight working weeks left to meet a December deadline, GATT's Uruguay Round is in such deep trouble that only top-level determination can save it. There is little cause for optimism. The United States and the European Community remain at loggerheads over U.S. efforts to lower farm export subsidies, even though Washington has retreated from its drive to end all subsidies. And if the big powers remain stalled on agriculture, U.S. efforts to extend GATT provisions to service industries and to stop international piracy of copyrights, trademarks and other intellectual property are at risk.

Arthur Dunkel, GATT's director-general, was refreshingly blunt in blaming the present impasse on "the absence of new instructions from a number of capitals" -- capitals, we surmise, that were present in full panoply at Houston. He said further that negotiators were using "linkages" as an excuse for "playing hide-and-seek with each other and not revealing their hand."

One might like to think that this is just bargaining brinksmanship in anticipation of a December breakthrough. But the issues are so complex and the stakes so huge that GATT negotiators may have to settle for less than a completed accord.

The question then becomes whether any deadline can force a decision. Negotiations have been going on sporadically for four years only to produce a three-way split among the United States, the European Community and the Third World. Make that a four-way split: Japan wants special consideration for blocking rice imports in the name of "food security."

A GATT failure at this particular juncture would be especially ominous. It would accelerate a drift into regional trading blocs and thus undercut the global trading system GATT has promoted for 40 years. It would give protectionist elements in every country -- not least the United States -- an opportunity to consolidate in pursuit of their special interests. And it would reduce the velocity of world commerce, thus slowing economic growth and fostering trade wars. Maybe even real wars.

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