Trade at the Summit

July 15, 1991

If Soviet president Mikhail S.Gorbachhev were not a dominating presence at the Group of Seven economic summit in London this week, a very perky ghost would be spooking the leaders of the world's most powerful industrial democracies.

The ghost would be the communique most of these same summiteers issued at Houston a year ago vowing to personally "make the difficult political decisions" and assign the "highest priority" to completion of a new world trade agreement before the end of 1990.

As it happened, they did no such thing. Negotiations under the General Agreement on Tariffs and Trade failed dismally last December as lower-ranking bureaucrats received neither the authority nor the goading from on high necessary to liberalize and open up world trade. Since then, the whole exercise has been one long squabble.

What has this got to do with the overriding question of reforming and rescuing the Soviet economy? Jerry Jasinowski, president of the National Association of Manufacturers, says "the best thing the London summit could do for the Soviet Union would be to get the GATT Round going again." Direct Western financial help from the West, he believes, may not be as helpful "as a stable international economic environment in which the Soviets can earn their way."

Alas, no such environment exists. With most major economies in recession or in the doldrums, the political conditions for bold trade initiatives are, if anything, worse than they were 12 months ago in Houston. The key to a breakthrough would be an accord between the United States and the European Community to lower insanely high European farm subsidies that lead to massive dumping and barriers to competitively priced imports. President Reagan once demanded the elimination of all agricultural trade barriers by the end of the century. President Bush would probably be willing to settle for half a loaf if the other important elements of the GATT package could be rescued.

A package approach is necessary. Unless agricultural trade is freed up, big farm export nations would find minimal incentives in a new GATT pact. Unless textiles can find open markets, Third World states would lose interest. Without patent and copyright protection, new rules for service industries and arrangements to promote the free flow of capital, neither the U.S. nor its European adversaries on farm policy would be fully satisfied.

So one of the prime tasks of the London summit is to redeem the discredited pledge of the Houston summit. High-sounding rhetoric will no longer suffice. Western leaders will have to set specific deadlines, establish achievable guidelines and unmistakably tie the fate of the world economy (Moscow, take note) to the fate of the world trading system.

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