GATT's Last Gasps

December 20, 1991

With a well-timed act of sabotage, France may have doomed any early chance the world trading system can be strengthened or updated, much less sustained in the form that led to the triumph of capitalism over communism. Its condemnation even before publication of a tentative accord on agriculture -- an issue that brings angry French farmers to the barricades -- could be the coup de grace for the Uruguay Round of negotiations under the General Agreement on Tariffs and Trade.

If so, this is bad news for a world struggling with recession in the United States and other industrial democracies, breakdown in the old Soviet empire and chronic poverty in the Third World. It could lead to trade wars, particularly among such emerging regional blocs as the European Community, the North American Free Trade Association and a Japan-led coalition on the Asian rim.

Twice in two years of summitry, leaders of the Group of Seven put their personal prestige behind a GATT agreement. They failed to meet a December 1990 deadline. They will fail again this month. Now what remains to be seen is whether six years of arduous negotiations will come to an ignominious end or whether enough can be salvaged for one more try next year.

In addition to agriculture, many disputes still rage: U.S. refusal to scrap its ban on foreign-flag shipping between U.S. ports; new rules for service industries such as banking, insurance and communications comparable to existing rules for goods; regulations to protect patents and trademarks from international piracy. But from the beginning, farm subsidies that effectively keep out foreign agricultural products and often lead to dumping have been the key to GATT negotiations. They bring into conflict the big grain exporting countries (the U.S., Australia, Argentina, Canada) and highly protectionist European countries sitting atop mountains of surpluses. Japan fits in here, too, because there is no chance Tokyo will open its rice market if the EC maintains its barriers.

For years, liberal trading nations in Europe have tried to bring France into the fold. But the worn-out Socialist government of President Francois Mitterrand has never dared to take on a powerful, often violence-prone farming sector. Germany, with its own subsidized farmers seeking protection, has followed along while letting Paris take the hits.

With GATT reaching what could be a drop-dead point, France sought to undercut GATT Secretary General Arthur Dunkel even before he publishes his own blueprint today. Prime Minister Edith Cresson complained publicly this week that the Dunkel plan supports the U.S. anti-subsidy position "without any regard for European interests within agriculture or other fields." This ridiculously skewed depiction of a laborious compromise could just be a bargaining ploy. But it will take the best efforts of Mr. Dunkel, a Swiss without real power, plus the top leaders of the Western powers to prevent GATT from taking its last gasps.

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