World Trade or World Turmoil

December 27, 1991

The closer the world draws to global recession, the more nations seem to veer toward protectionism. In a new example of this sad irony, the European Community has rejected an international compromise in its marathon farm trade disputes with the United States while warning that an improvement in trade rules is "an indispensable element in the strategy to remedy the threat of world economic recession."

Hypocrisy? Of course it is. Europe, however, has no monopoly. As economic doldrums increase in this country, pressure is building to put the screws to competitors such as Japan and China. This is a favorite theme of Democratic contenders for the White House. Though an instinctive free trader, President Bush is sufficiently alarmed by his plunge in the polls to toughen his trade policies.

When he goes to Japan in early January, he can be expected to threaten retaliation if the Tokyo government does not open its markets enough to allow the president to claim a certain success. A week after that, China either has to reduce its pirating of U.S. patents and copyrights or face punitive tariffs of up to 100 percent on key exports.

While the bashing of these Asian nations is politically popular in the United States, the EC has yet to become a full-fledged target of American frustrations. That may change -- and should change. The Europeans, with France in the lead, are proving the main obstacle to worldwide reforms under the General Agreement on Tariffs and Trade. GATT's director general, Arthur Dunkel, himself a European, issued a 451-page report last week seeking to reconcile the various problems that have blocked a 108-nation revision of commercial practices during five years of negotiation. The EC's main complaint was that GATT was seeking to undermine the EC's mammoth subsidies to farmers who otherwise cannot compete on world markets.

If this was Mr. Dunkel's intention (and we think it was), we think he should be considered for the Nobel Peace Prize. Until the Europeans abandon their insular protectionism, they give other nations, including the U.S., the cover they need to adhere to protectionist policies themselves.

The temptation now is to declare GATT negotiations all but dead in light of repeated failures. Indeed, some Washington officials already are saying that the United States had better learn to live with existing rules while using its retaliation hammer to pursue its own interests. Nevertheless, we believe President Bush should keep trying. Because proposed GATT reforms would embrace international commerce in service industries for the first time, because they would impose new rules on intellectual property, because they would regulate textile trade and farm commodities -- because they would do all these things and more, GATT just cannot become a goner. Not only is it a bulwark against world recession; it is a bulwark against the worldwide upheaval that would come in its wake.

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