TIME: Almanac 1993/TIME Almanac 1993.iso/time/100890/1008205.000

Text File | 1992-08-28 | 5.6 KB | 109 lines

                                                                                BUSINESS, Page 65

How Stubborn Can You Get?


Unless the U.S. and Europe budge, global trade talks may fail

By GISELA BOLTE/WASHINGTON -- With reporting by Adam Zagorin/
Brussels, with other bureaus


    When it comes to trade, the nations of the world generally
do better by building bridges rather than walls. The major
trading countries have boosted annual global commerce from $60
billion to nearly $4 trillion annually over the past four
decades, thanks in part to their success in reducing tariffs and
other protectionist barriers. Even so, during the past decade
the world's bridge-building organization, the General Agreement
on Tariffs and Trade, has come under heavy fire from critics who
claim it is irrelevant and ineffectual in a world of high
technology, booming service industries and disparate wage rates.

    To give the institution new life, some 100 nations
representing more than 85% of world trade are engaged in the
most ambitious trade-liberalizing talks ever, which began four
years ago at the Uruguayan beach resort of Punta del Este. But
with only two months left to complete the negotiations, the
lofty spirit of the so-called Uruguay Round is bogged down in
protectionist politics. The sticking points: how to limit
agricultural subsidies, reduce protection for textiles and write
new rules for trade in services. Last week President Bush
warned against a breakdown in the talks. The Uruguay Round, he
said, is "the last train leaving the station, and countries
around the world must jump aboard."

    The talks have had two main goals: to blunt protectionist
pressures and extend GATT's rules to such areas as agriculture,
services, investments and intellectual-property rights. Fully
half the nations involved would like to see a sharp cutback in
the subsidies that rich countries pay their farmers at the
expense of their own ability to trade agricultural commodities.
Growers in the industrial countries reaped income and price
supports to the tune of $250 billion last year. The European
Community and the U.S. have been the worst offenders, with farm
subsidies totaling $97 billion in the E.C. and $67 billion in
the U.S. European agriculture ministers last week agreed on a
10-year plan to cut domestic farm subsidies by 30% from 1986
levels. But that proposal may be rejected by the governing
European Commission, some of whose members believe Europe should
make deeper cuts to foster cooperation with the U.S.

    The Bush Administration views the 30% cuts as "grossly
inadequate" and U.S. Trade Representative Carla Hills warned
last week that the Uruguay Round is "in jeopardy" because of the
E.C.'s stubbornness on farm subsidies. To underscore her point,
U.S. trade negotiators plan this week to propose reductions of
as much as 70% in all worldwide domestic farm subsidies, plus
even heavier cuts in export subsidies and greater market access
for such agricultural imports as corn and wheat in the E.C.,
sugar and dairy products in the U.S. and rice in Japan. The
so-called Cairns Group of 14 agricultural-exporting countries
ranging from Argentina to Australia has threatened to block
accords in other trade areas unless GATT members agree on
substantial agricultural reforms.

    Agricultural subsidies are not the only potential
GATT-busters. When the Uruguay Round talks began, industrial
nations agreed -- at the demand of many developing countries --
to phase out trade barriers to textiles and apparel. Last month,
however, the U.S. Congress approved a protectionist bill that
would further limit textile-and-apparel imports and impose new
quotas on such European products as Armani suits and Benetton
sweaters. The bill, which President Bush plans to veto, would
not only undermine the U.S. negotiating position in GATT but
also increase the average American family's annual clothing
costs by $750 in a decade. While the House vote fell short of
the two-thirds needed to override the veto, the U.S. textile
industry still hopes for an eventual success. Developing
countries deplore the bill. "How can the American government
justify asking Brazil or other countries to open their economies
when the U.S. is closing its own?" asks Adimar Schievelbein, a
consultant to the Brazilian shoe industry.

    If GATT is to play a central role in global trade, the
group's members will have to strike a comprehensive package of
intelligent compromises. Success depends significantly on the
U.S. and the E.C. Should they take the lead by accepting
substantial cuts in their agricultural and textile barriers,
other countries are likely to follow suit. That would mean an
opening of more international markets and the extension of GATT
discipline to all major areas of trade. The resultant growth in
trade would generate, according to Hills, an additional $200
billion in domestic annual output for the U.S. alone.

    By contrast, a collapse of the Uruguay Round would
undoubtedly lead to greater friction between major trading
nations and increase the chances that the world will splinter
into giant, exclusionary trading blocs. The negative
consequences would not end there. The stability of poorer
nations, including emerging East European democracies that will
rely heavily on exports, would be seriously undermined. So
would the chances of organizing alliances to deal with such
international crises as the face-off in the Persian Gulf. A
breakthrough is still possible, Hills declares, "because the
upside is so fantastic and the downside of failure is so grim."
But the odds of success, she says, are only slightly better than
even.