Singing Along with Ol' Blue Eyes

By DAN GOODGAME HOUSTON

When freedom broke out across Eastern Europe last year, Soviet spokesman Gennadi Gerasimov enunciated "the Sinatra Doctrine." Each newly liberated Soviet satellite, he explained, was now free to say, "I did it my way."

The tune that Ol' Blue Eyes immortalized could have served equally well as the theme song for the annual economic summit of the world's richest democracies held in Houston last week. Just as the Soviet Union's power to ride herd on its neighbors has been crippled by its domestic turmoil, America's ability to corral its allies has been hampered by two factors: the burgeoning economic clout of Japan and West Germany and the belief that the communist threat to Western security has receded. Today the U.S., Japan, West Germany, France, Britain, Canada and Italy -- known in diplomatese as the Group of Seven -- might just as well be dubbed the Sinatra Seven. Each has decided to do things its way on such divisive issues as direct aid to the Soviet Union and China, global warming and free trade.

That agreement to disagree was evident on the most important topic the summiteers discussed: the high tariffs, domestic price supports and export subsidies used by many nations, including the entire Group of Seven, to protect their farmers from more efficient foreign competitors. Experts estimate that such protectionist measures cost the developed world's consumers and taxpayers some $245 billion a year. They also undercut the ability of poor countries to export their agricultural products. George Bush asked his summit partners to phase out government support for farm exports (not that Bush is sure he could sell such sacrifices to farm-bloc legislators in his own Congress). But the European nations and Japan, whose rice farmers are the backbone of the Liberal Democratic Party, insisted that farm subsidies are necessary to protect the social fabric in their countries. They agreed only to keep negotiating the matter.

The problem with such tactics is that unless wealthy nations begin to open their markets to food exports, markets for industrial and service exports could soon close down. That could break the world into rival trading blocs, each dominated by the strongest economic power in the region. As British Prime Minister Margaret Thatcher observed, "There are three regional groups at this summit: one based on the dollar, one based on the yen, one on the deutsche mark."

Though a division into rival trading zones would pose a threat to future U.S. economic expansion, Bush implicitly seemed to accept Thatcher's analysis. He noted that the U.S. could no more dictate what West Germany does to help Moscow than Bonn, London or Paris could dictate Washington's policy in Latin America. "I don't feel that everybody has to march in lockstep," Bush said. "We're dealing with entirely different times."

Though the U.S. remains first among the industrial powers, its pre-eminence is slipping. Until recently, says a White House official, "we used to be able to precook these summit agreements" among the "Sherpas" who prepare the agendas for the heads of governments. These days, however, "everything of importance has to be decided by the heads of state, so they're doing real negotiating on the spot. It's like an open political convention where everybody's trying to line up votes."

Since the 1940s, the U.S. has been the world's dominant economic power, using its muscle to promote financial stability and encourage freer trade. As in the 1920s and '30s, when Britain was receding from a similarly pivotal economic position and isolationism precluded the U.S. from filling the vacuum, no country is entirely fulfilling that role today. A lack of economic leadership contributed to the breakup of the world into trading blocs and the onset of the Great Depression. Today similar consequences could ensue if the richest countries insist on doing things their way.

With reporting by Richard Hornik/Houston