How Stubborn Can You Get?

By GISELA BOLTE WASHINGTON

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.

With reporting by Adam Zagorin/Brussels, with other bureaus