Beware of The Three-Way Split

By Strobe Talbott

IN THE NEW WORLD ORDER, THE TENSION BETWEEN LIBeral and protectionist trade policies will matter as much as the struggle between capitalism and communism during the cold war. That's why GATT is an acronym worth understanding and a process worth rescuing.

The General Agreement on Tariffs and Trade is actually not one agreement but many. It's an accretion of rules and deals aimed at chipping away the barriers that impede the worldwide import-export business. GATT has been unfolding since 1947 in stages, or "rounds." The latest, which began in Uruguay in 1986, has been stalled for a year and a half. There are many sticking points, but the biggest is European agriculture, which is still heavily subsidized and highly protectionist.

Unless the seven major industrial democracies break the impasse, the Uruguay Round is headed for disaster and GATT itself for collapse. The result could be the wrong kind of new world order.

GATT is the imperfect, sputtering but indispensable engine of globalization. It prods all nations in the direction of vigorous, profitable and peaceful commerce with one another. Paradoxically, GATT thrived when the world was divided between the camps of the two superpowers and the U.S.'s principal trading partners were also its military allies, united in the common cause of opposing the Soviet threat. As recently as three years ago, the U.S. and the West Europeans would have found a way to finesse their current dispute over cereals and seed oil.

At a moment when transatlantic relations are under new strain, Europe is coming together as never before. The European Community is the world's most advanced and promising experiment in transnationalism. Meanwhile, the Free Trade Agreement between the U.S. and Canada will soon embrace Mexico. And on the far side of the Pacific, the booming economies of Southeast Asia are increasingly tying themselves to Japan's.

One of the most important questions for the coming decade is whether this new trend of regionalization ends up being compatible with globalization. The answer will depend largely on whether GATT continues to nudge the world toward one giant free-trade zone. If GATT survives, the odds are better that regionalism will give way to transregionalism, just as nationalism has already given way to transnationalism in Western Europe. If, however, GATT dies, the opposite could happen: the temptation to form regional clubs could, over time, supplant and undermine global cohesion. Europe, North America and East Asia may evolve into three internally open but externally closed trading blocs.

In that case, the E.C. would be less likely to expand to include the nations recently liberated from communism. The developing countries of Africa, Asia and the Middle East would be largely locked out of the regional groupings, therefore deprived of the benefits of free trade and thus less likely to keep developing, either toward prosperity or democracy.

Even with the fate of the Uruguay Round still up in the air, there are already signs of creeping regionalization in its more exclusive, divisive and competitive form. France and Germany, the dominant powers on the Continent and the principal culprits in the E.C.'s agricultural protectionism, have formed a joint army corps that is clearly intended as a hedge against the day when the U.S. pulls its forces out of Europe.

The Bush Administration stoutly denies that that day will ever come. But if the Uruguay Round fails, the American public and Congress will, with some justification, blame the Europeans, and pressures will build in the U.S. to retaliate by withdrawing the G.I.s who are still supposedly defending Europe.

Meanwhile, the Japanese feel too dependent on the American market. They resent the rise of Japan bashing in both the U.S. and Europe. They also fear that the growing strength of the E.C., combined with the troubles in GATT, will stimulate the formation of a Western Hemispheric Community, stretching from Alaska to Tierra del Fuego, that will be less receptive to imports from Japan. For all these reasons the Japanese are concentrating on cultivating customers and suppliers closer to home.

Japan's neighbors remember the last such enterprise. It was called the Greater East Asia Co-Prosperity Sphere, and it was an imperialistic plan to guarantee access to raw materials and markets in the region a little more than half a century ago. The Japanese attack on Pearl Harbor was motivated largely by the desire to prevent the U.S. Navy from interfering in Japan's mercantile scheme for East Asia. That episode stands as a reminder of what can happen when economic anxieties and commercial quarrels get out of hand.

The danger will be especially great if there are three blocs. By its nature, a tripolar world would be less stable than the bipolar one that existed when the U.S. and the Soviet Union were squared off against each other. In geopolitics, three is an awkward number: it encourages two to gang up on the third, or one to play the other two off against each other. In 1984, George Orwell imagined a global rivalry among three superstates, Eurasia, Eastasia and Oceania. Postdate the title 20 or 30 years, and the novel is a cautionary tale with a contemporary ring.