CHICAGO — THE stalled General Agreement on Tariffs and Trade negotiations will likely be completed by the end of the year, now that Congress has extended President Bush's fast-track negotiating authority, several trade officials predict. After four years of negotiations, the current round of GATT ran aground last fall over the issue of agriculture subsidies, leading to speculation that the organization had toppled its last trade barrier.
``GATT will survive because there is no good alternative,'' says Charles Carlisle, deputy director-general of GATT. And he adds: ``A dead organization doesn't keep attracting new members.'' El Salvador joined last week, raising the number of members to 102. Another dozen membership applications are pending, he says.
Trade is simply too important to the global economy to allow it to become hung up on agriculture, which only accounts for around 10 percent of world trade, Ambassador Carlisle says.
``In the end, the main players will not allow the round to go down the drain,'' agrees Andreas van Agt, the European Community (EC) ambassador to the United States.
Prosperity at stake
``What is at stake here is prosperity,'' adds Mich`el Camdessus, chairman of the International Monetary Fund.
The US, Canada, Brazil, Australia, and Argentina would like GATT members to reduce internal farm subsidies by 75 percent and export subsidies by 90 percent over 10 years. European countries had refused to go beyond 30 percent.
However, Germany's Chancellor Helmut Kohl recently stated that Europe's common agriculture policy made no economic sense. Ambassador van Agt views Mr. Kohl's remark as significant. Germany is the world's largest overall exporter. He adds that he has been surprised at how long it has taken German industry to speak up, seeing that ``GATT is critical to it.''
The previous six rounds of GATT negotiations pushed industrial tariffs down to 5 percent from 40 percent, Carlisle says.
This helped bring 8 percent annual growth in world merchandise trade from 1950 to 1970. During the 1980s the growth rate slowed to 4 percent, he says.
In the last 12 months, about 80 percent of the growth in the US economy has come from exports, says Gary Edson, chief of staff to the US Trade Representative.
The world's economic output amounts to $25 trillion. World trade last year reached $4.4 trillion. Failure to agree in the trade talks would slow growth in that output, hurting the third world and East European nations in particular, Carlisle says. The world would dissolve into trading blocs, and GATT's credibility and authority to resolve trade disputes would be undermined, increasing the chances of trade wars, he adds.
That doesn't mean an agreement will be easy. Carlisle calls the current GATT round, which began in 1986, ``the most complex, ambitious trade negotiations ever.'' It attempts to cover ``everything that moves in international commerce,'' including ``invisible'' items such as intellectual property.
Fields of contention
Although agriculture is not the most important item in world commerce, it is the most distorted and politically difficult. He said the 24 members of the Organization for Economic Cooperation and Development (OECD) paid $300 billion in 1990 in the form of agricultural subsidies and artificially high prices for food. Overcoming this hurdle to a GATT agreement will require involvement by the heads of state of the GATT member countries, Carlisle says.
The US should ``tone down its excessive demands'' and be as flexible and forthcoming on agriculture as it demands Europe to be, says van Agt. He points out that the EC is the largest importer of agriculture products - $63.5 billion worth in 1989, or one-fifth of total world agricultural trade. Its agriculture exports were only two-thirds as large.
Agriculture reform will be extremely delicate in the EC, which has 10 million farmers, compared with 3.5 million in the US, van Agt says. Farm size averages 33 acres in Europe, 450 in the US.
Agriculture is only one of 15 topics of the GATT round. Fairly large differences remain over services and market access, while talks are so far advanced on intellectual property rights and textiles that those could be completed in a couple of weeks, Carlisle says.