Costly compromises to freer trade

As negotiations begin in Seattle tomorrow, subtle but significant

In South Korea, imported chilled beef can be sold only in government-approved stores that don't sell domestic beef. The United States slaps up to a 67 percent duty on hot-rolled steel from Japan to protect US manufacturers. Some European countries require auto headlights to be yellow instead of white - to give their companies a competitive advantage.

When ministers of the World Trade Organization (WTO) meet in this salt-scented city tomorrow, they will focus on trying to remove some of the remaining impediments to the free flow of commerce around the world - many of them subtle but significant.

The past 40 years have seen a reduction in overt tariffs, although progress has not been uniform. But compromise on other types of barriers - such as the Korean beef stricture - has proven elusive. Thus WTO representatives will now concentrate more on these issues in their quest to liberalize world trade - which many consider essential to economic progress in the 21st century.

The task won't be easy. Many of the most subtle trade rules are also the most controversial, raising questions of national sovereignty and embodying different values. Some of those differences will be highlighted by the thousands of protesters descending on this city from around the world, highlighting everything from the destruction of rain forests to child-labor practices.

For the first time, world trade ministers will at least debate whether to include some of these issues when they negotiate over the next several years. But trade experts believe it's important that the WTO make additional progress - in whatever way possible - to keep the modern-day Phoenicians of the world freely exchanging everything from bulldozers to beef jerky.

"If it's delayed, you'll see protectionism measures and pressures emerging in trading nations," says Clayton Yeutter, a former US trade representative and a key negotiator in the last trade talks, the Uruguay Round.

Certainly the trade ministers from 135 countries will have their diplomatic skills tested. Already, the controversy surrounding certain issues, such as the ending of farm export subsidies, has prevented negotiators from hammering out an agenda in pre-Seattle meetings. It has cast doubt on whether the negotiations will ultimately be successful.

"Trade negotiations have become so much more complicated - improving access to borders may mean deep changes in domestic policy," says Bob Hormats, vice chairman of Goldman Sachs International in New York.

Take agriculture. Farm tariffs now average 40 percent compared with 4 percent for industrial goods. But the real conflict surrounds subsidies. The US claims the European Union, which accounts for about 80 to 90 percent of export subsidies, rewards farmers for their production. The greater the production, the more the subsidy.

The EU, however, says its subsidy policy is changing. In the past, 90 percent of the $40 billion it spends went towards price supports. Now it's down to 40 percent and will continue to drop, says Willy Helin, an EU spokesman in Washington.

The issue is divisive. On one side is big agriculture-producing countries such as Australia, Argentina, and Uruguay, gathered under the banner of the Cairns Group. They want a definite timetable to end export subsidies.

The Europeans want the WTO to consider the social impact when it looks at farm policy. Whenever the EU considers removing the subsidies, farmers protest violently.

On this dispute, the US has joined the Cairns Group. "It's a very serious situation and one that has to be corrected," says Charlene Barshefsky, the US trade representative and chief negotiator in Seattle.

The US beef sent to Korea also typifies how hard it is to resolve these issues. After Korea lowered its tariffs on imported meat, it established a rule that frozen beef could have a shelf life of only 30 days. Meat exporters challenged the law - and won.

More recently, Seoul decreed that imported beef could be sold only in government-approved stores not selling domestic beef. Now the American Meat Institute is challenging this. "Imagine if we told Korean companies they could only sell their products through certain stores...," says Len Condon of the Washington-based Institute.

Many countries feel the same way about US antidumping rules, which prohibit the sale of goods at below market value. Recently, the US has used the laws to put large duties on steel products.

But other countries have also enacted antidumping statutes. One recent report found that nearly half the antidumping complaints filed in 1997 were in emerging markets such as Mexico and India. China, the US, and Japan are the main targets.

Japan wants the issue on the table. The US doesn't. "We've told the Japanese 15 different ways that our antidumping laws are not on the agenda," says David Aaron, undersecretary for international trade at the Commerce Department.

Exactly what will be on the agenda isn't clear. The US wants a narrow list that looks at the farm issue and the elimination of tariffs on e-commerce. To mollify critics, it wants the WTO to take up quality-of-life issues, such as a study of the relationship of trade and the environment and child-labor practices.

The labor issue is particularly contentious among developing nations, which don't want the WTO to tell them how much to pay workers. The Europeans want a broader agenda - including issues such as genetically modified organisms.

(c) Copyright 1999. The Christian Science Publishing Society

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