US determined to change international trade rules
Punta del Este, Uruguay — This seaside resort is known for its vacation beaches and casinos. But there is no vacation in store for United States trade officials who are trying to persuade 91 other countries gathered here to make important changes in the world trading system, known as the General Agreement on Tariffs and Trade (GATT).
At stake, US officials say, is nothing short of the future of international trade. (GATT and US industry, Page 20.)
Clayton Yeutter, US trade representative, uses the term ``momentous'' to describe the launching of the trade talks. The trading system, says Charles Blum, a key assistant to Ambassador Yeutter, ``has largely broken down.''
The US position going into the conference has been that of an aggrieved party determined to make some changes. With a record $145 billion trade deficit this year, US officials feel pressured to produce results. ``If nothing happens, it could be a short conference,'' Mr. Yeutter warns.
There are many obstacles to progress. The Latin American ``debt bomb'' is still hanging over the world banking system.
``The debt issue is becoming a trade issue,'' Enrique Iglesias, foreign minister of Uruguay, said at a press conference.
Countries such as Brazil and Mexico must export to earn dollars to pay their debts. At the same time, they are limiting imports and protecting their industries.
GATT itself now includes 92 countries, leading many to wonder if it is possible to obtain a consensus with so many different interests at stake.
``I think the real challenge for GATT is finding ways to make it stronger,'' says Bart Fisher, a Washington lawyer who deals with international issues.
Complicating Yeutter's task is a protectionist-bent Congress, which is not an enthusiastic supporter of the treaty. Complains Sen. Bill Bradley (D) of New Jersey, ``GATT is now 40 years old and still has no teeth.''
A group of Senate Democrats wrote a position paper earlier this year calling GATT an anachronism. ``The GATT assumes a world that no longer exists,'' said the Democrats, ``of fixed exchange rates and countries that do not protect infant industries; a world where customs duties make a significant difference. That world is gone forever.''
Organized labor is equally critical. Spits out Lane Kirkland, president of the AFL-CIO, ``Free trade doesn't exist except as an empty slogan.''
Despite such criticisms, the White House has pressed for a new GATT round. In July, President Ronald Reagan said, ``This new round will prove of particular importance in removing barriers in those areas of trade, such as agriculture and services, that are growing rapidly in importance.''
The White House has staked out four key areas to be included in the GATT round. These are services, intellectual property, investment, and agriculture.
In agriculture, the US, as well as many of the other efficient grain-growing countries, wants to end the system of export subsidies practiced by the European Community (EC).
The French government is heavily subsidizing farmers on small parcels of land. The subsidized exports are to be sold at world prices during a glut.
In order to sell grain to the Soviets this year, the US has likewise offered to subsidize its exports. Such subsidies, says Yeutter, ``have created massive disruption in farm trade and brought world agriculture to the brink of crisis.''
With 66 percent of its jobs in services, the US wants GATT to cover such areas as insurance, tourism, construction engineering, and banking. In many countries, governments own the telecommunications system, to which US companies want equal access.
The inclusion of services is sharply opposed by the so-called Group of 10, which includes Brazil, India, Nigeria, and East-bloc countries. To win support for its position, the US will back the group's proposals in such areas as commodities and natural resources.
Yeutter wants to hold the feet of the 2,000 delegates to the fire on counterfeiting of goods. ``We're going to ask all those in favor of counterfeiting to stand up,'' he says. The US Commerce Department recently estimated US companies lose $20 billion in sales because of overseas piracy of US product designs.
Many countries' laws against counterfeiting are not enforced. Howard Bruns, president of the Sporting Goods Manufacturers Association, recalls a recent visit to South Korea where he saw counterfeit US running shoes. ``I could have made 10 arrests myself just that afternoon,'' he complains. But, since counterfeiters provide jobs and foreign exchange, many governments ignore the violations.
Also, many countries ignore US patents and copyrights. US computer softwear producers are particularly eager to get their products covered by GATT.
The US wants to include trade-related investment rules in GATT. Yeutter says that when foreign countries require companies to export a certain percentage of their product or to use in a product a certain amount of material produced locally, trade distortions result.
``We want to inject greater certainty into what is now a most uncertain, and often intimidating, economic environment,'' he recently told the US Chamber of Commerce.
The delegates also face a request from the Soviet Union to join the world trade group as an observer. This places the US in a difficult position, because it would like GATT to review the issue of state-owned enterprises such as British Steel, and Airbus Industrie, the French government-owned aerospace company.
But the White House maintains that the Soviets want to use GATT for political purposes. Yeutter differentiated between giving entree to the Soviets and the People's Republic of China, which is in the process of joining GATT with a request for observer status. The Chinese recently started privatizing their industry, he notes.
Both the EC and the US also intend to use the conference to once again complain to the Japanese about closed markets. ``Japan must open up, or the whole system will fail,'' says Mr. Blum.
In fact, there is much skepticism that this round will prove disappointing, leading toward more bilateral agreements. In an effort to prevent this, Yeutter says, the week will be one of ``long days and late nights.''