GATT Setback Won't Lead to Trade Wars

NOW come the prophets of doom. Last month in Brussels, after four years of effort, the Uruguay Round of international trade talks broke off in disarray. Almost immediately pessimists began to predict an imminent collapse of the multilateral trading order. An era of regionalism and protectionism is about to commence, we are warned. The remarkably successful system nurtured since World War II under the auspices of the General Agreement on Tariffs and Trade (GATT) is about to succumb to the kind of aggressive - and mutually destructive - trade warfare that helped perpetuate the economic crises of the 1930s.

Happily, such ominous predictions are apt to prove far too alarmist. That the liberal postwar order is now more at risk cannot be doubted. The collapse of the Uruguay Round is a severe blow. But the GATT system is hardly about to fragment or disintegrate into warring blocs.

The GATT system was already under pressure because of two recent - and dramatic - developments in global affairs. One was the ending of the cold war, which removed one of the most important adhesives that, for 45 years, had helped to hold the non-communist world together - namely, the specter of a security threat from the Soviet Union. Economic rivalries among the main trading nations, no matter how potentially explosive, were never allowed to seriously endanger the foundations of the Western Alliance. But with the waning of the Soviet threat, greater weight is being attached to divergent commercial interests by individual governments. As the Uruguay Round demonstrated, this has greatly amplified the risk of tensions and friction in trade relations.

The other development is the accelerating redistribution of economic power among Western nations - in particular, America's relative eclipse in the shadows of a resurgent Europe (led now by a newly unified Germany) and an increasingly assertive Japan. The diffusion of power has already altered significantly both the ability and the willingness of the United States to bear its traditionally large share of the costs of economic leadership.

Whereas once Washington consciously accepted a special responsibility for management of the postwar order, making timely concessions or sacrifices when necessary to resolve commercial conflicts, today the burdens of leadership are being abandoned or rejected as too costly. Increasingly the US is unilaterally pushing its own economic agenda, even at the expense of others, thus compounding current strains on trade ties and institutions. This too was clearly demonstrated in the Uruguay Round.

But this does not mean that the multilateral trading order is threatened with imminent disintegration or breakdown. The GATT system is far too robust for that. We must not overlook the existence as well of a number of important ``countervailing forces'' that have evolved since 1945 to help ``lock in'' the benefits of open markets and commercial interdependence. Key among these are a variety of international structures that have been set in place to help promote collective economic management by governments, including not only the GATT itself but also other formal institutions or regularized procedures such as the annual economic summits of the so-called Group of Seven. Such structures lessen the likelihood of conflict arising from misunderstanding or miscalculation.

Countervailing forces also include influential private constituencies created by the integration of national economies - multinational corporations and the like - that have an important stake in the maintenance of open markets for foreign trade and investment. And they include significant value changes bred by the achievements of the postwar order that can also be expected to resist any return to the aggressive and antagonistic ``beggar-thy-neighbor'' culture of the 1930s. All these forces can be counted on to remain influential in the 1990s.

Precisely how influential, of course, is difficult to say. In reality, the balance of strength between disintegrative and countervailing forces is likely to vary greatly across both issues and time, depending on individual circumstances. Outcomes, therefore, are likely to be not only highly idiosyncratic but also frequently mutable, with commercial relations increasingly taking on the characteristics of a colorful and complex mosaic - growing closer together in some instances, growing wider apart in others, and occasionally even reversing direction under the pressure of events. In short, no uniform or predictable pattern of change in the trading order should realistically be expected.

The prophets of doom have a point. In the years to come, the GATT system will be tested on virtually every kind of issue in commercial relations. But the prophets of doom also miss a point: the strength of the countervailing forces acting to hold the system together. Trade wars are not about to begin.

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