Global Trade Pact Is Proving Elusive

High-profile talks in Washington fail to close US-EC gap on farm subsidies

AFTER years of promises to wrap up negotiations essential for a global trade accord, American and European officials held more high-profile meetings in Washington this week.

But despite the lights and cameras on the White House visit by European Commission President Jacques Delors and Portuguese Prime Minister Anibal Cavaco Silva, who is president of the European Community (EC), the world's trading giants failed to overcome crucial differences.

Europe and the United States represent only a portion of the 108-member General Agreement on Tariffs and Trade (GATT), designed to open markets and reduce subsidies, quotas, and other barriers to international commerce. But as long as the largest traders sharply disagree over agricultural supports, there is no prospect of completing the broader talks on a host of issues ranging from intellectual property rights to banking and insurance.

Europe in general and France in particular are under fire from the US for protectionist agricultural policies. US Trade Representative Carla Hills, long frustrated by the farm lobbies' powerful grip on EC policy, wants European governments to end the high subsidies they pay for local production that make US farm exports more difficult to sell in European markets.

Mr. Delors arrived in Washington with what he called "a modest proposal" to end the impasse, but US trade officials asserted they quickly recognized that the new offerings were reworked from old proposals.

Refusing to detail mutually exchanged US and EC plans, President Bush and his EC guests simply said they would study each other's suggestions and press ahead to conclude an agreement by June.

"We are ready to make a real effort to bring GATT to a successful conclusion," Delors told a group representing the international business and diplomatic community meeting at the Washington-based European Institute on Wednesday. He quickly qualified his remarks, saying that "the Community is not ready to pay any price in order to satisfy" US demands.

A high-ranking European official said, "There is more room for disappointment than agreement between the US and European proposals."

White House Press Secretary Marlin Fitzwater echoed that sentiment. "There's not a lot of reason for optimism at this point," he told reporters.

One observer close to trade policymakers asserts that compromise is imminent. US negotiators are worn out, he says, and European farm lobbies, largely composed of French and German millionaires, can easily weather the EC agricultural reforms that Mr. Delors himself is pushing for. An agreement will be reached by June, he says.

Trade watchers caution that regional blocs are fast emerging, while progress toward liberalization through a worldwide agreement has been thwarted by political discord. Joseph Connor, chairman of Price Waterhouse World Firm, Inc. and now head of the International Chamber of Commerce, warns that the lack of political leadership on the GATT is doing great harm to the international economy.

"The proliferation of trade blocs has two sets of potential victims whose only recourse will be effective global rules," says Mr. Connor. "First, there are the members that would like to join up, but may never be asked."

Referring to Eastern European nations and the former Soviet republics Connor says, "The EC could permanently slam the door on its neighbors to the east."

And while the "US and EC extolled these countries' break from communism," he says, "they are not willing to buck powerful protectionist interests and open their markets to the few products these countries are able to export - agricultural goods and textiles." The weaker members in regional blocs, such as poor Latin countries in the Bush administration's Enterprise for the Americas zone, will be subjugated by the stronger members, such as the US, says Connor.

He warns that the world economy "will be a gigantic caste system," with the highest class made up of the developed countries, the lower class composed of weaker countries and the untouchables, the countries outside the blocs.

Economic stagnation will result, he says. "It's not sufficient for the Bush administration to blame Congress," said Delors, referring to the US special interests opposed to the GATT. "We all live in a democratic process, and it's not easy."

Europeans are trying to determine whether Bush is under pressure to push through a GATT agreement before the US presidential election in November. US Sen. Bill Bradley (D) of New Jersey doesn't think so. He says, "Protectionism won't be a big issue this fall during the presidential campaign." He is not sanguine about completion of the GATT talks any time soon.

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