Bush and Major Talk To Kohl on Trade
THE wags have been calling the GATT the General Agreement to Talk and Talk. The Uruguay Round of negotiations to liberalize trade under the Geneva-based General Agreement on Tariffs and Trade have gone on since 1986.
But crunch time could well be here.
President Bush and British Prime Minister John Major have been on the phone nearly every day with German Chancellor Helmut Kohl, urging him to agree to cutting subsidized farm exports by the 12-nation European Community. They would like a "breakthrough" firmed up this weekend before they and the other leaders of the Group of Seven industrial democracies get together in Munich Monday for their annual economic summit.
The French government, at the highest levels, has been willing to go along with more concessions - despite the vivid demonstrations against them by French farmers. But Mr. Kohl is personally worried about his political support within Germany, particularly among Bavarian farmers. The costs of German reunification and other problems have weakened the standing of Kohl's party, the Christian Democratic Union, in recent state elections.
Another risk for the round has been a long-standing split within the European Community (EC) bureaucracy in Brussels. Agriculture officials, under commissioner Ray MacSharry, have been more reluctant to reduce farm subsidies than the external affairs side, under commissioner Frans Andriessen.
In theory, the bureaucrats of the EC are in charge of foreign trade. In fact, member nations make key decisions.
The United States, having seen its share of the world market suffer as a result of subsidized EC farm exports, has insisted that farm trade be included in this round of trade talks.
After years of wrangling and a 96-hour final marathon meeting in May, the EC agricultural ministers reached an agreement on reform of the Community's common agricultural policy. This costly policy, with its subsidies to farm exports, has been the principal obstacle to a Uruguay Round agreement.
Under the reform, the EC will shift away from subsidizing farm production to support of farmer incomes and reduced production. That shift is most welcome to the US. But the US wants a double constraint on exports - both a cut in subsidies and volume limits on such subsidized exports. EC reforms might restrain the export of wheat and other grains adequately. But they could allow feeding more grain to, say, chickens and pigs, and thus allow a greater volume of meat exports.
The toughness of the US has caused some nervousness. The influential Economist magazine of London calls upon the US to approve a deal, though it is not completely satisfactory.
"It is important to have a breakthrough," says Harald Malmgren, a Washington trade consultant who helped negotiate the Kennedy Round of trade talks under GATT in the 1960s.
If Chancellor Kohl does muster enough political courage to settle the farm-trade issues, the negotiators still have some four months of work ahead, Mr. Malmgren estimates. They have to deal with trade in services, for example. The EC will likely want to include banking and transportation, which the US has resisted.
With vacation time coming up, the Bush administration and the 107 other GATT nations included in the talks are not likely to get an agreement, perhaps 450 pages long, to their legislatures for approval until December. That's fine with many in Congress. They would as soon not have to discuss the details of the trade deal on the hustings anyway.
But Bush does want to complete a North American Free Trade Agreement with Mexico and Canada this summer, Malmgren says. It is likely to divide Congress when submitted for approval.
Should the Uruguay Round succeed, one Canadian study says it would boost world income by $118.6 billion as trade expanded. The US share would be an extra $35 billion.
If the talks fail, the danger of trade wars and an expansion of regional trade blocs would increase. The US, for example, has threatened to impose trade restrictions on EC imports in a fight over subsidies to European oilseed farmers. There are already 23 regional trading blocs in the world involving 119 countries, each practicing some trade discrimination, notes Norman Fieleke, an economist with the Federal Reserve Bank of Boston.