NAFTA Success Should Prompt Fast Shift to GATT Talks

IF Congress fails to pass the North American Free Trade Agreement (NAFTA) Nov. 17 it will make it more difficult to conclude the stalled world trade talks.

European officials believe the failure to pass NAFTA will reinforce protectionist sentiments in Europe. ``It will make it more difficult to overcome them,'' says Pascal Lamy, chief of staff for Jacques Delors, president of the European Commission.

If NAFTA passes Congress, the Clinton administration will have to quickly focus its attention on the trade negotiations under the General Agreement on Tariffs and Trade (GATT). GATT is a treaty, signed by 108 nations setting the ground rules for world trade. The current negotiations, started in 1986, are aimed at liberalizing trade in services and agriculture, as well as merchandise.

In order to be voted on by Congress without the possibility of congressional amendments, the negotiations must be completed by Dec. 15. It takes about three months to get the drafted treaty through the congressional process. If it is not passed by March 15, Congress can add amendments - almost certainly assuring its death.

However, according to Mr. Lamy, the actual window for completing the negotiations is much smaller. He says the negotiations must be completed by Dec. 2 or Dec. 3 when a meeting is scheduled for European Community ministers.

Lamy says the reason for the earlier deadline is the necessity of selling the pact in each country. European leaders will need to meet with trade unionists, opposition political parties and the media to assure the passage of GATT by the EC. The GATT negotiators have been bargaining for the past seven years over the multilateral pact.

However, the Europeans are still not sure that the GATT round will be successful. The United States and EC still differ on agricultural subsidies, textiles, and the reform of GATT itself.

The US maintains that the agricultural negotiations are complete. Last year, the US reached an agreement (known as the Blair House agreement) with the EC for both sides to cut export subsidies for farm products. The French, however, have objected to the agreement. Now, the EC maintains there have to be some additions to the Blair House agreement. If there are no modifications, EC officials say the GATT round will fail. The US will be hard-pressed to make changes in the agreement since US agricultural groups are not very enthusiastic about it.

The GATT bargainers have also not reached any agreement with Japan to open its markets to foreign-grown rice. And, Canada is resisting attempts to open up its milk and poultry markets.

Also, the Americans are resisting EC attempts to eliminate US domestic legislation which allows the US to retaliate against products which are sold at below cost on its shores. The Europeans would prefer to reform the GATT with tough measures designed to punish illegal trading practices.

Negotiators will also have a difficult time with proposed changes in textiles tariffs. The EC and other GATT members want the US to lower textile tariffs. If there is no agreement on textiles, the EC believes the GATT round will collapse since the textile issue is important to developing countries and some of the lower income EC members.