Asian Nations Stand to Lose Most if GATT Round Fails

ASIA'S commercial future is on hold while American and European trading partners squabble over a new world trade treaty.

Although not yet a full-fledged member of the General Agreement on Tariffs and Trade (GATT), China could become a major beneficiary of the gains made in the Uruguay Round, Western economic analysts say.

Japan and South Korea are poised to bring down one of the last major trade barriers by gradually easing bans on rice imports, even at the political risk of opposition from influential farming lobbies.

But trade relations in the region largely depend on the United States and the Europe Union (EU) - Asia's major markets - resolving their differences.

Failure of the Uruguay Round talks could polarize the world into trading blocs, hindering fast-growing, export-led economies such as China and South Korea, and further handicapping the region's lesser-developed economies, which stand to gain from freer trade.

The tussle between Americans and Europeans also has pushed some issues close to Asian hearts into the background. One point of contention is antidumping regulations, which regional officials say have been used against countries that have lower production costs and an advantage in manufactured goods.

Hong Kong and other smaller Asian countries are pushing to end the multifiber agreement, which makes exporters susceptible to stiff tariffs in their crucial clothing and textile trade with the US and Europe.

Smaller Asian economic powers also want to tighten up the international dispute settlement system institutionalized under GATT. Although the number of arbitration cases has increased in the last 10 years, compliance with decisions is low. Resentment has grown that the system is used for bullying by major economies. Hong Kong has pushed for a consensus approach among all GATT members before a decision can be overturned.

For China, GATT membership has been a long-held dream that could help cement market reforms and international recognition. After the EU, China could benefit the most from a new treaty, according to a GATT report.

With the world's fastest-growing economy, China would reap a $30 billion to $40 billion annual increase in income from an agreement, outpacing both the US and Japan.

But this year China, which has been an observer in the Uruguay Round, has backed off its campaign to join GATT after encountering American demands for more openness. Among US concerns are China's two-tiered currency system, which imposes a hefty premium on foreign exchange dealings, compliance with market access agreements, and protection of intellectual property rights.

``Chinese enthusiasm to join GATT has cooled as they [officials] confronted faster liberalization of the economy,'' says a Western diplomat in Beijing.

A GATT agreement could also usher in major trade - and political changes - in Japan and South Korea, analysts say. Under pressure not to wreck a new trade agreement by continuing to protect their rice markets, the two countries reportedly are moving toward gradually opening up rice imports.

Under any new treaty, nontariff barriers such as import bans would be lifted and replaced with a system of duties called tarification.

In recent weeks, the US has negotiated with Japan and South Korea to cut deals that would ease the pain of switching to the tarification system. Any agreements would have to be submitted to GATT for approval.