Who Said Gatt Is Dead?

Dead. Finis. Kaput. That's what pundits have been saying about the Uruguay Round of international trade talks since 1990, when the Europeans balked at slashing agricultural subsidies and negotiations collapsed. Free traders feared the worst--creeping protectionism, a faster drift toward regional trading blocs, even a global depression.

But the moribund talks are about to get a surprising jolt. And that could lead to a new General Agreement on Tariffs & Trade by yearend. Meeting behind the scenes during the past few weeks, trade ministers from the U. S., the European Community, Japan, and Canada are close to reaching an agreement that would lower trade barriers for a broad range of manufactured products, making markets far more accessible. The so-called market-access agreement will be presented for formal approval to leaders of the world's seven largest industrial countries when they meet in Tokyo on July 7. "We're going to get a major agreement," predicts U. S. Trade Representative Mickey Kantor.

Why are the GATT talks rising from the ashes? On the U. S. side, a Clinton Administration whose trade rhetoric has turned hawkish of late wants to show that it still has a commitment to free trade. Announcement of the agreement at President Clinton's first G-7 meeting will also allow him to demonstrate world leadership on a global stage.

The Europeans are finally ready to deal, too. Europe's trade barriers have failed to boost struggling Continental economies, and the EC is now ready to try a different tack. In late May, the EC met French demands by agreeing to reform its agricultural policy to increase income supports for farmers who take their land out of production. With subsidies for oilseeds, wheat gluten, and other goods no longer an issue, even the balky French now seem willing to negotiate. "Everyone is looking for some basis for reestablishing global growth," says Willard Berry, president of the European-American Chamber of Commerce. "A market-access agreement would have the biggest impact."

RICE CONCESSIONS. It took a change of tactics to get GATT back on track. Negotiators originally hoped to save market access for last, to sweeten an Uruguay deal that would impose comprehensive new global-trading rules. But in February, Kantor and EC Trade Minister Sir Leon Brittan decided to reverse course. They realized there would be no agreement unless GATT nations had a major incentive to deal, such as lowered trade barriers for manufactured products.

Details are still being worked out, but the deal is likely to call for dropping tariffs among the major industrial powers on specific sectors ranging from wood products and paper to electronics and textiles. Negotiations on financial and other services and on intellectual property rights will follow.The EC and the U. S. also are joining forces to pressure Japan to make some concessions. They are calling on Tokyo to break down obstacles for foreign financial-services concerns. And Clinton has appealed to Japanese Prime Minister Kiichi Miyazawa in private meetings for Japan to act like a world economic leader by opening markets and joining in multilateral negotiations. Western officials say that, as hosts of the G-7 meeting, the Japanese have been surprisingly accommodating on crafting a market-access accord. U. S. officials say the Japanese have even hinted they might phase out protection of their rice market, a big concession since it would anger farmers.There's still plenty of skepticism about the prospects for a deal. "We've seen GATT breakthroughs before, undermined later by politics," notes James L. Butkiewicz, a GATT expert at the University of Delaware. The market-access accord would run counter to Europe's protectionist tradition. And Robert W. Jerome, an analyst with the Washington-based Economic Strategy Institute, worries that lowering tariffs in an iffy economy may not play well on Capitol Hill. "If you can't convince Congress that the North American Free Trade Agreement makes sense close to home," Gerome says, "it will be hard to convince them that a GATT deal will be in U. S. interests."

Yet many experts see an improving atmosphere. What's new, says former Uruguay Round negotiator Julius L. Katz, is that "the motivation is suddenly there for everyone to come to an agreement." That's a far cry from prospects when Katz and his boss, former U. S. Trade Representative Carla A. Hills, left office five months ago. But negotiators can't squander this opportunity after so many disappointments. To quote Elvis--President Clinton's favorite male vocalist--it's now or never.

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