Latest Talks on Trade Liberalization May Fall Short of U.S. Expectations
The United States and its major economic allies inched toward a compromise Wednesday over how far to go in speeding up the international trade liberalization talks now going on in Geneva, but it seemed likely that the result would fall well short of what Washington had wanted.
In late-night bargaining at a ministerial-level meeting of the 24-country Organization for Economic Cooperation and Development, the two sides narrowed their differences. But the United States seemed unlikely to win all its demands on a new proposal to prod the negotiators to prepare a detailed outline of what they intend to accomplish between now and the scheduled end of the trade talks in 1990.
Washington also wants the trade officials to hammer out a specific framework for a companion package designed to dismantle agriculture trade barriers.
The Reagan Administration has made a major issue out of winning OECD backing for both goals.
‘Polluting’ World Market
Washington believes that support by the OECD is necessary to make the trade issue a highlight of the annual seven-nation economic summit, which this year will be held in Toronto in mid-June. Administration officials said the Unites States will renew its fight in Toronto even if it fails to win much at this week’s meetings.
Agriculture Secretary Richard E. Lyng pressed the U.S. case again Wednesday, charging that current agricultural subsidies are “polluting” the world market. But European and Japanese officials remained adamantly opposed to going as far as the Unites States wants. Willy de Clercq, trade minister of the European Common Market, said the OECD should not try to be too specific about what the agricultural talks should produce.
“That’s why we’re all around the table in Geneva,” De Clercq told reporters here Wednesday.
Meanwhile, several top European officials urged the United States to move to dampen its consumers’ demand for imports, rather than drive the dollar’s value down further, if it wants to speed progress in reducing its trade deficit.
Britain’s chancellor of the exchequer, Nigel Lawson, warned that unless the United States stops consuming so much at home it will not be able to export enough to bring its trade deficit down quickly. He warned that U.S. domestic consumption “is rising uncomfortably fast” and is outstripping the nation’s capacity to produce.
Common Market President Jacques Delors, a former finance minister of France, made a similar point. The Europeans do not want the dollar to fall further for fear it will hurt their own international competitiveness.
‘Seeing New Optimism’
However, Treasury Secretary James A. Baker III, head of the U.S. delegation, appeared unwilling to consider slower growth for the U.S. economy, especially in an election year.
Baker said at the meeting that the United States is making good progress in correcting its trade imbalance, and he said he expects the trade deficit to decline in 1988. He expressed satisfaction that while some economists had predicted earlier that the U.S. economy might be slowing down, “now we are seeing a new optimism about 1988 growth prospects.”
The Treasury secretary told reporters that the Administration does not believe inflation is on the rise again, despite concerns by some analysts that price pressures may be returning. “We see no evidence of that,” he said. The Federal Reserve Board recently has begun to nudge interest rates up in response to such fears.
Although the trade dispute this week is partly a procedural squabble, the Administration regards it as important to ensuring that the trade liberalization talks in Geneva maintain the momentum needed to produce satisfactory results.
The United States wants the major industrial nations, which are represented in the OECD and at the seven-country annual economic summit, to lend new political impetus to the talks. The Geneva negotiators are scheduled in meet in Montreal in December to conduct a “midterm review” of how the long-range talks are going. It is this session that the Administration wants to ratify specific plans for future negotiations.
The trade and agricultural issues are dominating this week’s OECD ministerial meeting. The conferees usually deal with broad economic policy issues as well, but this year the finance ministers attending the meeting have decided to forgo any effort to push through new initiatives and instead are expected to urge European countries to phase out restrictive work rules and other so-called structural rigidities in their economies to increase efficiency and spur more economic growth.
On the agriculture issue, the United States is seeking support for eliminating all agricultural subsidies that are trade barriers worldwide over the next 10 years and replacing them with income payments to farmers that are not linked to increased production.
The Europeans and Japanese, however, want a more gradual approach and want only to reduce subsidies and trade restrictions, not phase them out entirely. The United States and Europe now spend about $20 billion a year on farm subsidies.
