Talking Tough on Trade Barriers : Negotiations Starting This Week Could Affect Both Global and Bush Administration Policy

Top trade officials from around the world will meet here this week in an attempt to jump-start the stalled 2-year-old global talks on easing trade barriers, but the effort seems likely to be difficult.

The talks were launched in October, 1986, in Punta del Este, Uruguay, with the goal of reducing government subsidies and trade barriers on a wide variety of items--including agriculture, services and intellectual property--to stimulate world commerce.

The trade ministers, representing the United States and 95 other countries, are not expected to completely resolve any of the major issues during this session. “That is out of the question,” Clayton K. Yeutter, the U.S. trade representative, concedes.

But the United States hopes that the meeting, which is being billed as a mid-negotiation review of the “Uruguay Round” talks, will provide fresh political impetus for the effort and produce a timetable and agenda for the final two years of talks, which are scheduled to end in 1990.

Trade experts say the outcome could have major implications--not only for prospects for the continued global trade negotiations, but for the kind of trade policy that the Bush Administration will pursue.

Alan J. Stoga, a trade analyst at the Kissinger Associates consulting firm in New York, warns that a failure to make headway at Montreal could dampen the remaining support in Congress for the longstanding multilateral trading system and spur America toward increased protectionism and more individual trading arrangements with specific countries.

“If the Montreal session doesn’t accomplish much, you’ll be risking a growing number of trade complaints here at home” against other countries, Stoga said. And President-elect George Bush will be under pressure to pursue a more aggressive--some would say more protectionist--trade policy.

“This could be the most important trading round since the (trading) system’s inception,” said William E. Brock, Yeutter’s predecessor as U.S. trade representative.

The problem is that it still is far from clear whether the United States will get what it wants in Montreal--or even anything close to it, U.S. officials admit.

Washington wants the delegates to agree on a “framework” and calendar for the bargaining in three key areas--reducing subsidies and barriers to agricultural trade, writing new rules for trade in services and strengthening rules governing patents and copyrights.

It also wants to strengthen the machinery of the Geneva General Agreement on Tariffs and Trade, which administers world trading rules, for settling trade disputes among major nations. And it wants GATT members to write rules governing foreign investment.

But prospects that the Montreal session will resolve any of these issues are relatively slim. Although negotiators have made some progress on strengthening GATT procedures to curb unfair trading practices during the last two years, they still are far apart on the three big items on the U.S. agenda.

Indeed, Yeutter and other top U.S. officials already have begun trying to lower expectations for the Montreal session.

The trade representative reminded reporters last week that the Montreal meeting was designed mainly for taking stock and that traditionally the serious bargaining does not begin until just before such talks are slated to end--in this case not until late 1990.

“You shouldn’t assume that failure to reach agreement in Montreal is a step backward--it may be a step forward,” the U.S. trade negotiator said. “The hope is to keep the process up and avoid any retrogression.”

To the United States, the biggest sticking point concerns agriculture. “A lot of countries are holding back on concessions until they see what happens on agriculture,” a U.S. official said. “If we can break the logjam there, a lot of other things will fall into place.”

The Reagan Administration has been pressing for an agreement that would phase out all agricultural subsidies and trade barriers worldwide by the year 2000--a step it says is necessary to keep the cost of government supports for agriculture from getting out of hand.

Opposed by EC

Washington essentially wants three things--a phase-out of farm subsidies, which are contributing to the current glut in agricultural products; an end to export subsidies and more access to markets worldwide.

The U.S. position is being backed by a group of 14 relatively free-market agricultural exporting countries, from Australia to Canada, which contend that their treasuries simply cannot afford to match the export subsidies being maintained by the United States and the European Community to help sell their farm products in the face of a glut.

But the EC, whose system of highly subsidized small farms would be threatened by any such action, has vigorously opposed the U.S. plan as unrealistic. It has argued that the long-term phase-out idea should be jettisoned in favor of a more modest reduction in some existing subsidies.

“We want to extinguish the fire where the fire burns now, “ said Willy De Clercq, the EC’s trade minister. “No one ever agreed that the Uruguay Round should move toward complete elimination” of agricultural subsidies and trade barriers, he said.

As a result, the three factions are entering the Montreal talks all but deadlocked. The U.S. proposal to end all subsidies eventually “is a non-starter,” De Clercq said.

Negotiators say the outlook is touch and go on the other major issues that the United States wants resolved:

- On services, Washington has hopes of persuading other countries to agree generally to extend the same procedures to trade in services--banking, construction, insurance, legal work and the like--that now apply to trade in manufactured goods.

For example, the United States wants countries to allow service companies from abroad to establish branches in their nations without impediment and to extend the same privileges to all GATT members, no matter who they are.

But Brazil, India and other newly industrial countries are wary of such moves, and Yeutter declared this week that the latest text of a draft of agreement on services--riddled with ambiguities and alternative language--is “the worst document I’ve ever seen.”

As a result, there will have to be a good deal of serious bargaining in Montreal to get even a token accord approved.

- Talks on enforcing patents and intellectual property rights are even less further along.

Washington wants the trading nations to commit themselves to crafting new standards for enforcing intellectual property rights, which currently are governed loosely by a smattering of narrower accords.

But Brazil and other newly industrial countries, which frequently pirate Western technology, are adamantly opposed to any such measures. U.S. officials say little progress now seems likely.

Battle Lines Unclear

In the end, both the substance and the political dynamics of the trade talks are so complex that putting together deals in a universally acceptable package is particularly difficult.

To be sure, the United States, Europe and Japan are agreed on the need to reduce barriers and come up with new standards for trade in services, intellectual property and foreign investment.

And the developing countries want more access to the industrial world for their own products--a reduction in import barriers for tropical products such as jute and oranges, lower tariffs generally and an end to quotas on textiles.

But the battle lines are still unclear. Argentina, for example, could end up supporting the U.S. demand for new rules on trade in services, provided that Washington comes up with the votes for liberalizing trade in tropical products.

And the Europeans cannot make new commitments to ease agricultural trade barriers unless the trade ministers make visible progress on the services and intellectual property issues. The true outcome of the talks “will be a lot harder for everybody to judge” than the 1986 meeting in Uruguay, Yeutter conceded. “There isn’t going to be any quantifiable standard by which to judge Montreal.”

Progress in Several Areas

Nevertheless, Washington is preparing to mount a stiff fight. The Administration is taking a 150-member delegation of negotiators, lawmakers and business people--about double the number at the meeting at Punta del Este.

And Yeutter has been warning repeatedly that the United States will go home empty-handed rather than abandon any principles it considers important.

“The U.S. is prepared to leave without language” if it decides that tactically “we’d be better off,” he said. “We in the United States are not going to sell our soul in Montreal just to get agreements.”

To be sure, it is unlikely that the trade ministers will go home completely empty-handed--even if they cannot agree on face-saving language for the short run.

The preliminary negotiating, carried out in 15 separate groups of lower-level trade officials, has left the Uruguay Round talks far ahead of previous global trade negotiations, such as the Kennedy Round of the 1960s or the Tokyo Round of 1973-79. Progress has been made in several areas.

But for the United States--and other industrial nations--the success of the talks ultimately will depend on how much progress is made on agriculture, services and intellectual property, which they consider the cutting edge of future trade flows.

“What matters in Montreal is that we not be disappointed” in getting some sign of progress, Brock said.