Soviets Ask for Observer Status in Trade Group

The Soviet Union has formally applied for observer status in the General Agreement on Tariffs and Trade, the 97-country organization that administers the Western trading system, the Geneva-based group announced Friday.

The move, which was expected, would mark a major milestone in the push by the Soviets to become part of the Western economic system, from which they have been barred for the past 45 years. Moscow has been pressing for such status since last summer.

The Soviets, who are attempting to undertake a difficult transition from a fully state-owned economy, have said they are seeking observer status partly as a symbolic move and partly to learn more about how a market-based economy works.

President Bush told Soviet President Mikhail S. Gorbachev at last winter’s Malta summit that Washington would support the Soviet application, but not until after the current “Uruguay Round” of global trade negotiations. The talks are scheduled to end in December.

GATT officials said Friday that they probably would begin consideration of the Soviet application at an April 3 meeting of the organization’s top policy-making council, which is expected to initiate preliminary “consultations” with individual GATT members.

An informal sampling of GATT members earlier this year showed that most other countries are willing to act on the Soviet application soon, but approval still is not expected to come until early in 1991. Under GATT rules, Washington could block an earlier vote.

Although the granting of observer status traditionally is a prelude to full membership for a country, most analysts say even with early action on its application, Moscow probably would not win full-fledged membership for at least several years.

The reason is that the trade rules followed by GATT members are based on market-oriented economic policies that do not work well when industries are entirely state-owned. Economists say it could be several years before the Soviet Union establishes a market-driven economy.

The application for GATT observer status comes as the United States and the Soviet Union are negotiating bilateral trade and investment agreements designed to pave the way for normalization of U.S.-Soviet trade relations later this year.

U.S. officials say they hope to have the negotiations completed by mid-spring, in time for Bush to announce at a June meeting with Gorbachev that Washington will grant most-favored-nation status to the Soviets, offering them the same low tariffs as other trading partners.

The U.S. insistence on waiting until the end of the year before acting on the Soviet request is based partly on a reluctance to disrupt the talks, which already are bogged down in disputes among participating countries.

Washington also is loath to open the door for other applications while the talks are continuing. The major industrialized countries put a temporary lid on new applications when the Uruguay Round began.

Ironically, the granting of observer status to the Soviet Union could further rankle China, which had hoped to beat Moscow into GATT. China won observer status in 1986, but its application for membership was put on hold following last summer’s Tian An Men Square massacre.

Last January, Taiwan increased Beijing’s anxiety by applying for membership as well, ostensibly as part of a customs union that includes several neighboring islands. The Bush Administration favors Taiwan’s move on economic grounds but still has not backed it formally.

As expected, the United States reacted favorably to the Soviet request. Rufus Yerxa, the U.S. ambassador to GATT, welcomed the move as a sign that Moscow is serious about making free-market economy reforms.

Frans Andriessen, the European Community’s trade minister, also endorsed the move.