A Lot Is Riding on Trade Talks by 104 Nations : Uruguay Round: Many fear chaos on a global scale if attempts at liberalization fail. And success is far from certain.

The world’s trade negotiators are heading into the home stretch of the Uruguay Round: a four-year, 104-nation marathon that has become the most ambitious and the riskiest effort in history to liberalize world trade.

If the effort succeeds, it could open vast new markets to foreign goods, substantially alter world trading patterns and, for the first time, set broad rules for trade in agriculture, services and intellectual property.

But if it fails, trade officials warn, it would revive protectionist pressures worldwide, exacerbate tensions between rich and poor nations and push countries into narrow trading blocs that would almost surely hurt global trade.

“The signal we would send to the outside world would be that the multilateral trading system that has existed since World War II has nothing to offer any more,” said Renato Ruggiero, Italy’s trade minister. “It would be a very bad political signal to send.”

U.S. Trade Representative Carla Anderson Hills, who is not usually given to hyperbole, calls the Uruguay Round talks “the most important trade negotiations ever held.”

Although the trade talks are being held in Geneva, they are called the Uruguay Round because the negotiations were launched in Punta del Este in 1986.

Success remains far from certain. Although the negotiators have drafted texts for several portions of the complex 15-item agenda, they have hit serious impasses on some key issues.

As a result, the White House has begun a major international drive to jump-start the talks. Significantly, it has softened the tone of America’s trade rhetoric, lest Japan and other trading partners take offense.

U.S. officials are expected to seek ministerial-level backing for speeding up the talks at this week’s annual meeting of the 24-country Organization for Economic Cooperation and Development, the Paris-based economic forum for industrialized countries.

And President Bush plans to make reinvigorating the talks a major plank at this year’s annual seven-nation economic summit, to be held in Houston in mid-July. Bush last Wednesday declared the talks to be “my top trade priority for this year.”

The Geneva-based General Agreement on Tariffs and Trade, the 97-country trade compact under whose aegis the talks are being held, is also stepping up the pressure on the delegates to get the negotiations off the dime.

Arthur Dunkel, director-general of the organization, has asked negotiators to complete provisional agreements on key sectors this summer, in time to begin final horse-trading over specifics before a formal wrap-up session in Brussels in December. “We have to have made the basic deals by late July,” he said last week.

That will not be easy. The United States and Europe still are far apart on the key questions of how fast to cut agricultural subsidies. U.S. officials have long complained that government subsidies give European farmers an unfair competitive edge.

The United States and its trading partners are also at odds over how far to relax restrictions on textile imports. If the United States does not agree to lower its barriers to foreign-made textiles, developing countries might retaliate by opposing rules governing trade in services and intellectual property. U.S. negotiators are seeking such rules--none exist now--in hope that they will help U.S. companies gain new markets abroad.

Even if the Bush Administration can get the kind of deal it wants, it faces a skeptical Congress that seems ready to reject any accord that does not contain a “credible package” of trade concessions by other countries.

Members of the Senate Finance Committee served notice earlier this month that they would block any accord that did not include new rules affecting agriculture, services and intellectual property.

Lawmakers are already drafting a farm bill and textile-quota legislation that would toughen U.S. trade restrictions in both areas. Although the threat serves as a cudgel to advance U.S. interests in the international trade talks, it also damages America’s effort to appear as a champion of free trade.

“It’s giving arguments to protectionists around the world who say, ‘Never mind what the United States says--look what it does,’ ” GATT Director-General Dunkel said. “It’s unfortunate for U.S. trading partners to have to face such a discrepancy.”

By far the most formidable potential stumbling block to a successful accord is the U.S.-European dispute over agriculture--a spat that has grown more intense and more expensive as the years have passed.

Both sides want to reduce the cost of subsidies and open more markets for their exports. The Brussels-based European Community spends $119.4 billion a year to underwrite farmers and farm exports. The United States spends about $73.8 billion in direct government support and rural development outlays.

But the two sides are split by philosophy and domestic political realities. The United States, though hardly averse to subsidizing its farmers, generally favors a free-market system. Washington wants an international accord to end farm subsidies by a specific date.

But Brussels contends that to do so would force too many of Europe’s 20,000 small farmers off their land and into the cities. The EC does not mind reducing some subsidies here and there, but it is flatly unwilling to go nearly as far as America would like.

The United States is also out on a limb on textiles. Other countries want to phase out existing quotas on textile imports from developing nations, but Washington wants only to replace them with a global quota, which would be far more restrictive.

With the agenda so complex and far-ranging, virtually all the major issues are intertwined. Failure to win approval on even one or two key items could unravel the entire accord.

Washington wants Europe to lift import restrictions on soybeans, for example, but to get that, it may have to agree to scrap longstanding U.S. sugar and dairy quotas. Third World countries that want to sell fruit in more foreign countries will have to back new rules for services.

For all the worry over the threat of a breakdown, the trade-liberalization talks have come a long way since the United States proposed them at a preliminary GATT ministerial session in 1982.

Back then, even the suggestion that GATT might tackle an agenda the size of today’s brought derisive hoots. Third World countries snubbed all proposals on services. The session broke up in disarray over merely placing agriculture on the table.

U.S. policy-makers say Washington’s strategy now is “to go for the large deal”--to push for as many big-ticket items as possible in hope of making a successful accord a must. “The small deals can’t be sold,” a senior U.S. strategist said.

And Washington will continue trying to intensify the pressure on Europe and other U.S. trading partners during the OECD meeting this week and at the seven-nation economic summit in July. “No agreement is better than a bad agreement,” Bush warned U.S. trading partners last week.

But the most immediate question is whether the United States and Europe can break their impasse over agriculture in time to prevent the overall talks from fragmenting. Even some Americans are urging Washington to be more accommodating.

“The U.S. has to adopt a more pragmatic position, or there will be no Uruguay Round accord,” said Harald B. Malmgren, a Washington-based trade consultant.

The outcome remains in doubt.

“I think it’s a close call--a very close call,” said William E. Brock III, a former U.S. trade representative.

He and other trade experts believe that the United States may ultimately have to settle for a pact that some GATT members refuse to sign. What Washington needs to do now, Brock says, is make sure that as few countries as possible bow out.

In the meantime, U.S. officials are bracing for a frenetic summer. “The next couple of months are going to be fairly key,” a U.S. trade negotiator said. “The sense of urgency has been instilled. Now comes the hard part--getting it all to play out.”