PERSPECTIVE ON HOUSTON SUMMIT : Make the Rules Match a World of Global Trade : If other leaders follow Bush’s lead, they can set the stage for greater prosperity into the next century.

President Bush has stated that the Uruguay Round negotiations of the General Agreement on Tariffs and Trade will be his highest priority at the Houston economic summit. The President has it right. The reform of GATT this year offers an extraordinary opportunity for the world leaders gathered in Houston to set the stage for greater economic prosperity in the 1990s and beyond.

Why should the Uruguay Round, named after the country where the talks began in 1986, receive top priority at the summit? Because more than ever, trade matters--to consumers and producers around the world, to national economies, to international politics. Because trade matters, effective rules for open trade matter. That’s what the Uruguay Round is all about.

Trade has become a major force in the world’s economies. Since GATT was first signed more than 40 years ago, world trade has soared from roughly $60 billion to more than $3 trillion a year.

And it has become more important to the United States as well. The total of U.S. exports and imports now equals one-fourth of gross national product, compared with 10% of GNP 30 years ago. America is the world’s largest exporter of goods and services. Trade is the basis for highly competitive American industries, the stimulus for American innovation and the source of millions of American jobs.

Yet, as trade has become more important, it’s also become a greater source of international tension. With the collapse of the Warsaw Pact, future frictions are even more likely to center around economic disputes, not military ones. Will we be ready for this era? How will a U.S.-Soviet patent dispute be defused in 1995? What will America do if U.S.-based insurance companies are barred from a robust Mexican market? What will American farmers do if they’re frozen out of a dynamic, integrated Europe?

That’s where GATT comes in. Its purpose is to set the rules for international trade and to resolve disputes. Seven previous rounds of GATT negotiations have sharply reduced tariffs and planted the seeds for a thriving world trading environment.

But GATT now needs to be revised for a more complex global economy. It was designed when trade was much smaller, and traded goods were mostly agricultural commodities and natural resources. Today, trade content has expanded to include sophisticated services and new technologies. The Uruguay Round is intended to bring GATT rules of trade up to date with today’s global economic realities.

The American business community has had a major role in setting the agenda. For example, business insisted that new guidelines on services--more than $600 billion worth of trade in 1989 alone--be negotiated and covered for the first time by GATT rules.

American companies have also been strong proponents of reduced tariffs, improved disciplines on safeguards and dumping, cuts in trade-distorting subsidies, better rules on government procurement, a speedier and more effective dispute settlement process and the expansion of GATT disciplines to cover intellectual property (patents and copyrights) and investment.

Major American farm organizations have similarly called for reforms. Worldwide farm trade subsidies have seriously undercut America’s competitive advantage in agriculture. U.S. Trade Representative Carla A. Hills has correctly said that major reductions in such subsidies are the “linchpin” of a successful agreement.

Now, after four years of intense, generally productive but at times antagonistic debate among GATT’s 97-member countries, the Uruguay Round is in its final months. With a closing deadline scheduled in December, time is running short. Trade negotiators await their final instructions. From July 23-25 in Switzerland, international negotiators will try to make their first tentative agreements to lay the groundwork for final talks this fall. It is a tall order given the divisions remaining in so many areas.

Many developing countries will only sign an expanded trade agreement for services, patents and investment unless the economic summit countries agree to provide better access for their products. But developed countries--with so much at stake--seem unwilling to make the hard choices. And differences between developed countries over issues like agricultural subsidies stymie progress on other issues.

For these reasons, clear leadership from the Houston summit is a must. President Bush, having already called the GATT round his highest priority for the summit, should ask other world leaders in Houston to join him in signaling the significance of GATT.

This is the first time that a comprehensive approach has been the basis of the GATT talks--and it may be the last. If negotiating countries fail in this round, the new trade patterns and disputes of the 1990s will be handled unilaterally or, at best, by regional trade arrangements. Neither of these approaches is compatible with the globalization of industries and trading patterns now under way. Left to these devices alone, trade disputes will tend to escalate into destructive rounds of retaliation and counter-retaliation. If that happens, international trade will stagnate and the world economy will lose a powerful engine of growth. That’s the risk if the GATT talks fail.

But if the governments at the economic summit stand solidly behind a new GATT system, the world economy can build the strongest platform for lasting peace and prosperity.