BREAKDOWN OF THE TRADE TALKS : NEWS ANALYSIS : Big Opportunity to Open World Markets Lost : GATT: However, despite extreme pessimism voiced by many delegates, some still have hope for salvaging an agreement of some kind.
The failure of the current round of international trade negotiations is not a tale of economic catastrophe but of lost opportunity.
The opportunity that beckoned was a sharp rise in world trade. For every $5 worth of goods and services they produce, countries already sell about $1 abroad. The trade talks that dissolved Friday could have boosted that ratio still higher, to the long-term advantage of practically everybody.
The main short-term losers would have been farmers in industrial countries--particularly Europe and Japan--who could not compete on world markets without government subsidies.
“The negotiators have not been able to see beyond these special interest groups,” James Lockett, a trade lawyer in the Brussels office of Dorsey & Whitney, a Minneapolis firm.
Those who were most disappointed by the dissolution of the talks Friday predicted dire consequences. New Zealand Trade Minister Owen Jennings, who had hoped that a trade pact would open new foreign markets to New Zealand’s farmers, predicted a new round of trade wars as individual countries sought to protect domestic industries from foreign competition.
“Failure would give a green light to the creeping protectionism we’ve seen in the 1980s,” added Australian Trade Minister Neal Blewett.
Rubens Ricupero, Brazil’s trade minister, said poor nations such as his could enrich themselves only by selling their products abroad. “If we don’t have a fair and open trading system, we will be left in the cold,” he said.
Of course, trade is important to the industrial countries too. Gary N. Horlick, a former Senate Finance Committee aide who observed the talks here for the Los Angeles law firm of O’Melveny & Myers, said Seattle-based Boeing Co. could not make a profit on the next generation of passenger jet, for example, if it could not sell it outside the U.S. market. Japan’s economic miracle was based on exports, and overseas sales have recently helped prop up the U.S. economy.
Despite extreme pessimism voiced by many delegates here, some still held out hope for salvaging an agreement of some kind, especially if the heads of the 12 EC countries urge action when they meet at the end of next week in Rome.
But even these optimists said any accord patched together in the coming weeks or months probably would fall short of expectations.
“There’s plenty of time to reach an accord,” said Lockett. “But it will probably be broad but thin. A great opportunity has been lost.”
The 107 nations that this week fell short of rewriting the rules governing commerce between nations still have more than two months to find common ground. After that, approval of the trade pact by the U.S. Congress--an essential element of the global trading system--will become highly unlikely.
If the Bush Administration could complete a trade package by March 1, Congress would be committed to voting it up or down as a whole without opportunity to amend it beyond recognition. Congress is increasingly doubtful that a trade pact would work to the advantage of American businesses, however, and 37 of the 100 senators are sponsoring a resolution to repeal this unusual procedure. Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) said Congress would have no agreement to worry about unless the 12-nation European Community accepted deeper cuts in its subsidies to farmers.
“When the U.S. and Europe had a fight over Italian pasta and California walnuts in 1985, they went 30 days past the so-called deadline before reaching an agreement,” Horlick said.
But this time the agenda is far more ambitious. The 107 nations agreed four years ago to try to set rules for the first time for trade in services and in agricultural products. And they worked to bring down barriers to trade in textiles and other products.
Nobody thinks that trade would suddenly stop dead in its tracks if the trade talks were not revived. “There will be some disputes, but nobody wants to go to war,” said Clyde Prestowitz, president of the Economic Strategy Institute in Washington.
That’s the good news. The bad news is that the absence of a crisis works against achieving an agreement.
“It is in times where there is no perceived crisis that it is harder to get people to have vision,” said Roger Porter, President Bush’s chief domestic policy adviser.
But over the long term, said Brian V. Mullaney, senior economist in the London office of the investment firm Morgan Stanley, a failure to reach an accord would slow the growth of world trade. And that in turn would spell lower economic output and lower standards of living.
“There’s too much to lose not to come to an eventual agreement,” Mullaney said. “But it could get ugly in the interim.”
Prestowitz, a former Commerce Department official, said he feared that any agreement reached now would not amount to much. It is already too late, he said, for these trade talks to revitalize the world trading system.
“Even if they get something, it’s been so laborious,” he said. “It’s clear that the postwar drive for (an open world trading system) has run out of steam.”
For several decades after World War II, Prestowitz said, the United States so dominated the world economy that it could afford to give more than it got from international trade agreements. Now U.S. dominance is being challenged by Japan and by the 12-nation European Community, he said, and the United States is trying to get more from these trade talks than it is willing to give.
“When it’s the turn of others to give for the good of the system,” Prestowitz said, “we’re finding that there’s not so much enthusiasm.”
