Leaders Fail Again to Jump-Start Trade Pact : Economy: They agree to liberalize commerce rules. But disputes over agriculture and other issues persist.

Leaders of the seven biggest industrial democracies recommitted themselves Wednesday to liberalizing the rules of international commerce but tacitly conceded that they had failed to jump-start the deadlocked effort to negotiate a new trade accord.

Indeed, this year’s declaration closely resembled the promise at last year’s economic summit to complete a new trade accord by the end of 1990.

Although the leaders here assigned the highest priority to the trade talks, they did not resolve disputes over agricultural trade and other issues that have left five years of negotiations in deadlock.

The continued failure of the negotiations has raised the specter of a global trade war, but world trade has soared anyway. Nations exchanged $3.3 trillion worth of goods last year, a 14% increase over 1989, despite the failure to meet the leaders’ promise to complete the trade talks last December.

Now they have set this December as the new deadline. Most analysts believe that trade will continue to rise if that deadline is not met, although not as fast as it would under a new accord.

“I don’t think the world trading system will collapse if they fail,” said Laura Tyson of the Berkeley Roundtable for International Economics. “But there will be a tendency to backslide, to make deals between two countries that leave other countries out.”

Robert Hormats, a former State Department official who is now with Goldman Sachs International in New York, said the trade talks’ failure would encourage the development of regional trade blocs in North America, Europe and East Asia.

Trade was the dominant economic issue during the Group of Seven’s annual summit. In their final communique, however, the leaders also declared that global economic growth, which slowed in the past year because of recessions in the United States, Britain and Canada, was perking up again. Consequently, U.S. officials did not press their proposal of several months ago to bring interest rates down worldwide as a means of stimulating economic growth.

The leaders also committed themselves, without specifics, to “develop a cooperative approach for tackling environmental issues,” including global warming.

And they encouraged free-market reforms in the Soviet Union and renewed their pledge to assist the struggling economies of Eastern Europe.

But it was on trade that the summit leaders unleashed their rhetorical artillery.

They declared that “no issue has more far-reaching implications for the future prospects of the world economy” than the so-called Uruguay Round of international trade talks, which was launched five years ago in the Uruguayan resort of Punta del Este.

“We shall each remain personally involved in this process,” the seven leaders declared, “ready to intervene with one another if differences can only be resolved at the highest level.”

That language was hauntingly similar to their 1990 communique, when the leaders said: “We intend to maintain a high level of personal involvement and to exercise the political leadership necessary to ensure the successful outcome of these negotiations.”

Five months after that, what had been billed as the final week of the trade talks collapsed in Brussels in a dispute over farm issues.

Although the seven leaders insisted that they could succeed this year where they failed last year, they offered little hard evidence. British Prime Minister John Major, asked what had changed, said: “That is the sort of question that can only be answered in retrospect by the actions that are taken.”

German Chancellor Helmut Kohl held out the prospect of “quite abject economic misery” if the talks fail. “You need free trade just as you need clean air to breathe.”

Most analysts saw little change from last year.

“Everybody agrees in principle that they want free trade,” Tyson said, “but they want it modulated by exceptions that suit their particular purposes. The leaders all share a common interest in the success of the talks, but I do not see a political will, especially in the next 12 months.”

The United States will have difficulty making concessions before next year’s presidential election, she said. The nations of the European Community are preoccupied with bringing down trade barriers between each other, she added, and the Japanese prefer to resolve trade disputes bilaterally rather than multinationally.

Goldman Sachs’ Hormats also predicted “a low probability of success.”

The one “glimmer of hope,” he said, is the latest proposal in the European Community to scale back its huge farm subsidy program, which its trading partners say gives European farmers an unfair edge in competition for world agricultural sales.

A Canadian official in London, asking not to be identified, said the Europeans “seem to be more seized now with the importance, not only to themselves but to Eastern Europe, of making progress.”

However, the latest EC proposal, which would slash crop subsidies by up to 35%, must still be approved by the agriculture ministers of the 12 member nations. Past reform proposals have been shot down, especially by the Germans and French, who fear that reduced subsidies will leave their farmers unable to compete for worldwide markets.

At best, the Europeans do not intend to complete their agricultural reform until next year, after the 1991 deadline has passed for completion of the trade talks. European Commission Vice President Frans Andriessen, the EC’s chief trade negotiator, said he feels that Europe would merely have to demonstrate its “orientation” at the trade talks.

Before trade talks broke down last December, the United States had proposed substantially deeper reductions in all nations’ farm subsidies than the EC is now considering. And the United States and the EC members are not alone in measures designed to protect their farmers from foreign competition.

Apart from liberalizing trade in agriculture, trade negotiators from more than 100 countries are trying to set rules for the first time governing trade in services such as banking, insurance and tourism.

They are also trying to bring down national barriers to textile trade, to set rules governing the transfer of “intellectual property” (patents, copyrights and trademarks) and to increase exports of tropical products to the industrial nations.

Success, Tyson said, would not end national barriers to trade.