NEWS ANALYSIS : U.S.-EC Accord Could Pave Way to Global Pact : Trade: Experts say agreement in world talks would be likely to enhance America’s dominance in markets for services, ideas and intellectual property.

WASHINGTON — The U.S.-European agreement Friday over farm subsidies offers a historic opening for a global free trade agreement that could play to an American strength--this nation’s dominance in the markets for services, ideas and intellectual property.

Economists and trade experts said the apparent resolution of the brewing trade war with the European Community--especially France--has removed the biggest obstacle to the long-stalled worldwide trade negotiations. The success of the global trade talks--the so-called Uruguay Round of negotiations (named for the South American country where they began in 1986) supervised by the Geneva-based General Agreement on Tariffs and Trade--would mark an important reordering of the international trading system.

If a final agreement is reached in the global trade negotiations, “it could be one of the most important achievements in economic affairs in the last decade,” said Robert Hormats, vice chairman of Goldman Sachs International and a former Carter Administration policy-maker.

For the first time, the United States and other industrialized nations may gain rules to govern exports and market access for services and intellectual property, such as movies and television programming. In return, newly developing countries would obtain greater access to Western markets for their more basic agricultural products and manufactured goods.

“This is the first round of trade talks ever to deal with services, and given our comparative advantage in that area, the United States could be a big beneficiary,” notes Allen Stoga, an international trade analyst with Kissinger Associates in New York.

The Uruguay Round of talks, which began six years ago, was designed to address classic issues that split the industrialized West from the Third World. Ironically, the negotiations have been stymied for years by a division within the West itself over a side issue--farm products--that has far greater political than economic significance.

The talks spawned odd, shifting alliances between the United States and other nations, setting the stage both for this fall’s U.S.-European dispute and its ultimate resolution.

On agriculture, the United States has consistently sided with Third World nations that have pushed for a reduction in farm subsidies in Europe and throughout the industrialized world. Because America’s farmers are the world’s most productive, U.S. trade negotiators have argued that a global reduction in export subsidies, crop price supports and other barriers to free trade would benefit U.S. farmers by leveling the playing field and opening new foreign markets to American products.

In contrast, the Europeans have found it difficult to muster the political will to slash government support for Europe’s 9 million farmers. In France in particular, the farmer is seen as embodying the French way of life and so the debate over agricultural trade has taken on a nationalistic tone among French politicians.

Thus, even though agriculture accounts for little more than 10% of global trade, its political importance has meant that it has overshadowed broader trade issues. Global free trade talks languished while the Europeans played political poker with the United States over agriculture.

“The Europeans kept trying to wait us out on agriculture, thinking we would cave,” said Carol Brookins, president of World Resources, a consulting firm specializing in agricultural trade issues.

In its final stages, the battle narrowed to an arcane debate over European subsidies for oilseed products like soybeans, sunflower seeds and cotton seeds, and threatened U.S. duties on French wine.

The U.S.-French farm dispute also obscured the reality that the United States and the Europeans were allied on an array of issues in the global trade talks, especially those dealing with services and intellectual property.

Greater access to Third World markets for professional services under a new trade agreement would benefit international banks, law and accounting firms, credit card companies, computer software producers and international television programmers--in the United States and Europe. The global talks offered the first opportunity ever to impose realistic rules governing the burgeoning international trade in such non-traditional exports.

Ultimately, the common interests of the United States and Europe over those issues--coupled with a new get-tough approach by the Bush Administration--forced a compromise on agriculture.

“We have full expectations that the breakthrough we have achieved will unblock the negotiations and provide new impetus necessary to complete the round,” said a statement by the EC.

EC spokesman Peter Doyle added: “Agriculture has held a number of other issues hostage. Now that we have this deal, it changes the atmosphere and we can go back to work” on the broader trade talks.

To be sure, the agriculture agreement still must be sold to farmers and legislators in both the United States and Europe. In the United States, some farm advocates in Congress indicated that they did not think the deal went far enough, while in Europe the deal was immediately denounced for going too far.

“The U.S. is completely in the right in the oilseeds dispute . . . we are giving up too much and getting very little in return,” said Sen. Max Baucus (D-Mont.), chairman of the Senate subcommittee on international trade.

Steve Yoder, president of the American Soybean Assn., added, “Obviously, we are disappointed with and deeply concerned by the levels of oilseed production this agreement will permit within the European Community.”

By contrast, a European farm lobbying group blasted the deal Friday, saying it would cost millions of jobs in agriculture and related sectors and cause income losses for farmers.

But if the deal holds in Europe and the United States, perhaps the biggest immediate winner will be President-elect Bill Clinton. A finished trade agreement would mean one less economic headache for Clinton when he takes office Jan. 20. A deal would let him concentrate on his domestic economic agenda without worrying about a looming trade war.

Swift completion of the Uruguay Round also might ease the political pressure on Clinton to quickly decide how to deal with the North American Free Trade Agreement with Canada and Mexico, which he will also inherit from the Bush Administration.

While the Uruguay Round and the North American trade agreement do not conflict with each other, many economists believe that a global trade agreement will tend to make the free trade pact with Mexico and Canada less crucial to the American economy.

Clinton has conditionally endorsed the North American free trade pact but has said he wants to see it altered to deal more directly with environmental problems in Mexico and to provide greater assistance to U.S. workers who lose their jobs when companies move factories to Mexico.

Clinton spokesman George Stephanopoulos took a cautious approach to the trade deal. If it is a step toward the completion of GATT, and “if it is certainly in our interests and it protects our agriculture in the way that it must, then it would be positive. We just haven’t seen all the details yet.”