Entertainment Issues Only Remaining Snags on GATT

Global trade negotiators Monday inched to the brink of completing their seven-year campaign to rewrite the rules of international trade, with only a solution-defying dispute over entertainment issues standing in the way.

One by one, some of the most contentious issues slipped toward resolution as negotiators reached agreement on textile quotas--a political headache for the White House--and maritime issues.

They also found a likely compromise to the troublesome question of subsidies for production of civilian aircraft, a dispute that earlier this year almost involved the United States and Europe in a trade war; formal acceptance of this proposal remained at least a day away.

But the ultimate success of the talks among 116 nations hinged on a decision by the 12-nation European Community to accept an American compromise on payment of artists’ royalties earned by foreigners in Europe and on limits on foreign television programs there. Without a compromise, officials warned, the entire trade pact could dissolve.

While other issues remained on the table, there was widespread optimism that they will be settled, possibly as early as today but certainly by the deadline Wednesday.

“Whatever happens, the Uruguay Round is going to be monumentally the greatest trading agreement ever,” said Peter Sutherland, chief arbitrator of the talks that began in Punta del Este, Uruguay, in September, 1986. The talks are being conducted under the auspices of the Geneva-based General Agreement on Tariffs and Trade (GATT).

For seven years--over the course of three U.S. presidencies--diplomats and trade experts have labored over a massive restructuring of quotas, tariffs and other barriers to international commerce. Their goal is to bring down tariffs by an average of one-third, eliminate other obstacles to trade and provide a massive refueling of the international economy.

After at least two missed deadlines--including a series of talks three years ago that easily came as close to resolution as the current session appears to be now--only one issue, albeit a deeply controversial one, stands firmly in the way. “Virtually every text of a very voluminous agreement has been agreed,” but each risks being undone if the entertainment issues are not settled, said Sutherland, director general of GATT. “We have achieved an extraordinary series of agreements in a very short period of time.”

The deadline this Wednesday was set by the U.S. Congress, which gave President Clinton the authority to negotiate the trade pact with the provision that the accord, if completed by Wednesday, will not be subject to amendment by the House or Senate; each chamber will be required to approve it by only a simple majority before it can take effect.

Adamant that there could be no last-minute extension of the deadline, U.S. Trade Representative Mickey Kantor said Monday night that either the agreement will be reached “by the 15th, or we turn into pumpkins on the 16th.”

Against that looming deadline, negotiators met into the night to try to conclude an agreement that would greatly expand the foreign reach of banks, insurers and other financial institutions. The United States is willing to allow foreign institutions to offer financial services in America only if other nations are forced under the new agreement to allow similar access to their markets for American institutions.

On Monday, a team working on a textile agreement settled on a plan to shave five years off an international agreement limiting foreign producers’ access to the U.S. market in exchange for provisions granting American manufacturers improved opportunities to sell overseas.

This was a sensitive compromise: Textile unions have fought any move to force workers into greater competition with lower-wage counterparts in other countries, while retailers have sought to reduce tariffs--taxes on imports--that increase the price of imported clothing.

The optimism in Geneva was offset by tension over the outcome of issues centering on the U.S.-European business relationship involving movies, television programs, recordings and blank videotape sales.

That uncertainty was reflected in the mood conveyed by Leon Brittan, the EC’s chief trade negotiator. He flew from Geneva to Brussels on Monday to brief the community’s foreign ministers on the talks.

Before returning to Geneva for another day of negotiations, Brittan said that agreement was in sight. But, seemingly less optimistic that questions over shipbuilding and aircraft manufacturing had been resolved, and with the entertainment issues still up in the air, he said, “I can’t believe the United States wants the Uruguay Round to fail over any of these issues.”

On movies, where the EC is trying to reserve a share of the European market for domestic producers so it can preserve its “cultural identity,” Brittan noted that Americans already have 80% of the European market, and “this is not an American industry that is struggling for survival.”

The compromise seeks a way around European requirements that at least 51% of programs on television here be made in Europe; the French minimum is 60%. The compromise also tries to steer past limits on royalty payments, primarily to foreign production companies, and blank-videotape sales taxes, which subsidize movie production in Europe.

Under partial terms of the compromise, it was learned, foreign production companies would receive royalties earned in Europe but would have to spend the money on subsequent work there.

It is estimated that such royalties are worth $250 million.

The aircraft and shipping compromises were said to essentially finesse disputes. The aircraft industries would be put under the regime of GATT, a 46-year-old organization that oversees international commerce. But subsidy limits agreed to by the United States and Europe last spring for the industries would not change.

U.S. aircraft manufacturers have complained that European government subsidies to the British-French consortium Airbus Industrie have given the joint venture an unfair competitive advantage.

Shipbuilding and other maritime services, similarly, would be brought under GATT under the proposed compromises; no specific steps to change current support programs would be taken.

Gerstenzang reported from Geneva and Havemann reported from Brussels.

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