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World View : Clearing the Maze for Free Trade : The latest round of global trade talks are limping toward a finish. The economic implications are vast.

November 20, 1990|KAREN TUMULTY and JOEL HAVEMANN | TIMES STAFF WRITERS

WASHINGTON — Four years ago, the governments of more than 100 countries, rich and poor, set out on an unprecedented round of negotiations aimed at overhauling the ailing global trading system and ultimately stimulating the entire world economy.

They vowed that the new arrangement would reflect the economic realities of the 21st Century--governing not only traditional manufactured goods, but telecommunications, banking, copyright protection and a host of other issues that did not even exist when the first attempt to write global trade rules took place in the late 1940s.

What is more, the new worldwide trade compact those 100 countries envisioned would finally tackle the thorny issue of agriculture, declaring that no nation's sacred cows (or crops, for that matter) would stand in the way of free trade.

Proponents argue that success of the new talks--now in their climactic stage--could mean a bonanza to the world economy so large that it defies comprehension. Although some criticize these figures as vastly inflated, the Bush Administration contends that the U.S. economy alone would stand to gain $125 billion in just the first year--the equivalent of more than $600 for every man, woman, and child in the country.

A failure, adherents warn, would raise the risk of a new round of trade battles--precisely what the world does not need as the global economy begins to falter. Indeed, many economists blame the last great binge of protectionism, in the 1920s, for turning a garden-variety recession into the Great Depression.

Trade officials fear that without a worldwide agreement, countries will coalesce into three "trading blocs"--the European Community, the Americas and Asia--that will wage economic warfare against one-another, cutting off export opportunities for firms outside their respective blocs and making almost everyone the poorer.

But with the official meeting to wrap up a new agreement set for Dec. 3-7 in Brussels, the final days of trade talks in Geneva have turned into what former U.S. Trade Representative William E. Brock III calls "a thoroughgoing mess."

Brock was the leader who initially proposed--and argued most passionately for--these talks. As the Ronald Reagan Administration's top trade official, he had played the biggest role in getting them moving. Now he says ruefully: "I'm beginning to wonder whether my pride of parenthood is something I ought to brag about."

The key to success is for the leaders of the United States and other major trading nations to convince all sides that the benefits they gain will far outweigh the damage that some of their industries may suffer. The new trade accord is "a win-win situation, where there are conspicuous losers and a broad array of winners," asserts Robert Z. Lawrence, a Brookings Institution international economics specialist.

So far, however, indications are that much of the world remains unconvinced of that.

Recriminations are flying as the European countries refuse to make deep cuts in their farm export subsidies, and the United States insists upon special protection for some of its service industries. The Japanese, despite their position as the world's most formidable exporters, still will not open their own markets to rice imports. Now, a group of crucial agricultural exporting countries, including Australia, Canada and the United States, are threatening to walk out altogether.

And that is just the beginning. Even if the negotiating countries do strike a deal--which is far from certain--U.S. participation in the arrangement will hinge on approval of the accord by Congress, where special interests will be battling furiously.

"As difficult as it may be to reach agreement, it will be equally difficult, perhaps more so, to gain Senate approval of any final product," says Sen. Lloyd Bentsen (D-Tex.), who chairs the Senate Finance Committee under whose jurisdiction any new trade accord would fall. The situation in the House, if anything, is even more bleak.

Amid the self-interested squabbling, it is sometimes difficult to remember that free trade was an important part of the utopian future that allied leaders envisioned in the plans they laid just before the end of World War II.

At Dumbarton Oaks and Yalta, the leaders sketched out an international organization, the United Nations, that would settle international political disputes and make war unnecessary. At Bretton Woods, N.H., they set up the International Monetary Fund and the World Bank, creating a financial system designed to restore the economic health of war-ravaged countries. And in 1947, almost two dozen of the world's most important trading countries met in Geneva to launch the General Agreement on Tariffs and Trade, under which they would eliminate barriers that hindered international commerce.

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