Prospects Improve for Breakthrough in Trade Talks

HOPES are rising that, with a little extra time, more than four years of international negotiations will result in a package of growth-inducing incentives to the world trading system. Officials and negotiators with the 105-nation General Agreement on Tariffs and Trade (GATT) say they are increasingly optimistic that the complex multilateral talks - called the Uruguay Round because they began in that country in 1986 - can end in an agreement that will keep world trade expanding.

GATT Director-General Arthur Dunkel told a group of world economic leaders gathered in Davos, Switzerland this week that he hoped ``this time next year you will hear reports of how the results of the Uruguay Round are being implemented.''

The Uruguay Round broke down at what was to be the final ministerial session in Brussels in December over European Community (EC) resistance to agriculture trade reforms demanded by food-exporting countries. After a series of talks last month Mr. Dunkel says he senses a new preparedness among major trading partners to compromise.

Reasons for optimism

Observers point to several key reasons for the renewed optimism:

The EC this year has embarked on a substantial reform of its Common Agricultural Policy (CAP). The reform should slash the EC's spiraling farm subsidies, which remain the principal target of a large group of farm exporters, including the United States, Canada, Australia, and many developing countries.

The Gulf war has given new meaning - and urgency - to signs of international cooperation. Some officials say the US is especially keen to conclude successful negotiations that can show how developed and developing countries can work together.

Importance of trade

Ironically, an international economic slowdown is providing evidence of the importance of world trade in development. World trade, while still expanding, is thought to have fallen below past years' growth rates of 6 and 7 percent. Countries with developing exports are among the first, and hardest, hit.

``It's not anything concrete, but the feeling is that in the face of recession or threatened recession, and in the face of the Gulf war, people are more determined now to take the steps to push back an economic slowdown,'' says one GATT official.

Yet a major deadline looming on the horizon is March 1, when the so-called ``fast-track'' legislation in the US Congress runs out. Under current law President George Bush must present the GATT trade package to Congress by the first of next month if it is to be eligible for a ``yay or nay'' vote without amendments.

The ``fast-track'' vote is considered obligatory for the Uruguay Round's success. With prospects for agreement by the March 1 deadline waning even as hopes for the round are reborn, US chief trade negotiator Carla Hills says she is willing to seek a fast-track extension if she can provide Congress with tangible signs of progress in the talks.

Mrs. Hills probably has little concrete evidence yet. But the most promising indicator in US eyes is the EC's proposed agricultural policy reform. The EC is proposing among other things to reduce price supports, which make Europe's expensive produce exportable, in favor of direct assistance to farmers.

Yet even if adoption of reforms goes smoothly it will be at least next year before results are seen. And smooth-sailing is far from guaranteed. Already French agriculture officials, who represent the EC's major exporters, say the proposed reforms are unacceptable.

It was largely a strong French-German front that kept a divided EC from bowing to international demands at the December GATT talks. But this week German Economics Minister J"urgen M"ollemann said his country favored a successful Uruguay Round to perpetual harmony with France.