Trade Disputes Could Stop New GATT Deal Cold

THE seven-year struggle to reach a new multinational trade accord is about to end - possibly in failure, trade experts say.

The Uruguay Round of trade negotiations under the 108-nation General Agreement on Tariffs and Trade (GATT) are "at a truly critical time," notes former United States Trade Representative Clayton Yeutter.

Washington trade consultant Chris Whalen is more pessimistic, stating the round "is going to be allowed to die in the crib."

Trade relations received another jolt Feb. 1 when US Trade Representative Mickey Kantor announced the US would bar government purchases of certain products from some or all European Community nations if the EC does not end discrimination against US goods by March 22.

Arthur Dunkel, director of the Geneva-based GATT, admits the talks will not be complete by March 2, the target date. After March 2, President Clinton would not be able to get a GATT treaty through Congress before "fast track" (no amendments) authority expires on May 31. The new administration has yet to signal what it intends to do about the stalled GATT round. However, getting Congressional approval to extend the "fast track" authority is considered dubious.

"As a practical matter the new administration will have to wrap it up this year or forget it," says Mr. Yeutter. The six-year-old round aims at liberalizing trade in many areas, such as services and agriculture, which will help the US. It also would open up textile markets, which may hurt US companies.

World trade problems include:

* There are signs of stronger protectionist sentiments. For example, US auto manufacturers are pushing for higher tariffs on imported minivans and four-wheel-drive vehicles. If the government goes along, it will add thousands of dollars to imported vehicles.

* The US announcement that it would bar federal purchases in telecommunications, power generation, and transportation equipment was in retaliation against an EC directive that gives preferences to companies from within the EC for such purchases. The US has tried for a year to reverse the directive.

* On Jan. 27 the Commerce Department ordered additional tariffs on steel produced in 19 countries, including Canada, Mexico, the EC, and Japan. Days later the Canadian government placed provisional tariffs on US steel. The EC has also promised to retaliate.

* Sen. Bennett Johnston (D) of Louisiana has introduced a bill to impose a tariff on imported oil if the price falls below $25 per barrel. Such a levy, says Yeutter, "would certainly be challenged in the GATT" and "there is a high probability" the US would lose any challenge.

The administration position on some of the key GATT issues remains unclear. During his confirmation hearings, Mr. Kantor said he supported continuing negotiations. But Kantor also said the Clinton administration would want to review progress so far to see if it needed a tougher approach. Yeutter advises that it would be a mistake to reopen negotiations on GATT issues which have already been decided. In order to get an item through GATT it must be approved by "consensus." If one nation disputes a change, it is unlikely the change will take place. "If we say we would like to start over again on an issue, this position would generate enormous animosity and cost the US.... Even if the GATT members acceded to our wishes, we would pay the price elsewhere," Yeutter warns.

Transition during trade negotiations is a difficult proposition. In 1976, President Carter's team inherited unfinished GATT talks. President Ford's negotiators were battling the Europeans over the issue of subsidies. After the round was completed, "both sides walked away believing opposite things," says Judge Morris, senior policy analyst for trade at the National Association of Manufacturers in Washington.

In 1963, the US and the European Community began the "chicken war." The Europeans, intent on protecting their domestic industry, imposed tariffs on US broiler imports. The US retaliated by putting tariffs on light and medium weight trucks. Today, those same tariffs keep imported chickens - a major industry in Arkansas - out of the EC and lightweight trucks out of the US.

In fact, the protected EC farmers now produce 25 percent more chickens than the EC consumes. It exports those birds to markets formerly dominated by US exports. "They've taken away our Middle East and now our Far East markets," says Bill Roenigk, vice president, National Broiler Council. Ending such export subsidies is one GATT round goal.