That undiplomatic comment did not come out of the blue. The off-again, on-again haggling among 115 countries has exhausted even its most ardent advocates in Washington. After seven years of contention, negotiators in Geneva finally seem ready to close a deal that could boost U.S. grain exports, protect software from piracy and make it tougher for France to restrict Arnold Schwarzenegger films to preserve its “cultural sovereignty.” But influential members of Congress, unhappy with the results and worried that a fierce trade debate next year could derail health-care reform, are telling Clinton just to leave the existing GATT rules in place. If the negotiation isn’t finished by the Dec. 15 deadline set by Congress, “it’s not the end of the world if it simply expires,” says Sen. John Danforth, a Missouri Republican. “It might be a pretty good message.”
That wasn’t the sentiment back in 1986, when negotiators convened in Punta del Este, Uruguay determined to forestall rising protectionism by expanding the General Agreement on Tariffs and Trade. There’s widespread agreement that the 45-year-old GATT has not kept up with the times. it contains no rules to bar a country from keeping out foreign insurers or construction companies–no small matter when U.S. service exports are running at $190 billion a year. And it has gaping exceptions allowing countries to protect agriculture, textiles and clothing from foreign competition. Since the round began, though, higher unemployment in Europe, North America and Japan has chilled the enthusiasm for freer trade, while missed deadlines and angry words have only sharpened protectionist sentiments. The talks have been complicated by objections that environmental laws could be deemed unfair barriers to trade, an issue that wasn’t even on the negotiators’ radar screens in 1986. Clinton’s failure to have his chief GATT negotiator confirmed by the Senate hasn’t helped matters, leaving the talks to officials who have been preoccupied with NAFTA.
Meanwhile, much of the strange coalition that opposed NAFTA, stretching from Ross Perot to Ralph Nader, is preparing to fight approval of any GATT agreement. But this time, many of the business interests that helped pass NAFTA are also among the antis. Steelmakers, who enthusiastically backed NAFTA, worry that language in the preliminary GATT text will make it harder to win protection from subsidized imports. Textile companies, which see Mexico as a booming market, object that the United States might have to phase out quotas on clothing imports without requiring low-wage countries like India and Pakistan to accept U.S. cloth. Drug manufacturers, once among the biggest backers of a new GATT accord, complain that the pact won’t require developing countries to respect their patents. With a long list of critics and a short list of friends, “even a very good GATT agreement could easily be less popular than NAFTA,” warns Washington trade lawyer Jeffrey Lang.
Unlike NAFTA, whose importance lies mainly in strengthening a poor U.S. neighbor, a GATT success would give the economy a bang by increasing world trade. But with NAFTA in the bag and Clinton pursuing open markets in Asia, Washington no longer buys the argument that a GATT failure will drive the world into a trade war. Confidence that U.S. exports will keep growing, plus a rising impatience with France’s reluctance to accept big cuts in farm-export subsidies, have removed the urgency of striking a bargain by the Dec. 15 deadline. “The willingness to make changes that make a deal politically salable may be far less” than it was even a year ago, says former U.S. trade representative Carla Hills.
Walking away from GATT would resolve a political problem for Clinton. But the farm-subsidy wars, the restrictions on foreign investors and the patent and copyright problems that sparked the talks won’t just fade away. “These issues have to be addressed,” says Democratic Rep. Robert Matsui. “If we don’t address them, that means we’re going to see a lot of unilateral actions by individual countries.” Sooner or later, the United States and its trading partners will have to sit down and talk about breaking down those trade barriers, which are increasing in importance as services trade grows. If China enters GATT and other developing countries become more assertive, that conversation may be even more difficult tomorrow than it is today. That’s all the more reason to press on.
