BUSINESS/ECONOMY

Anxious world traders

PATRICIA BEST October 6 1986
BUSINESS/ECONOMY

Anxious world traders

PATRICIA BEST October 6 1986

Anxious world traders

BUSINESS/ECONOMY

It became known as the long stare. And for observers attending an agenda-setting meeting of the General Agreement on Tariffs and Trade (GATT) in Punta del Este, Uruguay, two weeks ago, it reflected the intransigence that plagues international economic relations. U.S. Secretary of Agriculture Richard Lyng and Willy de Clercq, the European Community (EC) minister for external relations, had been arguing during a long and testy session about the definition of an agricultural subsidy—a sensitive issue for the Europeans, who rely heavily on subsidies for their farmers, and for the Americans, who have been hurt badly by those subsidies. Eventually the two men stopped talking as they realized that agreement was impossible. Still, the issue was crucial to both sides.

Rather than let the subject drop, the pair stared at each other for a full 15 minutes without saying a word. It took another negotiator at the table to finally break the ice. And in the end the two sides arrived at a compromise on wording that goes to the eighth round of GATT talks, which begin later this month in Geneva.

A White House aide said later that the Americans were giving “serious consideration” to submitting the incident to The Guinness Book of World Records as the longest stare in the history of international negotiations. But U.S. representatives might easily surpass that putative record as their government pits itself against nearly every other nation on major economic issues in an increasingly acrimonious atmosphere. With a web of conflicting interests hampering real movement on many key issues, the world’s most influential bureaucrats and politicians have been meeting over the past two weeks at conference tables in Washington, Punta del Este and Scotland. The focus for much of the discussion has been on a growing global trade imbalance, which has most affected the United States. And the coming GATT round will take the next four years in a search for long-term answers to

problems in the $2.7-trillion annual world trade.

In Washington last week, finance ministers and central bankers from the five major industrialized countries, the United States, Japan, West Germany, Britain and France, gathered to discuss the value of the U.S. dollar and the United States’ gaping $174-billion trade deficit. The group, known as the G-5, had come together twice previously—in London last January and at the Plaza Hotel in New York almost exactly a year ago, when the participants agreed to stage-manage a significant

drop in the dollar. U.S. Treasury Secretary James Baker demanded that action as a way of boosting American exports. But it has not worked. While the greenback has fallen 40 per cent against the German mark and 55 per cent against the Japanese yen, the trade imbalance has continued to widen.

Now, the United States wants to tackle the problem from another angle. It wants its major trading partners— especially West Germany and Japan— to adopt policies that would encourage domestic growth, which American officials hope will trigger demand for more American goods. That would also address another American complaint: that the United States is alone in maintaining worldwide economic

growth. Declared a senior Reagan administration official just before the G5 met: “It’s absolutely essential that the United States get some help.”

Two weeks earlier, at Gleneagles, a Scottish luxury golfing resort, EC finance ministers had met to consider the plight of the United States. The Europeans emerged from their discussions saying that they were willing to grant an American request that they lower their interest rates—if the United States did not push its dollar lower. The European ministers expressed concern about continuing volatility in currency markets—the result of several statements by Baker that the dollar might have to slide lower as a way of boosting exports. But Europe’s concil-

iatory gesture appeared to be shortlived, as the trend-setting West German central bank, the Bundesbank, decided not to reduce its key bank rate. And before Friday’s G-5 meeting, observers said they expected the Europeans to argue that the United States should tackle its estimated $225-billion budget deficit as a way of correcting the trade imbalance. At the same time, both the Americans and the Europeans have singled out Japan as being particularly unco-operative. Tokyo has resisted demands that it, too, lower interest rates and increase imports.

Still, many analysts say that the most serious threat facing all trading countries comes from another source: rising protectionism in the U.S. Congress, and the inevitable dislocation that would occur if Congress succeeded in getting the United States to abandon its long-standing push for free-flowing world trade. The GATT meeting in Uruguay was a scene-setter for the official round of trade

talks in Geneva—expected to be the most far-reaching ever for the 92 member nations. The GATT was originally drawn up in 1947, in the aftermath of the Second World War, when industrialized nations concluded that a major new set of trade rules was needed. Setting the agenda at Punta del Este took five days of tough negotiating, including two all-night sessions. But in the end, the United States succeeded in including three major trade issues: agriculture, the service sector and so-called intellectual properties such as copyrights.

This week, another major economic conference—the joint annual meeting of the World Bank and the International Monetary Fund (IMF)—is under

way at the institutions’ headquarters in Washington. Central to the discussion is the struggle of developing nations to continue paying even the interest on more than $1 trillion in debt, owed mainly to Western governments and banks. Many observers expected the delegates to refine a proposal to have the IMF and the World Bank collaborate on increased surveillance of the economies of both debtor nations and industrialized countries. As well, Barber Conable, a former U.S. congressman who assumed the World Bank presidency last July, wanted to double the amount that the institution lends annually to developing nations to $30 billion by 1990 from the present $16 billion. Still, for the wealthy nations that must foot that bill, this week’s debate will serve as a diversion from the spreading trade wars.

PATRICIA BEST

WILLIAM LOWTHER

PETER LEWIS