GRUFF GATT TALK

THE BLUSTER coming from the world's trade ministers as they prepare for the upcoming General Agreement on Tariffs and Trade talks is reminiscent of schoolboy bravado prior to playground fisticuffs.

But here the stakes are much higher. It's not bloody noses and skinned knees, but the future of the global trading system that is at stake.U.S. Trade Representative Clayton Yeutter says unless the other 90 GATT members agree to put agriculture and services on the agenda, the United States will pull out of the talks, scheduled to begin Monday in Punta del Este.

France, along with several other European Community members, blocked agreement on the draft agenda because it felt the draft was to "over- concentrat e" on the issue of export subsidies for European farmers.

Brazil and India say a more open market for services will lead to the collapse of their own fledgling telecommunications, computer software, banking and insurance industries.

Such talk does not make fertile ground for trade talks. The Reagan administration has, to date, warded off Congressional protectionism - and only just - by affirming the need for a new set of global trade standards. If the talks were to collapse, it's very likely an increasingly protectionist Congress will impose its own agenda.

"If this round is not launched," warns C. Fred Bergsten, director for the Institute for International Economics, "it will represent a dramatic blow to the trading system by giving a push to the already protectionist feeling in Congress."

Even if Congress can't muster enough protectionist votes to override the certain presidential veto, Mr. Bergsten says, the public pressure will be so intense that the administration will have to adopt a more protectionist stance.

Since World War II the United States has used GATT as the centerpiece for its trade policy. In the absence of such a framework, the United States would be increasingly reliant on bilateral trade pacts. The United States already has a free trade pact with Israel and one is in the works with Canada.

Used as a compliment to multilateral agreements, bilateral pacts are fine. They can even beused as a prod to move countries in the direction of freer trade. On their own, however, bilaterals are a risky proposition. Those countries with clout can bully their way into favorable bilaterals, while those with less leverage find themselves squeezed out of markets. The only recourse for such countries is to reciprocate, and close their markets to other countries. Of such agreements are trade wars made.

In the world trade arena, the United States carries the biggest stick. In wielding a big stick, however, the United States must avoid hitting itself over the head. Bilateral pacts that squeeze out developing nations, for example, strip away the only means such nations have for servicing their huge external debt - running a trade surplus.

Mr. Yeutter knows how important the multilateral framework is to the future of world trade, and his desire to see agriculture and services on the agenda is commendable.

The United States is a services economy. According to Robert Lawrence, an economist with the Brookings Institution in Washington, roughly 75 percent of all Americans work in service-related jobs and 57 percent of the U.S. gross national product is in services.

A nation like Brazil that has run a substantial trade surplus in manufactured goods with the United States - some $12 billion over the past three years - must be willing to make concessions for services. And pressure

from Mr. Yeutter is not so bad an idea. Brazil has much to lose if the talks collapse. The same goes for South Korea and India.

But if services seem a difficult item on the agenda, agriculture must be classified as impossible.

While many of the developing nations are pressing for a rollback in agricultural protectionism, the French are blocking attempts at removing agricultural export subsidies. For the French, the protectionist Common Agricultural Policy is the most beneficial aspect of membership in the European Community. Under CAP protection, inefficient French farmers are assured huge sums of money through export subsidies and to do away with such subsidies would be politically unfeasible for the French government. The same goes for the governments in Dublin, Athens and Copenhagen. EC officials say they will not allow an outside organization to dictate how they operate

internally. Yet, even EC officials concede the CAP needs reforming. Fully 70 percent of the EC's budget goes to the CAP and the huge surplus of agricultural products (the famous wine lake and butter mountain) are a source of embarrassment to Brussels.

GATT rounds take years to complete and, realistically, the United States can't expect much from the negotiations. Any progress in services or agricultural will be hard fought and may require rolling back protectionism elsewhere (steel? textiles?). But what's important right now is that the talks commence, for without a multilateral trade framework, the collapse of the world trade order is only just around the bend.

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