SEATTLE: STORM CLOUDS AND A WAKE-UP CALL

SEATTLE: STORM CLOUDS AND A WAKE-UP CALL

Storm clouds continue to gather over Seattle as President Clinton prepares to open the World Trade Organization meeting that's expected to launch a new round of negotiations to lower trade barriers.

The activities that will capture media attention involve thousands of demonstrators in the streets protesting America's liberal trade policy, with the WTO as archvillain.The main event, however, will begin Tuesday inside the conference hall, where 135 trade ministers will try to reach agreement on the agenda for a new round of multilateral negotiations. And the outlook is not favorable.

The United States opposed a new round altogether during 1998 because it would be too overloaded with contentious issues and take too long to complete - perhaps eight years, like the previous Uruguay Round. Instead, it thought new trade liberalizing initiatives could better be dealt with on an issue-by-issue basis, like the recent financial services and basic telecommunications agreements.

In January, the United States reluctantly agreed to a more integrated new round, but only if the agenda were narrowly focused. Essentially, it wanted the agenda limited to increased market access for agriculture and services and reduction in nonagricultural tariffs. On this basis a relatively quick agreement could be achieved in three or four years.

Since then, everything has moved downhill toward a comprehensive agenda for a round that will go on to mid-decade or beyond. Wide differences still exist on almost all major agenda items. The politically expedient tendency has been to paper over differences through all-inclusive general language, leaving the real negotiations for later.

There are two make-or-break issues, where the United States is isolated, that could lead to impasse this week.

The first is to put anti-dumping on the agenda so as to revise current procedures and reduce protectionist abuse. Japan and some developing countries insist that anti-dumping be on the agenda. The European Union and almost everyone else agrees to do this, but the United States, in the face of strong pressures from the steel industry and influential members of Congress, categorically opposes inclusion.

The second issue is core labor standards. The United States alone proposes the establishment of a WTO working group to examine how labor standards should be related to WTO commitments, including the possible use of import restrictions to punish countries that do not measure up to standards.

Developing countries are united in opposing this U.S. proposal, fearing protectionist intent by the AFL-CIO in particular. The EU, Japan, and others support the developing country position.

Ironically, the anticipated Chinese entry into the WTO during the round could be the kiss of death for labor standards in the WTO, since China does not comply with core standards and would never permit the threat of restrictions on its exports for noncompliance.

With this stormy prospect, the two central questions about the meeting are: Will it succeed in launching a reasonably focused new round? And, if not, how much difference will it make?

The Seattle meeting will almost certainly not reach agreement on such a narrowly focused and expeditious agenda. The most likely outcome is a far more comprehensive agenda, with vaguely defined objectives, that can be expected to drag on much longer than the three-year timetable disingenuously proclaimed by ministers.

There is also a good chance the meeting will reach an impasse, especially if the United States remains isolated on anti-dumping and labor standards. The meeting would then end with the establishment of a preparatory committee to continue work on the new round agenda, for adoption at the next WTO ministerial meeting in 2001.

It could also end with the official opening of the new round, while leaving the specification of the agenda for later, which amounts to almost the same thing.

This leads to the second and more important question of how much the Seattle outcome really matters. The real negotiations will not begin before 2001, when a new president is in office and has reconstituted majority support in the Congress for further trade liberalization, including fast-track trade-negotiating authority.

The answer is that the Seattle outcome does matter, but not in the way most observers see it. Whatever the outcome at Seattle on the agenda of the new round, it can be renegotiated by the new president, especially in the context of restored U.S. leadership for free trade that has always prevailed in such negotiations.

What does matter at Seattle is the confrontation in the streets and the major differences in the conference hall over a liberal trading system that is currently adrift and imperiled. However the Seattle meeting concludes, this will be the essential message.

An unholy coalition of protectionists, economic nationalists, environmentalists, and anti-globalization activists has seized the day against liberal trade, to a large extent moving into a power vacuum vacated by the heretofore dominant U.S. liberal trade establishment. A disabled Lexus amid flourishing olive trees!

Seattle will thus provide a salutary wake-up call for those who see open trade and investment in the U.S. national interest. It will provide serious food for thought, and action, for both major political parties in drawing up their election promises in 2000.