As the dust settles from the fight over NAFTA, eyes are turning to the next major battle in the international trade arena: the General Agreement on Tariffs and Trade. The latest round in the negotiations to liberalize world trade have stumbled along since 1986, when they were launched in the seaside resort of Punta del Este, Uruguay. Designed to last five years, the GATT talks have missed deadline after deadline, leading to quips that the treaty ought to be renamed the General Agreement to Talk and Talk.
Still another deadline is approaching; on Dec. 15, President Clinton's negotiating authority from Congress will expire. If no agreement is reached by then, the talks will collapse--and that means the end of efforts to bring agricultural trade, intellectual property rights and a host of other crucially important issues under international regulation. Their success or failure, in fact, could have an impact on global prosperity that would dwarf that of the much fought over North American Free Trade Agreement.
But while GATT -- unlike NAFTA -- has never stimulated much passion in the United States, it has inflamed politics in France, which seems to be doing everything it can to scuttle the negotiations. France's politically powerful farmers, fearful of losing their life-support system of government subsidies, have been pouring into the streets to protest the accord, and the government has been sympathetic to their cause.
French opposition could spell disaster for the talks, and for the future of the international trading system. This round of talks (known as the Uruguay Round) is especially important, since it was designed to bring a number of new areas under international trade regulations. Agreement has been reached on about 85 percent of the goods and services covered, but the key areas of agriculture remains contentious, and the French are digging in their heels.
The stakes are high. "Compared to the GATT, the North American Free Trade Agreement is small potatoes," says Allan H. Meltzer, an economist at Carnegie-Mellon University in Pittsburgh. Whereas NAFTA is a regional agreement to open trade between the United States, Canada and Mexico, GATT is global and involves the most wide-ranging revision of world trade rules since President Truman over saw the establishment of the current system after World War II. That system paved the way for unprecedented prosperity among Western nations in the decades that followed.
Ireland's Peter Sutherland, the director-general of GATT, has flat out called the issue "the most important and urgent issue on the world agenda today." Adds Meltzer, "The completion and successful ratification of the Uruguay round would be a strong signal that the world intends to move in the direction of freer trade."
According to a new study by the Organization for Economic Cooperation and Development, a successful GATT round would inject $270 billion into the world economy by the year 2002. It would provide a global framework for economic and political stability. Growth and market access are crucial for the strengthening of economic reforms in Eastern Europe and the former Soviet Union, and in the developing world as well.
Free trade has been at the center of U.S. policy throughout the post-World War II period. But the international climate has changed since the Uruguay Round started. With the major economies stagnating, the world economic climate has been growing increasingly protectionist and nationalistic. GATT skeptics such as President Francois Mitterrand of France argue that the agreement no longer is relevant in a world in which factories can relocate at will. The developed countries, the argument goes, can simply no longer compete with the developing countries, with their plentiful supply of cheap labor, lack of social benefits and weak environmental provisions.
Some go even further. According to the French newspaper Le Monde Diplomatique, the "concept of free trade is a simple instrument of American power. …