Toward Agreement

Five times since the end of World War II, the nations of the free world have laboriously negotiated tariff reductions, but the sum of those efforts has amounted to only a nibble at the barriers to expanding world trade and prosperity. Late last weekend, after four years of continuous and suspenseful bargaining, 53 non-Communist countries struggled to the verge of an agreement that should result in the biggest bundle of tariff cuts in history.

Much more than trade depends on the successful outcome of the Kennedy Round. Historically, it represents a last stage in undoing the damage to the world economy caused by the protectionism of the Depression in the '30s. Its failure, coming on top of Europe's new climate of economic nationalism fostered by Charles de Gaulle, could well turn the free world back toward commercial--and political--policies of suspicion and mistrust.

Bluff & Brinkmanship. The key agreements, hammered out in a crescendo of bluff and brinkmanship between the U.S. and the Common Market last week in Geneva, fell a long way short of John Kennedy's hopes when he persuaded Congress in 1962 to empower the President of the U.S. to chop tariffs by 50%. Though levies on many industrial items would fall by the full 50%, the average tariff cut will amount to no more than 25% on the goods that make up the $180 billion in annual trade among non-Communist countries. Washington figures that the reductions, phased over four years starting in July, will add at least $3 billion a year to that volume but leave the total balance of U.S. imports and exports about where it stands. The effects will be felt by nearly every segment of the U.S. economy. Imported Volkswagens, for instance, will probably cost less to the U.S. consumer, as will French cheeses, Swiss watches, Japanese cameras, Italian ceramics and Hong Kong silk suits. American farmers, on the other hand, expect bigger markets abroad for such items as cotton, tobacco and soybeans.

Because of the June 30th expiration date of the Trade Expansion Act, which enables the U.S. to cut its import duties across the board, the Kennedy Round negotiators came under relentless pressure to end the marathon talks last week to allow time for the complex documents to be prepared for President Johnson's signature. Much of the delay was caused by the Common Market team, led by diminutive Jean Rey, a Belgian lawyer who heads EEC external affairs. Again and again since last fall, Rey stalled the bargaining in order to seek fresh instructions from EEC head quarters in Brussels. As last week began, even persuasive Eric Wyndham White, the British director general of the General Agreement on Tariffs and Trade, which administers the Kennedy Round, was unable to get Rey to commit himself to a final deadline.

At one point, the tensions grew so great that William Matson Roth, a millionaire San Francisco shipping executive who succeeded the late Christian Herter early this year as chief U.S. negotiator, angrily threatened to break off negotiations and return to Washington. That impasse, which might well have doomed the Kennedy Round to failure, was resolved when Nils Montan, chief Scandinavian negotiator, persuaded Roth and the Common Market's Rey to lunch with him at the Geneva Intercontinental Hotel. Over filet mignon de veau and a bottle of 1962 Chateau Capbern St. Estephe, tempers cooled. Roth promised to stay in Geneva; Rey agreed to quit stalling and wind up the negotiations promptly.

The Case of Dye. Major stumbling blocks remained over freer trade in grains and chemicals. But Roth, in a dramatic shift in the U.S. position, withdrew his demand for guaranteed access to Europe's grain markets. Reason: the best offer from the Common Market amounted to less grain than American farmers already sell to the Six. Still, the U.S. insisted that reluctant Europeans join in creating a massive food-aid program for underdeveloped countries, which would increase world demand for U.S. wheat. For its part, the Common Market demanded that the U.S. get rid of its 1922 law that bases tariffs on certain chemical imports, drugs and rubber footwear on the American selling price of those products. The result is extraordinarily high import duties--up to 172% in the case of yellow vat dye-but only Congressional action can abolish the system.

At week's end, as Rey returned once more from Brussels with final instructions, that haggle narrowed down to how much European chemical tariffs should be sliced before the American selling price is repealed, and how much afterwards -- provided Congress agrees.

"I think," says Rey, "that we did pretty well." There was still the question of how big Europe's contribution to food aid would be and whether the Common Market could be induced to cut its du ties further on such farm produce as meats, canned fruits and vegetables.

Despite some probable disappoint ments when and if the tariff cuts take effect on the scale indicated by the final bargaining, the free world should move a step closer to economic unity.

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