A Launch for the Uruguay Round

By Stephen Koepp

Wintry rainstorms pelted the Uruguayan seaside resort of Punta del Este last week, forming an ominously fitting backdrop for the historic meeting of government ministers. Officials from 74 countries had arrived there to confront the ill wind of protectionism, which is threatening to freeze international trade and economic growth. The ministers, who at times donned Uruguayan wool sweaters and huddled around space heaters, struggled to agree on an agenda for a multiyear series of talks that they hope will create warmer trade relationships around the world. Declared Uruguayan President Julio Maria Sanguinetti as he opened the five-day meeting: "We have to decide whether we are going to promote active and vigorous trade with equal opportunities for all, or whether we will choose the path of trade wars."

After a week of tiring and often tense negotiations that ran well past midnight last Friday, the ministers resolved their differences and successfully launched the "Uruguay Round" of trade talks. Up until the last minute, delegates were haggling over such sticky agenda topics as agricultural subsidies and restrictions on trade in services. U.S. Trade Representative Clayton Yeutter, who staggered back to his hotel room at 5:30 a.m. Saturday and got only two hours of sleep before boarding a plane home, was ecstatic at * the outcome. Said he: "The launching of the Uruguay Round is a major victory for the principles of free and fair trade."

The umbrella for the new talks will be the General Agreement on Tariffs and Trade, a treaty created in 1947 and administered by a staff based in Geneva. The GATT group, which includes 92 countries, has staged seven epic rounds of trade talks, the most recent one dragging on from 1973 to 1979. The negotiations brought substantial reductions in tariffs, but GATT members thought it was time for another round. Reason: too many countries have circumvented the group's rules by raising a thicket of nontariff barriers, including import quotas, product standards and other obstacles to free trade. Said Leopoldo Tettamanti, the Argentine delegate to GATT: "We are in a mess."

The stakes are huge: some $2.4 trillion in annual exports of goods and services. World merchandise trade is expected to expand only about 3% this year, a sickly performance compared with the nearly 6% average annual growth of the 1970s. Protectionism is a prime reason for the slow pace.

The Reagan Administration, which generally neglected trade issues during its early years, was a prime mover in mounting the new talks. Congress and corporate leaders have put pressure on the Administration to stem the flood of imports into the U.S., which may produce a record trade deficit of $175 billion this year. Most members of Congress want to narrow that gap by imposing protectionist measures, which the President opposes.

The Administration sees the GATT round as a way to pre-empt Congress, since productive trade talks could open up foreign markets to increased U.S. exports. To cover every possible angle at the GATT session, the White House sent, along with Yeutter, a heavy-hitting team: Commerce Secretary Malcolm Baldrige, Agriculture Secretary Richard Lyng and nearly 60 other delegates.

The task of drafting a GATT agenda has produced months of bitter feuding. The U.S. pushed particularly hard for the GATT talks to include the topic of service industries, such as insurance, engineering and telecommunications, in which GATT has never established rules. America is strong in these areas, but U.S. companies face formidable foreign barriers. Several newly industrialized countries, notably Brazil and India, were opposed to the U.S. proposal on services. They fear that multinationals with advanced technology will overrun local industries before they get a chance to develop. In the end, the ministers decided to start talks on the services issue. But those negotiations will be held separately from the main talks on trade in manufactured goods.

The delegates also agreed that the Uruguay Round will tackle the bitter issue of agricultural subsidies, which have produced what GATT officials have described as "guerrilla warfare" among the exporters of farm products. A group of 14 countries -- Australia, Argentina and Hungary, among others -- have grown incensed at having to compete with nations that heavily support their agricultural industries, notably the European Community, which spends an estimated $25 billion a year to keep its farmers in business. Said Australian Prime Minister Robert Hawke: "This is the only opportunity to end the economic madness now pervading world agricultural trade."

The European countries, particularly France, wanted to avoid talking about any farm-subsidy reduction. But the U.S., which will spend approximately $26 billion on farm aid this year, insisted on putting the issue on the agenda. The subsidies have aggravated a glut of farm products, Yeutter pointed out.

All countries agreed that GATT needs to be strengthened so that it can do a better job of eliminating the increasingly varied and subtle forms of trade restrictions. Japanese officials, for example, have imposed peculiar performance standards on imported ski equipment, claiming that Japan's snow is "different" from the stuff on European and U.S. slopes. To overcome trade barriers as calculated as those, the GATT solutions will have to be creative indeed.

With reporting by Gisela Bolte and Frederick Ungeheuer/ Punta del Este