Last ditch try for Gatt accord: Industrial nations fear collapse of negotiations would spark trade wars and forestall world recovery

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The Independent Online
PRESIDENT Bill Clinton is planning a top-level diplomatic offensive designed to save the Gatt world trade talks before the Tokyo World Economic Summit in July.

There is mounting concern on both sides of the Atlantic that a final breakdown of the six-and-half-year Gatt negotiations could spark a bushfire of tit-for-tat protectionism and forestall a world recovery.

Washington officials worry that the summit is the last chance for the farming-to-copyright trade talks, which are probably doomed unless the Group of Seven leaders can break new ground in Tokyo on 7-9 July.

However, the US initiative is already being greeted with the sort of scepticism in other G7 capitals that underlines the difficulties of reaching a breakthrough. One official came close to accusing the US of bad faith, perhaps merely preparing its excuses for a final collapse of the talks.

US officials say they are painfully aware that a series of summits - beginning with the Houston summit in 1990 - have simply paid lip service to the need for an Uruguay Round deal.

The US Congress has just granted President Clinton an extension of the so-called 'fast track' authority on Gatt negotiations, under which he can present a package to Congress for simple approval or rejection, without risking its unravelling in Congressional committees. But the authority runs out in December, and there is little chance of a further extension.

In tandem with its drive on trade, the US will step up pressure on Germany and Japan to stimulate their economies and restore hopes for international recovery. Worried about the 34 million jobless in the industrial world, the US believes that without a more open trading system, any recovery would not create jobs. Pressure on Japan is likely to be stronger than on Germany, where interest rate cuts have helped placate US officials.

Top US officials will go Paris next week for the annual ministerial meetings of the 24-nation Organisation for Economic Co-operation and Development, a forum for debates on economic policies among a wide group of industrial countries. They will insist that without progress in the talks, trade disputes could proliferate, and prospects for economic growth recede.

In an attempt to keep up the pressure for an agreement on its key trading partners, the Clinton administration is planning to press for new measures by Japan to open up its markets, stimulate its economy and allow the yen to rise further against the dollar. The threat of US-Japanese trade tensions was highlighted last week, when Washington reported a dollars 10.2bn trade deficit for March, the largest for 10 years and more than half the shortfall in trade with Japan.

During the OECD talks, on 1 and 2 June, Lloyd Bentsen, the US Treasury Secretary, and Mickey Kantor, the US Trade Representative, will try to convince their counterparts of the need for progress in on Gatt.

Some officials have been encouraged by Japanese promises to cut tariffs on 800 goods at recent 'quadrilateral' talks between the US, Japan, the EC and Canada. Further quadrilateral talks are planned before the summit. But recent speeches by Mr Kantor linking trade to environment and technology policies as well as competition policies have underscored international unease at the US approach.