The tough Gatt going

Last-ditch efforts are under way to wrap up marathon talks on a world trade agreement ahead of US elections. But why is a deal so hard to conclude?
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THERE is a joke buried somewhere in the 450 pages of the Gatt Final Act, according to one official, and a prize will be given to whoever discovers it. Nobody has yet. But then the people who have dedicated the past six years to Gatt have little hope of ever finding anything remotely entertaining about the thing. For this is The Negotiation That Time Forgot.

Ministers, negotiators and associated hangers-on have trekked from the sun- drenched beaches of Punta del Este in Uruguay to Geneva to Montreal to Geneva to Brussels and back to Geneva in pursuit of this elusive agreement. No dice. Deadlines have been and gone, with nothing much to show apart from a stack of airline tickets.

What is particularly galling is that the artificial deadlines for reaching a deal are usually set at the end of the year and the meetings are then held in cold, rainy northern cities. Connoisseurs remember the 1990 meeting at the Heysel stadium in Brussels. Five days of meetings; five long nights of disagreement; no result. And it snowed.

A settlement is now a mere two years overdue. In the process, Gatt has cultivated a finely honed, long-term and long-distance tedium; there is something almost Zen-like about it. What is particularly, exquisitely dull is that over six years nothing has really happened. Amid the crumbling of the post-war order, Gatt is a laudable example of continuity and stability. The Soviet Union has disappeared, the Gulf war is over, Yugoslavia has disintegrated and still the 105 negotiators cannot decide what to do about farmers.

Six years ago, everybody said agricultural trade would be difficult to agree. It still is, and the newspaper stories written six years ago still look as good as new. Or they would be if anyone read them. The arguments are intricate, detailed and dull, no matter how important. They boil down to disputes over a few million tons of cereals and beef.

But for real tedium, concentrated and intense, you cannot beat hanging around at the meetings themselves. In the hall of Gatt's elegant but austere headquarters on the shores of Lake Geneva, there are normally more reporters than negotiators. They sit on the stairs or lounge in the corridors, stealing each other's cigarettes. It strikes an odd contrast with the workerist murals on the walls, which depict stout-hearted sons of toil in overalls building and making things. These date back to when this was the headquarters of the International Labour Organisation, now housed in a grey palace up the road.

The journalists swap stories about the past six years. Some have retired. Others have got married, divorced, changed newspapers, left the business and come back again. Nothing changes.

Television crews have a particularly miserable time. About the only thing to film is the occasional negotiator on his way to the lavatory. Gatt is not what you would call a visual story, since most of the action takes place behind closed doors.

Action is really a bit of an overstatement. 'You think it's bad out there,' said a whey- faced negotiator earlier this year. 'We have to sit here eating stale sandwiches and going over the same points hour after hour, day after day, year after year.' Arthur Dunkel, the Gatt supremo, is alleged to have a secret punishment room where he takes recalcitrant negotiators and puffs pipe smoke at them until they capitulate.

The only saving grace of these gatherings is that farmers can always be counted on to make a bit of trouble, though even they seem to be running out of enthusiasm. Earlier this year, there was a group of gloomy Norwegians picketing the Gatt gates. One of them had inscribed 'It is too late to be pessimistic' on his business card, a good motto for the negotiations. The bunch from Switzerland and France were a bit jollier, handing out glasses of Chateau Gatt wine and inflammatory press releases. The presence of fractious farmers is curiously uplifting, as it makes everyone feel important, however briefly. The ever-cautious Swiss police roll out the fire hoses and the Gatt security guards try to look menacing. There is a bit of jostling and shouting, the traffic is held up for 10 minutes, then everybody goes home. We are on our own again.

There are lobbyists for free trade, who support the Gatt. They are normally well- heeled people who do their lobbying through the columns of serious newspapers or in the comfort of their offices in the smarter streets of Washington DC. You do not see free traders waving flags in the streets of Geneva. This is a shame, as they could have a good punch- up with the farmers. The farmers would beat the hell out of the free traders and then perhaps the whole thing would be over. -

Everything you ever wanted to know about world trade deals but were afraid to

ask

Q WHAT IS GATT?

A. The General Agreement on Tariffs and Trade is a binding agreement between 105 governments that together account for 90 per cent of world trade. Its aim is to encourage trade by reducing barriers such as quotas and import duties. It is not a hard-line free trade organisation: in some circumstances it does permit protection against imports.

Gatt operates in three ways:

It provides a set of rules governing trade behaviour;

It acts as a forum for negotiations to liberalise trade; and

It is a 'court' in which governments settle their differences.

Q. Where does it live?

A. Gatt's headquarters is in Geneva. It has a permanent staff of 400, and its director-general is Arthur Dunkel, who is Swiss. Its staff monitor the various agreements, and watch out for national policies that might violate them. Trading blocs such as the EC act as a unit. Although ministers meet occasionally, most negotiations are conducted by special representatives or ambassadors.

Q. What is the Uruguay Round?

A. Since it was founded after the Second World War, Gatt has held eight 'rounds' of negotiations to liberalise trade further. The number of countries involved has grown from 23 to 105. The first five rounds were concerned solely with tariffs (quotas were banned from the beginning).

The so-called Kennedy Round in the mid- Sixties also set up an anti-dumping code, designed to stop companies selling products abroad for less than they did at home.

The Tokyo Round, which lasted from 1973 to 1979, attacked non-tariff barriers. These included public buying policies that discriminated against foreign suppliers, the use of technical standards as a way of blocking imports and the use of subsidies to make sure home-produced goods could undercut imports. They included devices such as France's decision to funnel all video recorder imports through a tiny customs post at Poitiers.

The Uruguay Round, which was launched in South America but now trundles along in Geneva, was started in 1986. It has been trying to hack away further at tariff and non- tariff measures. It has also been looking for the first time at patents and copyright; at foreign investment, which is increasingly a substitute for direct trade; at trade in services; and at agriculture. It also contains a new system for beefing up the grievance procedure.

The round should have been wrapped up at the December 1990 meeting in Brussels. But the negotiations broke up when ministers could not agree on reducing agricultural subsidies, and since then it has been deadlocked.

Q. Why does Gatt matter?

A. At the end of the 18th century, Adam Smith promoted the view that the more trade there was, the wealthier the world would be. It allowed countries to specialise in what they were good at, he said, and to buy what they were not so good at from abroad. Yet for much of the past 200 years there has been a battle between those who are for and against free trade. When times are good, the free traders tend to hold sway; in downturns protectionists move ahead.

In Britain protectionism was boosted for another reason. Joseph Chamberlain, the colonial secretary, wanted to bind the empire closer in the wake of the damaging Boer War, and decided Imperial Preference - a system of tariffs that discriminated against products from elsewhere - would do the trick.

In the 1930s countries reacted to the Depression by erecting ever-higher tariff barriers and more restrictive quotas. There is an argument that without the 'glue' of trade, the drift towards war gathered speed more rapidly. The link between trade and peace is, to many, overwhelmingly the most important single reason for supporting Gatt.

If Adam Smith was right, the lowering of tariffs under Gatt's auspices has contributed to the spectacular increase in the wealth of nations since the Second World War. As a truly international organisation, it is also the only one that can resist the dangerous division of the world into trading blocs.

Developing countries, and those in Eastern Europe, are watching Gatt's progress anxiously. They, more than anyone, need to be able to export freely. Since the 1970s, developing countries have been taking great strides towards liberalisation, while the back- sliding has tended to come from the West.

On the corporate side, companies that operate worldwide need Gatt most. For them, a restoration of barriers would be disastrous.

The Uruguay Round should bring a new layer of benefits, particularly through the liberalisation of trade in services. These account for 19 per cent of world trade: if the round is signed, banks and insurance companies will operate freely across national borders; national telecommunications monopolies will be dismantled; and shipping and civil aviation would be liberalised. All these would be particularly good for Britain.

The world recession has already led to a slowdown in trade. It grew last year by 1.5 per cent, the smallest rise since 1985, and desperately needs the boost an agreement should bring. The Americans reckon it would add dollars 4,000bn to world output. No one can say what would happen if Gatt collapsed. But the historical precedents are not encouraging.

Q. Why is Gatt so boring?

A. Because nothing ever seems to happen.

Q. But has it been successful?

A. Gatt was introduced to encourage countries to make trade, and not war. In many respects it has worked. By the end of the Tokyo Round, the average tariff on manufactured products in the nine leading industrial markets was 4.7 per cent, compared with 40 per cent when Gatt was founded. World trade has grown at an unprecedented rate since the war: Gatt has undoubtedly played a vital, if unquantifiable, part.

Gatt's effectiveness has, however, been undermined by the formation of trading blocs. These are allowed, even though they break the 'most-favoured nation' clause, which insists that members treat each other equally. Gatt is also powerless against 'gentlemen's agreements', such as those limiting Japanese car imports into European countries. Because they do not officially exist, they cannot be banned.

Q. What is the current sticking-point?

A. Agriculture has always been the most heavily protected industry, not least because farmers have always been politically influential. Both the US and the EC spend billions of dollars subsidising their farmers. There is a third bloc, the Cairns Group of leading agricultural exporters such as Australia and Argentina, which do not subsidise.

The Americans and the Cairns Group have been trying to reduce the level of food subsidies. The EC has been resisting, and since 1990 the two sides have been throwing proposal and counter-proposal at each other. The subsidies issue is complex, as farmers are supported by a variety of import barriers and export subsidies. Some Europeans see the issue as fundamental: the Americans are trying to undermine the Common Agricultural Policy, and the French (the agricultural superpower) do not like it. The powerful farming lobby showed its displeasure with the EC during the Maastricht vote. The French have been backed up by the Germans (who have a small, inefficient farm sector) and the Irish.

The Europeans have been accusing the Americans of dragging their heels over trade in services. As part of their negotiating stance, the Americans are balking at an agreement covering shipping, financial services, air transport and telecommunications.

Although the issues and sums involved are trivial compared with the overall benefits of the Uruguay Round, an agricultural agreement is essential to the whole round, because without it other agreements will be blocked. Argentina and Brazil are refusing to sign the clauses liberalising trade in services unless a farm deal is struck, for example.

Q. What's all this about oilseeds?

A. As the summer ground on, a new agricultural battle broke out. Gatt ruled against a new EC regime to subsidise oilseeds - such as soya bean, sunflower and rapeseed. The US said that the subsidies were costing its soya-bean farmers dollars 1bn in lost sales and that it would therefore levy tariffs on dollars 1bn of food and drink imports from the EC. The Americans have been insisting that the EC agree to binding arbitration on the oilseed question - a demand the Europeans have resisted.

The row has been a focus for all the simmering tensions in the Uruguay Round. Carla Hills, the US trade representative, said it showed the EC was treating Gatt with 'disdain'. The Europeans replied that it was now the Americans being driven by politics.

Q. Will the Uruguay Round collapse?

A. The Americans and Europeans have been playing a dangerous game of brinkmanship. Although George Bush has not triggered the punitive tariffs, he has raised the stakes by increasing export subsidies on wheat by dollars 1bn.

As the US presidential elections approach, the tension is rising to the point where Gatt is almost interesting. On Monday night a 21- hour session broke up, but both sides agreed the gap had been narrowed. But by Thursday Mr Bush was saying the US had 'stretched as far as possible' in the negotiations. Jacques Delors's position seems to be hardening. A rabbit may still be pulled out of the hat. But we have been saying that for six years.-

(Photograph omitted)

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