View from City Road: Gatt deal still the main issue

The trade truce between the US and the European Community agreed on Wednesday is an uneasy one at best. Describing the deal he struck with Washington as a 'de-escalation,' Sir Leon Brittan, the EC trade commissioner, acknowledged what is usually left unsaid: there is already a trade conflict between the two, albeit a Cold War, and has been for years.

Although the unresolved problem of telecommunications appears to be a stumbling block, it could yet be isolated from the broader trade issue. There remains, however, another very worrying element.

It seems to show a growing willingness in both Brussels and Washington to test each other's mettle. The EC wants to show it is not a junior partner; the US, to demonstrate that its economic weight still makes it the primary power in the world trading system. There are plenty of other issues lying around that can be exploited by both sides. Perhaps, looking on the bright side, this is just the reaction of a new European Commission to a new US administration.

What is still at stake is the success of the Gatt round. France and Germany are at odds over the next steps in Gatt. Nor has the US thrashed out all its internal problems over trade. Beyond this, there are further problems over agriculture: the EC yesterday lashed out at Canada, Korea and Japan, which have hitherto sheltered behind the larger transatlantic conflict. Getting a deal in Gatt requires both sides to avoid the posturing that has characterised the past few months and get down to business in Geneva.

So long as the EC and the US keep their eyes on the prize of a global trade pact, the system can, however, withstand these periodic explosions.