After nearly four years of deadlock and stagnation, the wide-ranging international trade talks here finally have begun to pick up momentum. The negotiations will decide the rules for world trade for at least the next 10 years.
American trade negotiators here - who have been influential in setting the pace so far - hope that the bulk of the most difficult issues in the negotiations can be ironed out next summer and the whole package tied up by late fall. Although some are less optimistic, many negotiators from other countries fell that such a timetable is possible.
Although industrialized countries' concerns over high unemployment and a sluggish recovery from a severe recession have created a poor atmosphere for discussing more liberal trade, negotiators have managed in recent months to come up with a timetable and strategy which focus on longer-term goals. One trillion dollars in annual world trade is at stake.
For example, the key to breaking the long-standing deadlock recently between the U.S. and the nine countries of the European Common Market over tariff reductions was a suggestion by the newly arrived head of the U.S. negotiating team here, Ambassador Alonzo McDonald, a businessman, that the cuts be made in stages over 8 to 10 years. To further placate European fears over their current economic problems, McDonald suggested that the later stages of cuts may be made only if economic conditions were favorable. The Americans and Europeans also compromised over the proposed rate of the cut - 44 per cent, plus or minus 5 per cent.
Unlike trade conferences of the past, however, this round of talks is concerned more with nontariff barriers to trade. These include health standards, government buying policies, and methods of determining an import's value for customs which are sometimes used as screens against foreign competition, and various tax and monetary incentives governments give to exporters to boost sales abroad.
Since the accelerated timetable for the talks was agreed to last summer, work has been progressing well on meeting the Dec. 15 deadline for draft versions of nontariffs barriers covered by trading codes, according to negotiators.
The schedule calls for proposals on tariff cuts and trading partners' replies to demand on changing nontariff barriers to be on the table by Jan. 15 for the next round of "torturous horsetrading," as one negotiator puts it. The Nov. 1 deadline for making demands on agricultural products and certain nontariff items was met.
Officially, 97 countries are participating in the talks, but the maze of contacts and bargaining going on here revolves around a much smaller circle, including the U.S., the Common Market countries, Japan, and a few articulate and well-staffed delegations from developing nations. Negotiators expect that the final agreement will include a number of special preferences and exceptions for poorer nations, but also will require some of the better-off Third World countries to give up some concessions in striking deals with industrialized nations.
As a way of narrow differences among countries, this session of the talks have moved away from large formal meetings to smaller, informal consultations. Trade negotiators frequently are seen shuttling about town, running from business lunch to trade mission, with their brief cases full of draft versions of trade rules and demands and possible counteroffers on trade barrier reductions. The idea is to resolve as many differences as possible before the proposals reach the table for the final round of negotiations.
Much of the bargaining these days centers on new rules to reduce nontariff barriers, such as import regulations and exporter incentives, or subsidies, which have become increasingly important sources of protection against foreign competition as tariffs have declined over the last 25 years. According to European sources, further reductions in tariffs depend in part upon progress on nontariff barriers.
But the "toughest nut of the whole negotiation," as ambassador McDonald puts it, is the impasse over the use of subsidies such as tax incentives, special interest rates and direct payments by governments to exporters to boost sales abroad, and "countervailing" duties. These are taxes on imports raised in retaliation against the subsidies.
Many negotiators here complain that before the U.S. imposes retaliatory duties, it does not determine whether the export subsidies of its trading partners actually are causing damage to American industry. Such a test is specified in the GATT rules, but the U.S., noting that the GATT considers valid those laws made before the trade agreement was signed, uses instead a 19th Century law which grants manufacturers extra tariffs to meet foreign tax concessions.
There is speculation that the U.S. may be willing to come into line with GATT rules and definitions on subsidies.
But so far, there has been virtually no progress. "Congress people enjoy their subsidies," says one negotiator. Finance ministers around the world try to eliminate the incentives only to run into opposition from other government ministries for various social and political reasons, he continues. Some negotiators feel that perhaps progress in other areas will improve the atmosphere and nudge the delicate subsidies question along.
"It is too early to talk of failures," says a trade diplomat here, "and it's a success that we're still here (in view of the gloomy economic climate)." The outcome is still a question, and it could be jeopardized by protectionist actions at home beyond the control of the negotiators.
But as U.S. negotiator McDonald optimistically points out, comparing the ordeal to climbing the mountains surrounding Geneva, "There are a lot of arguments over where we put out picks, but we don't get so mad that anyone gets pushed off, because we're all tied to the same rope."
According to the headquarters of the General Agreement on Tariffs and Trade, the agency which surpervises the trade rules, about 30 basic types of nontariff barriers - and even those which seem the least debatable, such as government health standards on imports - can be used to reduce or eliminate unwanted foreign competition.
Argentina and three other South American countries, for example, are charging that four European countries are keeping out their beef imports not due to a danger of foot-and-mouth disease in the beef, as the Europeans claim, but because the Common Market wants to protect its farmers who have produced too much beef. A Common Market veterinary committee is studying the situation.
While there has been considerable progress in other areas on a new code for nontariff barriers, negotiators still have not found a way to bridge differences on the so-called "safeguard" clause. This clause allows countries to restrict imports temporarily if domestic industries are being hurt substantially by foreign competitors. The U.S., for example, set restrictions on the amount of specialty steel it imported last year using the safeguard clause.
The current interpretation of the clause is that trade restrictions such as quotas (limits on the amount of imports) should affect all the importers of the product, but the Common Market wants to be able to apply the restrictions only on the importing countries causing the damage to domestic industry. The Japanese and developing countries strongly oppose this idea because they feel they would become the main targets.
The U.S. is attempting to mediate between the two sides, but it is probably that, by the Dec. 15 deadline, there will be two or three draft versions full of bracketed alternatives on the safeguard clause which will have to be hammered into an agreement later.