The Uruguay Round of world trade negotiations -- which have reached a critical stage in Brussels this week -- must not fail. Everywhere we face huge problems. The Persian Gulf is already edging toward war. The Soviet Union is in a state of economic and political collapse. Eastern Europe isn't much better. The U.S. economy is in or near a recession. It would be disastrous to add the breakdown of the global trading system to our troubles.
This could be, unfortunately, the ultimate outcome of the Brussels meeting. From their outset in 1986, these talks have turned on one pivotal issue: farm trade. And the crux of the matter has always been reform of the European Community's Common Agricultural Policy, which dumps vast amounts of subsidized food onto world markets. The Europeans have been so rigid that last week one top U.S. official could honestly say: "We have not yet had one serious day of negotiations." Unless Europe cuts its subsidized food exports, there won't be an agreement. Other countries simply won't make concessions in other areas.
No one should think a failure would serve American interests. Between 1985 and 1989, U.S. exports rose 66 percent and reestablished our country as the world's largest exporter. With the dollar's recent drop (making U.S. goods more competitive on world markets), exports should expand further. They stand out as a major source of growth for the economy in the 1990s. A deadlock of the Uruguay Round -- named after the country where the talks began -- would provide other countries with a pretext to protect their markets from our products.
Global trade wouldn't instantly grind to a halt, nor would existing international trade rules automatically end. But their authority would erode, and they would be increasingly flouted in the United States and elsewhere. Industries seeking import protection would get it more easily. There would be retaliation. This creeping protectionism could ultimately escalate into a wider trade war.
The harm, though, would transcend economics. Since the 1950s, the United States, Europe and Japan have been bound together mainly by two forces: the threat of communism and the belief that an open world economy promoted mutual prosperity. The first of these forces is gone, and a failed Uruguay Round would corrode the second. The ill will of new trade conflicts would sour relations just when cooperation is needed on issues ranging from the Persian Gulf and the Soviet Union to the greenhouse effect.
What the Common Agricultural Policy (CAP) does is to raise food prices inside Europe by having the Community buy excess farm production at artificially high prices (most grains, meats and dairy products are covered). The surpluses generated by encouraging farmers to overproduce are then sold on the world markets with gigantic subsidies. Today, Europe's internal price for a ton of wheat is about $235; the world price is about $75, meaning that the export subsidy amounts to about $160. In addition, farm imports to Europe are restricted by variable levies -- flexible tariffs -- that rise enough to ensure that Europe's high-cost food isn't undersold at home.
Not surprisingly, Europe now exports nearly 20 million tons of wheat annually, whereas it imported wheat until the late 1970s. Who loses export markets? Answer: the more efficient wheat farmers in the United States, Canada, Argentina and Australia. Brazil, New Zealand, the Philippines and Caribbean nations similarly suffer from CAP policies on soybeans, beef and sugar. In 1989, the CAP cost Europeans nearly $100 billion, divided roughly between higher consumer food prices and subsidies.
To be fair, the CAP isn't the only flash point in the trade talks. Many countries are infuriated by the U.S. habit of retaliating unilaterally -- often in violation of world trade rules -- against foreign trade practices we dislike. And there are major disputes between rich and poor nations. Consider:
Textiles and clothing: Quotas by industrial nations (including us) now restrict imports from developing countries. Poorer nations want the quotas scrapped.
Intellectual property: The United States, Europe and Japan want to combat the pirating of everything from computer software to movies to medicines. What's being sought are easier ways to retaliate against countries (mainly developing nations) that tolerate patent, copyright and trademark infringements.
It's easy to see the outlines of a deal. Europe and Japan (which bars rice imports) relent on agriculture, while the United States curbs unilateralism. Developing countries protect intellectual property and get more textile and farm exports. But opposition comes not only from Europe's farmers. It also comes from American apparel workers, Japanese farmers, some U.S. farmers (our import quotas on sugar and dairy products would be cut) and many others. The common denominator is economic nationalism. People everywhere resent how global commerce steals national sovereignty and threatens local lifestyles.
To accept the U.S. agriculture plan, Europeans say, would destroy Europe's picturesque countryside by bankrupting many farmers. This need not be, because the Community could pay farmers to cut production and remain on the land. But doing so would demand hard political decisions that the Europeans prefer to avoid. The current U.S. farm proposal (including a 90 percent cut in export subsidies over a decade) won't be acceptable; however, the current European proposal (including no commitment to cut export subsidies) is no change at all.
It is not just in the Persian Gulf that the post-Cold War world is being shaped. The ultimate issue in Brussels is whether Europe -- and Japan -- have any sense of global responsibility. Economies everywhere depend on a stable global trading system, and maintaining it often requires major nations to take steps with short-term political pain. The United States, the system's godfather since World War II, can no longer play this role alone.
What we will learn from Brussels is whether the Europeans and the Japanese can live up to their new responsibilities. If not, our relations with them will inevitably suffer. And the world will be a more troubled place for everyone.