Make no mistake about it: The failure in Brussels to reach a new multinational trade agreement represents a serious break in United States-European relations that goes far beyond economic issues. The major countries of Europe made a political decision to keep their farmers happy, regardless of the effect it will have on world trade. The response will be economic retaliation where possible.
"Europe in the '90s could turn out to be the Japan of the '80s -- the reputed enemy," suggests C. Fred Bergsten, director of the Institute of International Economics. Or, as investment banker Robert Hormats puts it: "They (in Europe) don't need us as much as they once did; they need one another more than they need us."
Japan and Korea, by failing to do their bit to stimulate a new global trade bargain in Brussels, have also ensured a bitter response in the next Congress.
All told, it is hard to conceive of a more negative result, on a grand scale. The hopes that existed for a new international order following the meltdown of the Cold War are fading when the major powers can't even resolve the question of excessive farm subsidies.
Consider also the serious blow to the process of economic summitry: the Houston economic summit in July made success of the trade negotiations its top priority. All seven presidents and prime ministers pledged in a final communique that they would personally oversee a breakthrough in the process.
But despite personal, secret entreaties from President Bush, three key players at Houston -- French President Francois Mitterrand, West German Chancellor Helmut Kohl and Japanese Prime Minister Toshiki Kaifu -- didn't keep their part of the bargain. German sources passed the word that after the German election on Dec. 2, Kohl would sponsor a compromise acceptable to America, Canada, Australia and the multitude of smaller nations that demanded a reduction in European farm payments.
But Kohl couldn't deliver Mitterrand, who refused to ask French farmers to take a cut in subsidies. "The main onus is on Mitterrand," says a high Bush administration official. Kohl was willing to make more concessions than was Mitterrand. But when it came to a choice between backing Mitterrand and siding with Bush, Kohl decided to strengthen his ties with the French instead of with the United States.
Like most other countries in Europe, the French fear a renaissance of German power through unification of the two Germanys. Bergsten cites German sources who confide that Kohl feels he must assuage Mitterrand's fears by acquiescing to him on farm subsidies.
At the end of the aborted talks in Brussels, the Europeans appeared stunned by the unanimity of world opinion ranged against them. "They tried to bribe Colombia, Thailand and some other small countries with special deals, and got nowhere," said an American official.
Kaifu, meanwhile, angered Bush by registering the first negative vote on a last-minute Swedish compromise on farm subsidies because it would have required Japan to accept a tiny, 5 percent rice-import quota. Then the Europeans turned it down. The American team thought the Swedish plan was negotiable. Former U.S. trade negotiator Michael B. Smith observed: "So there you had two of the world's three economic superpowers saying no."
Japan's intransigence on rice will exacerbate tensions on other trade issues, giving more credibility to those on Capitol Hill who insist that tough, punitive action is the only way to get attention in Tokyo. "The Japanese contributed absolutely nothing" to chances for success at Brussels, said Deputy United States Trade Representative Julius Katz.
Kohl appears willing to take the risk that German trade with the United States -- less important than its trade with the Community -- won't suffer much. His first attention goes to the demands and opportunities of unification with East Germany, and the opportunities for German trade and investment in Eastern Europe and the Soviet Union.
But some of his own countrymen think he has misassessed the linkage between the Brussels negotiations and the larger question of European-American relations. Many bankers and businessmen to whom I spoke on a recent visit are dismayed by what they say is Kohl's failure to repay Bush for his strong support for German unification with more generous help in the Gulf.
Katz promises an effort to let tempers cool, but warns "the ball is in the European court." So long as French farmers dictate to Mitterrand, however, and Kohl feels he needs Mitterrand's support in Europe, there can be no deal satisfactory to the United States.