BRUSSELS, DEC. 7 -- Four years of global trade negotiations collapsed in disarray today, putting at risk the postwar consensus that world prosperity lies in the free flow of goods and services across borders.
The failure of the talks raised the prospect of regional trading blocs emerging or new trade conflicts breaking out across the Atlantic and Pacific that over time would lower standards of living.
The session broke down over the same issue that has dogged it from its start four years ago -- European agriculture subsidies that the United States and other farm exporting nations claim are taking world markets from their more efficient farmers. The 12-nation European Community (EC), Japan and South Korea balked Thursday night at negotiating reductions in their trade protection for agriculture.
The impact of the failure to conclude negotiations to modernize the General Agreement on Tariffs and Trade (GATT) extended beyond commercial interests into political and strategic areas. EC officials said transatlantic animosity on trade issues could spill over into President Bush's attempts to build a new post-Cold War world order, one built around the major economic powers of the United States, Japan and a united Europe led by Germany.
Some analysts were more cautious.
"It is not the cataclysmic disaster that takes us down the road to rapidly increasing protectionism," said Jerry Jasinowski, president of the National Association of Manufacturers in Washington. "The GATT system as we know it still stands ... regional negotiations will continue and ... it's in the interest of all of the countries involved to maintain reasonably open trade... . "
Technically, the negotiations went into a recess and the U.S. delegation played their breakup in a low-key manner, in hopes of salvaging something during lower-level meetings that may begin in Geneva next month. "You haven't heard anything acrimonious from me," U.S. Trade Representative Carla A. Hills said tonight.
Bush, visiting Caracas, Venezuela, on the last leg of a Latin American tour, called the breakdown "disappointing."
Bush said "the United States remains committed to maintaining and strengthening the multilateral trading system." He said he hoped the European Community would now "develop the political will to renegotiate real market-opening agreements while there is still time."
Hills, however, made it clear the United States will not rush into new negotiations until it gets a clear signal that the EC is willing to discuss its farm trade program in detail and to agree to reduce its $12 billion program to help its farmers sell products overseas.
"When it is clear that a basis exists for successfully concluding the round, the United States will return to the negotiating table," Hills said.
Agriculture Secretary Clayton Yeutter underscored that point, saying: "There is no reason for anyone to go to Geneva if the EC does not adjust its position on agriculture."
A senior U.S. official raised doubts about whether that was likely, calling the EC "an economic behemoth that has no capacity to make political decisions."
The bitterness over the collapse ran deep among European negotiators, who accused the United States of making unrealistic demands and of being too willing to walk away from the talks before their scheduled conclusion tonight.
"I think it is about time we got a little bit of realism into this business of agricultural supports and the efforts that the Europeans have made," said EC Agriculture Commissioner Ray MacSharry.
GATT, put in place after World War II to police world trade, has for most of its history focused on manufactured goods. The latest round of talks began in Uruguay in 1986 and has attempted to extend GATT's sway into new areas such as liberalization of foreign investment, trade in services such as banking and insurance, and protection of intellectual property such as computer software, trademarks and videos.
Although most observers here tried to put the best face on the collapse of the trade talks, there were fears that the failure at the time of an economic downturn in many parts of the world could spark new bouts of protectionism.
"Trade specialists have long had a bicycle theory" about trade reform, said William Niskanen, chairman of the Cato Institute in Washington. "You have to keep it moving in order to stay upright."
Former U.S. trade representative William E. Brock said any resulting rise in protectionism could cut into U.S. exports at a time when the overseas sales of American companies are needed to pull the country away from a recession.
"This is a very unstable world," Brock said. "It's a lousy time to have headlines reading, 'Trade Talks Collapse.' "
Brock added that the collapse of the round could accelerate Bush's program of negotiating free-trade pacts with Latin American nations, most of whom strongly supported the U.S. position here.
Hills has said in the past that a series of U.S.-European trade disputes could escalate into trade wars if the round fails. These disputes included complaints over European bans on imports of U.S. pork and beef, which Hills has called trade protection in the guise of health regulation.
Further, the United States has a number of disputes with Japan and Korea that could bubble to the surface. Alan Olmer, a former deputy U.S. trade representative, called Japan "the big loser" from the collapse of the trade talks.
"It had the most to gain from a liberalized world trading system," he said.
The second biggest losers are developing countries that will not gain special provisions put in to win their approval for the extension of GATT rules into new areas such as intellectual property. In return for concessions in those areas, Third World nations had expected freer markets for their textile and agricultural products.
The United States had hoped that German Chancellor Helmut Kohl, head of the most economically powerful nation in Europe, would follow through on his pledge to Bush and take the lead within the EC to force changes in its agricultural policies. That didn't occur.
"He was distracted by his election" Sunday, said Hills. "We are still hopeful that as he settles in to address the problems of Germany as a whole he will see the benefit of agricultural reform."