Legally, Washington is in the right. Although experts at the General Agreement on Tariffs and Trade have twice affirmed U.S. complaints that EC subsidies unfairly reduce demand for U.S. soy and sunflower oil, the EC has refused to fix the problem. That entitles the United States to strike back in kind. But the sanctions have less to do with those legal claims than with the 110-nation Uruguay Round talks. Easing barriers to farm trade has been Washington’s top priority, but the EC, largely at France’s behest, has offered only minor reductions in export subsidies. The final bargaining session ended in failure last Tuesday, and the sanctions followed quickly-to widespread applause in the United States. “We regret that we were forced to take this action,” said U.S. Trade Representative Carla Hills. “For five years the EC has refused to provide the U.S. what it is clearly owed.”
Patience with the talks is wearing thin on both sides of the Atlantic. In Europe’s depressed economy, the Uruguay Round has won little popular backing and only weak business support; EC officials note that European businesses are so busy preparing for the elimination of all remaining barriers to trade among the 12 EC nations at the end of 1992 that they’re all but ignoring less immediate trade concerns. The situation isn’t much better in the United States. Many of the manufacturers that helped propel past GATT accords through Congress are now unenthusiastic. That makes farm support essential to winning congressional approval, but farmers will sign on only if they see big benefits—-like cuts in the export subsidies European farmers often use to gain international sales. Last week, Washington thought it had won such cuts, only to see the EC suddenly pull its offer from the bargaining table.
The very complexity of the Uruguay Round has been its undoing. The talks, so named because the first session took place in Punta del Este, Uruguay, are meant to establish GATT rules covering problems the trade organization has never addressed, from barriers to foreign banks and insurers to the protection of drug patents and computer-chip designs. Separate negotiating groups dealt with each issue-and, in a departure from the traditional rule that nothing is final until everything is final, tentative settlements have been struck in most of the groups. That has sharply reduced Washington’s leverage on farm issues, because U.S. negotiators can’t respond to EC intransigence on agriculture by revoking concessions on, say, manufactured goods. At the same time, the early agreements have failed to deliver all the benefits American businesses were hoping for. “If we could wave a magic wand and get the thing signed today with no changes, we’d be pretty unhappy,” says an executive who publicly backs new provisions to protect trade secrets but privately says his company’s concerns have not been met.
U.S. Trade Representative Hills postponed the sanctions for 30 days to give the Europeans time to return to the table. On Saturday, they indicated that they would do so. Still, the unpopular government of French President Francois Mitterrand shows no inclination to make concessions that could further hurt its standing at the polls, and Germany, the leading EC economic power, has yet to insist that Mitterrand give way. “It’s very difficult for the French to extricate themselves,” says a Washington trade lawyer. “If they don’t, the chances are we go into a kind of cryogenic state with the Uruguay Round.” The eventual thaw would come on Bill Clinton’s watch-and Clinton advisers worry that it could trigger a nasty break with his protectionist supporters in organized labor.
A trade war over white wine will cause no great damage and is easily called off. But in case the EC strikes back, Hills has prepared another list of products for possible future sanctions. Many of the items on it, like glassware and oil pipe, are also produced by politically powerful American industries that would like nothing better than to clamp down on imports; once those sanctions are in place, pressure from those industries will make them hard to cancel. Both sides understand the dangers. Whether they can summon the political will to avert them is less certain.
