After the Bonn trade talks

Press, 8 May 1985, Page 20

After the Bonn trade talks

The economic summit held in Bonn during the week-end ended unsatisfactorily, but the meeting was not a total disaster. A satisfactory outcome would have been for the leaders of the Western world’s top seven economies to agree on a timetable for a new round of negotiations under the General Agreement on Tariffs and Trade. The United States wanted a date set — preferably early in 1986 — but in the communique nothing was agreed, apparently because France was against a 1986 fixture. Part of a deal for a satisfactory outcome might have been that the United States would agree also to talks about the world financial system. Frhnce wants such discussions; the United States does not. In the end, neither a new round of trade talks, nor reform of the world currency system, has been agreed. Failure to get agreement does not mean that intensified trade disputes will follow. The existing G.A.T.T. rules still apply. A new round of negotiations would have attempted to apply G.A.T.T. codes to trade in services and some high technology. The negotiations would also have considered non-tariff barriers that have bedevilled much international trade. It should certainly have considered agricultural trade, though the prospect that trade in agricultural products would come to be treated in the same way as trade in manufactures was negligible. To have held further wide-reaching talks on ways to improve the free flow of trade round the world would have been important in itself, even if little practical progress was made to begin with. The negotiations would have meant that seven major nations — Britain, West Germany, Italy, Canada, and Japan, as well as the United States and France — were not only committing themselves, in principle, towards less restricted trade, but that they were working actively towards a series of

conferences on the subject. Such an outcome would also have been important within the United States where Congress’s displeasure about increasing imports may boil over into severe trade restrictions. A declared intention to hold a new trade round would have undercut Congressional demands for restraints on imports that threaten American industry.

At least, in Bonn, there was not a turning away from free trade as a desirable object. There was no sign of a mood to increase trade barriers. Such a sentiment would have been disastrous, especially for smaller countries like New Zealand that depend on exporting to survive.

This was also the first economic summit meeting in which the United States was prepared to concede that its high trading deficit was causing problems in world trade, not the least of which was the harm being done to the United States itself. The high value of the American dollar is causing American exports to fall and imports to rise. The United States has threatened to hold bilateral talks about trade with countries willing to talk. In the wake of the unsatisfactory meeting in Bonn, the time may be ripe to revive the idea of trade talks in the Pacific, for which some of the work has already been done. More American trade goes westwards to the SouthEast Asian countries, and to Japan, Australia, and New Zealand, than goes eastwards to Europe. If the Pacific countries showed an inclination to form a trading bloc, it would have the effect of diverting Congress’s attention away from trade restraints against Japan, Europe, and others. European countries would probably become alarmed about a trade arrangement which left Europe out. It might be a way, as Australia has suggested, of forcing Europe to reconsider its agricultural protection.