Bitter Standoff in Montreal

By Barbara Rudolph

Clayton Yeutter was looking for a strong send-off. The veteran U.S. Trade Representative, whose tenure ends in January, had hoped that last week's trade talks in Montreal would produce significant progress, especially on knotty problems like agricultural subsidies and intellectual property rights. He did not get it. After four days of exhausting round-the-clock negotiations, the talks ended in deadlock on several major issues, forcing a four-month extension of discussions. Said a philosophical Yeutter: "This provides additional opportunities for creative thinking."

The meetings were called as a midterm review of the Uruguay Round of trade negotiations, launched in the beach resort of Punta del Este two years ago. The purpose of the Montreal gathering, held under the auspices of the 1947 General Agreement on Tariffs and Trade: to establish guidelines for furthering free trade. Instead, last week's GATT meetings, involving delegates from 103 nations, were dominated by an inconclusive and bitter row between the U.S. and the European Community. The chief issue was an American demand that all nations agree to the total elimination of subsidies to farmers, which the U.S. believes distort international trade.

Willy de Clercq, the chief E.C. negotiator, opposed phasing out all agricultural subsidies that give farmers in some countries an advantage over others in world markets. Nine million E.C. farmers, a politically powerful bloc whose livelihood depends on payments that enable E.C. stockpiling of products like beef, wine and milk, would be certain to oppose such a plan. By contrast, many U.S. farmers, who also rely on Government income supports, favor eliminating farm subsidies -- if foreign farmers follow suit. Reason: they believe U.S. agricultural productivity would give them an edge if competition were fair. Searching for a compromise, Yeutter at one point consulted a thesaurus for a synonym of the word eliminate. Replied E.C. Vice President Frans Andriessen: "I'm interested in substance, not words."

The farm-policy debate overshadowed all other discussions in Montreal. Delegates were able, though, to adopt a framework for continued negotiations in the fast-growing services industries, including banking, investment and communications, which now account for some 30% of all international trade. Yet efforts to protect intellectual-property rights were stymied. The U.S. estimates that pirating and counterfeiting of such goods as tape cassettes and computer software cost American firms more than $40 billion a year.

After the lackluster Montreal performance, many countries may be tempted to bypass GATT and negotiate more bilateral or regional pacts with only a few trading partners. Still, no one is quite ready to abandon GATT. Says Bill Martin, chief economist of Phillips & Drew, a leading London brokerage firm: "There's not great hope that GATT can achieve much in the way of further trade liberalization. But GATT is a very important bulwark against galloping protectionism." An important bulwark, but an increasingly leaky one.

With reporting by Gisela Bolte/Montreal and Adam Zagorin/Brussels