G7 Summit: Hurdles stand in way of deal

TOKYO - The breakthrough in the world trade talks has brought a final deal within reach by the end of the year and may herald the prospect of more growth and jobs from the spring. But big hurdles, at least one of them potentially insurmountable, still stand in the way.

The so-called market access agreement is an outline. It still needs to be fleshed out between the big four trading blocs - the United States, Japan, the European Community and Canada - who negotiated it, and also approved or built upon in Geneva talks with the other 107 Gatt countries starting on Monday.

'It isn't a Gatt agreement or a market access agreement. It is a method of negotiation which will be a guideline when we get to Geneva,' said Alain Juppe, the French Foreign Minister, yesterday. While France could be expected to deliver the most downbeat assessment, Sir Leon Brittan, the EC's chief trade negotiator, also admitted it was a 'platform' and an 'edifice' to be built upon and not yet a concrete agreement.

The most difficult hurdle of all is agriculture. France has stated that a US-EC deal on cutting farm export subsidies - known as the Blair House agreement - remains unacceptable. That agreement was struck last December by the Commission, which has the power to negotiate trade deals for the member states.

But the Commission has avoided putting Blair House to the EC Council, so France has never had the opportunity formally to object. Nor has Brussels any intention of doing so until all other elements of the Uruguay Round are agreed upon. It is a gamble, based on the hope that France would be under huge pressure not to block a deal the rest of the world was ready to accept. Officials from the Group of Seven (G7) worry too that the Cairns Group of 14 large farm exporting countries may try to pick apart the farm deal.

But before that moment arrives, Gatt negotiators also need to conclude talks on liberalising services, where many difficulties remain. Other outstanding issues include agreement on how to settle trade disputes, anti- dumping rules and establishing a Multilateral Trade Organisation. This body would replace the Gatt and make unilateral trade actions more difficult.

Then there is a nasty dispute over steel. The US has proposed anti-dumping and countervailing duties on steel imports from 19 countries. Should they go ahead, proposals to eliminate steel tariffs would sink, with perhaps wider repercussions for the market access deal.

All this must be resolved before the 15 December deadline set by the US Congress.

Yesterday's success came after an unexpected Japanese concession on whisky and brandy, without which the deal might never have been reached. Japanese officials only offered to eliminate tariffs on these spirits after consulting their Prime Minister yesterday morning.

The EC began the latest push for an agreement on reducing tariffs on industrial goods - the heart of Gatt's traditional work - in January. But it was in May, after President Bill Clinton had appointed his new trade officials, that work began in earnest. The world's four trading partners set the Tokyo summit as their deadline for agreement.

In the run-up to the summit, G7 and trade officials were privately admitting that a failure in Tokyo would doom the Uruguay Round. The trade ministers zig-zagged across the world - from Toronto to Paris to Tokyo, back to Toronto and to Tokyo this week - in an attempt to hammer out agreement.

Because of the very nature of trade negotiations, in which horse-trading often takes place at the very last moment, the outlook was gloomy, then highly uncertain until yesterday morning, according to negotiators.

But there were two other considerations that may lend weight to suspicions that an agreement was deliberately delayed until the summit. First there was the desire to hand the summit a badly-needed success. Second, it was apparent to other negotiators that Mickey Kantor, the US Trade Representative, held back many of the US concessions until this week. Cynics might be forgiven for thinking that Mr Kantor's tactics helped to foster the impression that President Clinton's intervention in Tokyo was crucial. Certainly no one at the plush Akasaka Prince Hotel, where the talks took place, believed that.