Now, The Task Is 'Economic Containment'

During the cold war, containment meant keeping Soviet expansionism in check. Today, containment is taking on a new geopolitical meaning: preventing the economic might of Germany and Japan from so dominating world exports that it tears apart the global trading system. The gravity of the issue--"the issue of the 1990s," as Robert Lawrence of The Brookings Institution calls it--means that once uneventful economic summits, such as this week's meeting in Houston, will replace NATO summits as the most important international get-togethers of the year. Economics is no longer the sideshow; it's center stage. "The danger is that we replace the cold war with a trade war," says Robert Hormats of Goldman Sachs International, who himself helped organize half a dozen summits. "In a demilitarized era, economic forces are king."

Most experts prefer not to use such quasi-military terms as "containment" to discuss the threat posed by the economic rise of Germany and Japan and the relative decline of the United States. "Containment's totally the wrong word," says Henry Owens, consultant to Salomon Brothers and a summiteer under Jimmy Carter. "We're still close allies and business partners." Yet even an anti-alarmist like Owens concedes there is "an urgent need for better harmony between the Big Three's domestic policies and external policies like Third World debt, world trade and aid to the Soviets."

However it's labeled, "the danger of conflict is there," warns Michael Aho of the Council on Foreign Relations. "We will definitely see natural regional blocs. The question is, will they stay open to each other or will they close?" Germany already leads a European trading area that produces more than the United States and whose members do three fifths of their trading with each other. In East Asia, Japan is now the leading exporter to its neighbors. Japan and its emerging rivals--Korea, Taiwan and Hong Kong--all still depend heavily on the U.S. market, but that reliance is lessening. Meanwhile, the United States and Canada feel increasingly isolated and shortchanged in dealing with trade restrictions already in place in East Asia--and some now threatened in Europe.

The latest round of the General Agreement on Tariffs and Trade (GATT), half a dozen years in the making, is supposed to redress these imbalances. The so-called Uruguay Round was supposed to produce new and open worldwide codes for trade in computers, financial and other services and agriculture--all areas in which American business excels. The talks end in December, but they have been deadlocked for months over European and Japanese refusals to consider reducing farm subsidies. Nearly 100 Third World countries also say they will sign no other liberalizations if agriculture is included. "Agriculture is the Beirut of the trade talks--but its got to be solved," Aho says.

In the past, the Big Seven economic summit might have produced a vague communique that papered over the farm-subsidy deadlock. But last week summit "sherpas" were negotiating intensely to work out a substantive statement aimed at reopening talks. The most likely outcome was a call to use a draft compromise proposed by Uruguay's agricultural coordinator Art de Zeeuw as the basis for the new negotiations. "We're doomed to succeed, somehow, I think," said one top U.S. trade negotiator. "There's too much at stake to fail." With the risk of a trade war at stake, the world will have to start paying the same attention to GATT talks and trade numbers as it once did to NATO summits and missile counts.

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