FREE TRADE EFFORTS GOOD FOR INDUSTRY

Health of the oil and gas industry follows economic growth. Economic growth depends greatly on the volume of goods and services in trade among nations. Limited trade and sputtering economies mean trouble for oil, gas, and other forms of energy.

For these reasons, the oil and gas industry should be worried. It is possible that before 1993 ends, the U.S. will reject the North America Free Trade Agreement (Nafta), Europe's movement toward free trade will stall, and the 7 year old Uruguay round of trade negotiations will end in failure. All that by itself would not mean economic collapse. But it might provoke reactionary protectionism.

A DANGEROUS BRINK

Two related forces pushed the world to this dangerous brink. One is the official world's tendency to overreach. At their best, free trade measures simply remove impediments to trade, such as high tariffs, subsidies, and local-content requirements. Too often, however, they become vehicles for other political objectives: a single currency and political homogenization in Europe, for example, or transnational oversight of labor and environmental regulation in North America. By complicating what should be a straightforward though difficult endeavor, these hitchhiking issues accommodate the other force now jeopardizing free trade efforts: fear.

Fear comes from uncertainty. No one knows exactly what will happen when trade barriers come down. The creative energy of free markets never fails to surprise. It also makes economies grow. But its inherent uncertainty lets subsidized French farmers frighten food consumers and politicians. It ,helps Ross Perot create Nafta demons with fantastic projections of U.S. job losses.

To be sure, free trade agreements are not essential to international trade. Nothing stops nations from lowering trade barriers unilaterally. But a country with open markets should have access to markets elsewhere.

At present, the principal enforcement mechanism for trade reciprocity is the General Agreement on Tariffs and Trade (GATT), which covers tariffs on manufactured products. The Uruguay round aims at bringing other goods and services into GATT's scope and extending coverage to nontariff trade laws. U.S. negotiating authority lapses Dec. 15. Before then, reluctant French negotiators must somehow be brought into a crucial farm trade accord drafted last November by the U.S. and European Commission.

Just as trade will continue whether or not Europe and North America reach formal agreements, GATT will remain in force if the Uruguay round fails. The danger is that individual countries will conclude from stalled progress on these fronts that free trade no longer matters. Indeed, European officials initially took Nafta to mean the U.S. had given up hope for broadening GATT. Now, if Congress fails to ratify Nafta, they'll have reason to wonder why French farmers should concede anything to international free trade-which most of the world views as American wishfulness anyway.

RETURN TO PROTECTIONISM?

Then what? The worst case would be reversion by a significant number of countries to overt protectionism. Global depressions begin when countries conclude they have nothing to gain from unrestricted flow of goods, services, and money among nations.

The oil and gas industry has much to lose from such an outcome. It must do more, therefore, than support free trade in principle, if for no other reason than that most of the world doesn't see it as such. It must treat the anticompetitive gloom advanced in opposition to free trade agreements as a real threat to world prosperity and petroleum market growth. That's precisely what it is.