What A Gatt Deal Won't DoPaul Magnusson
It's 1995, and the new global trading rules agreed to in 1993 are in place. Television producers in France, rice farmers in Japan, and underwriters in India all embrace unfettered competition as good for the world economy. A new era of expanded trade dawns, as old barriers wither.
Unlikely? Sure is. For one thing, the compromises made in the seven-year struggle toward a General Agreement on Tariffs & Trade mean the final pact will fall short of its original promise. More important, the world has changed since this round of talks began in Uruguay in 1986. Another round will soon be needed on issues ranging from the environment to human rights to antitrust. "If we don't want special interests to dictate the next trade agenda on an ad hoc basis, we'll have to build on this agreement," says Paula Stern, former chair of the International Trade Commission.
After implementing the twin pillars of Republican trade policy--the North American Free Trade Agreement and GATT--the Clinton Administration will want to make its own mark. Its best chance: reforming the GATT codes that hinder U.S. use of trade sanctions to end such environmental outrages as drift-net fishing and trafficking in rhino horns and tiger penises.
CANS OF WORMS. New technologies also call for new trade rules. Charging "cultural imperialism," countries from France to South Korea have attempted to limit Hollywood's exports. But what rules will govern movies-on-demand broadcast by cable and satellite? And how about biotechnology, still in its infancy when this round of talks began? Licensing requirements and unwarranted safety rules shouldn't be allowed to stifle development. And what of efforts among emerging nations to fix prices on pharmaceuticals in order to make them available to a wider group? There should be limits.
And how much should nations seek to harmonize their antitrust policies? A system of vertically integrated industrial and financial conglomerates, the Japanese keiretsu, wouldn't be tolerated in the U.S. But in Japan, they are a way of life. The next round of trade talks should focus on the issue.
Admitting emerging market economies in China, Eastern Europe, the former Soviet Union, and Vietnam to membership in GATT should also be on the agenda. Western Europe has been loath to admit imports--particularly of farm goods--from the former Warsaw Pact nations. Admitting them would lower barriers to their goods.
There will be plenty of disputes left over from current talks as well. Consider subsidies for research and development. The antisubsidy U.S. position was formulated by Republican Administrations hostile to the idea of industrial policy. But Clinton sees nothing wrong with an industry-government effort to develop clean cars. The rules will have to be clarified.
And finally, there are tariffs. When the first GATT talks began in 1947, worldwide tariffs averaged 45%. If the new round is implemented, they will drop to near 5%. But huge tariffs will still protect such industries as U.S. glassware and European semiconductors. It may seem an odd notion to begin trade talks as soon as the current ones are concluded. But with trade accounting for an ever increasing share of each nation's economy, there are too many issues too important to lie fallow.
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