Gatt: `It's Yesterday's Agreement'

When it comes to trade policy, there's no mistaking Bill Clinton's vision. "We cannot turn away from the future," he says again and again. For the President, that translates into aggressive efforts to open markets abroad for the high-tech and service industries he wants to nurture at home. The strategy, Clinton believes, will produce high-paying, export-related jobs for the 21st century.

What, then, to make of the world trade accord reached in Geneva on Dec. 15? The President says the pact, negotiated under the auspices of the General Agreement on Tariffs & Trade, "sharpens our competitive edge in areas of America's strength." That's putting the best face on a deal that actually offers precious little for the industries of America's future.

The major achievement of the GATT deal is an agreement to slash tariffs on 8,000 categories of manufactured goods. That will help many old-line industrial concerns. But the accord sidesteps critical issues. It fails to open up financial markets and promote the export of movies and other entertainment. The patent protection offered to the drug industry is disappointing. And chipmakers don't get the tariff cuts they had hoped for. Indeed, seven years of dithering has produced a musty agreement focused on old skirmishes rather than on flash points of future global competition. "It's yesterday's agreement," says Gary Hufbauer of the Institute of International Economics.

GIN TONIC. For all its shortcomings, the deal will promote worldwide economic growth. Economists estimate that it will boost world output by $270 billion a year in 2005 and may create millions of U.S. jobs in the next decade. A collapse of the talks could have been disastrous psychologically for recession-racked economies in Europe and Asia.

And there are some big winners. The tariff cuts will create export windfalls for makers of industrial machinery such as Caterpillar and Deere, big agri-businesses such as Cargill, megaconstruction companies such as Bechtel Group, paper manufacturers, and makers of distilled spirits, furniture, and toys. But these are hardly the employers Clinton is counting on for America's economic security.

Contrast their fate with that of the booming U.S. service sector. A major reason Washington agreed to launch the GATT round in 1986 was to open foreign markets to these companies. But banks and securities firms made scant headway in their efforts to crack Japan and Korea. Washington agreed simply to keep talking about the issue for another two years.

The entertainment industry--one of the largest U.S. exporters--was equally frustrated. Unable to budge the French and other European countries from their quotas on foreign broadcasting, U.S. Trade Representative Mickey Kantor yanked the issue altogether at the end of the negotiations.Other export-driven industries such as pharmaceuticals, telecommunications, and aircraft saw only wimpy gains and some big negatives. Drug companies are worried about a decade-long phase-in of patent protections that could leave their products defenseless to pirating in Third World countries. "The billions of dollars pharmaceutical companies lose to patent pirates will continue for 10 years," worries Steve Berchem at the Pharmaceutical Manufacturers Assn. Even the semiconductor industry, which is largely satisfied with the final details, had to make a significant trade-off: a tariff cut in Europe, from 14% to 10%, rather than the zero tariff it wanted.

QUESTIONS. By caving in to intransigent trading partners unwilling to upset the status quo, U.S. negotiators raised questions about how successful they will be in future trade talks. Such negotiations will have to deal with the currently unresolved issues as well as even more nettlesome topics that have arisen since the GATT negotiations began in 1986. The Administration, for example, hopes to begin talks with Asian countries next year on eliminating "invisible" trade barriers, such as the Japanese keiretsu system and administrative procedures that hamstring the sale of foreign products. The Clintonites are also hoping to tackle the links between trade and everything from the global environment and human rights to antitrust policies.

It's an ambitious agenda. But trade issues, like America's economy, are getting more complex and subtle. The Administration has recognized that the U.S. economy has evolved. Now, it has to try once again to craft global trade talks that reflect the new economicreality.

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