U.S. Urges End to Trade Provision for Third World

The Reagan Administration, intensifying its efforts to pressure developing countries into adopting more free market economic policies, said Wednesday that it will push to end a 1955 trade exemption that gives Third World countries special permission to bar imports.

In a speech cleared by top policy-makers, acting Treasury Secretary M. Peter McPherson said the exemption, initially designed to provide temporary relief to poor countries that had big trade deficits, has been so abused that it now provides “lasting cover” for unjustified protectionism.

He said the United States will step up its opposition to the provision in the Uruguay Round trade liberalization negotiations under way in Geneva. The 1955 exemption was granted under the General Agreement on Tariffs and Trade, the organization that governs world trade.

Trade analysts said it is unlikely that a U.S. push to cut back the 1955 exemption will get very far before the Administration leaves office. The Uruguay Round negotiators are scheduled to make a mid-session review in December, but little new is expected to emerge.

‘Old Theory Bankrupt’

Nevertheless, McPherson’s speech Wednesday marked the first time that any industrial nation has publicly challenged the GATT-granted waiver. As such, it could lay the groundwork for a future U.S. administration to pursue the issue more aggressively.

The Uruguay Round talks are to continue for two more years.

McPherson argued that ending the special treatment for Third World countries’ trade practices would bring GATT into line with other organizations such as the International Monetary Fund and World Bank, which now push poor countries to open their economies.

“The old theory that trade protection promotes development is bankrupt, yet GATT still echoes this theory,” he said. The secretary, former head of the Agency for International Development, spoke before the American Enterprise Institute, a research organization.

In his speech McPherson said allowing developing countries special permission to bar foreign imports only reduces their ability to export, depresses wages, worsens their balance of payments problems and “is a strategy for economic decline.”

The 1955 concept that McPherson criticized, known in trade jargon as “special and differential treatment,” allowed poor countries with big trade deficits to block imports temporarily until they could get back on their feet.

GATT rules traditionally prohibit most other countries from imposing extensive or permanent import barriers. The trade rules set by the 96-country organization ordinarily allow GATT members to add new restrictions only to offset unexpected import surges.

But McPherson said many developing countries have misused the 1955 waiver, employing it to justify long-term import barriers that force consumers to use products that are made at home.

McPherson argued that developing countries “can gain much more by negotiating as true trade partners” in multilateral trade talks rather “than as special pleaders.” He argued that GATT should review the special exemption as quickly as possible.