Clouds Over Trade

Some sobering, challenging advice has been offered to world-trade negotiators as they prepare for an important review, commencing today in Montreal, of the so-called Uruguay round of negotiations on the General Agreement on Tariffs and Trade. The advice is from Barber B. Conable, president of the World Bank. It should encourage more serious commitment to the complex task of making world trade move more freely.

The economic future is clouded by “growing protectionism,” by “the disturbing pattern of world trade” in which both Africa and Latin America have fallen behind, by the increasing use of nontariff trade barriers--including massive subsidies, particularly in agriculture--and by growing bilateralism with more “product-by-product, country-by-country deals,” according to Conable.

The effect of all of this has been to reduce developing nations’ gross national products by about 3%--an amount twice the foreign aid provided by the developed nations.

Conable was speaking largely from the point of view of the developing nations, because he heads the most important financial agency helping those nations. He made clear, however, the relevance of Third World problems to an increasingly interdependent world in which the debt and trade problems of poorer nations directly affect the economic viability of richer nations.

Two of the priorities of this GATT negotiation would enormously affect developing nations, he noted. These are proposals to bring under international trade rules both agriculture and services.

“Today agriculture is the most protected part of trade,” Conable reminded the delegates. “Almost 90% of food imports are now affected by NTBs (non-tariff barriers).”

Freeing those barriers would be extremely helpful to developing nations, both directly in terms of export earnings and indirectly in terms of employment, because agricultural production in the Third World is more labor-intensive than in industrialized nations.

Developing nations strongly support the proposed liberalization of agricultural trade, but they are apprehensive about proposals to end barriers to trade in services because they fear the comparative advantage of the developed nations, Conable noted. He cautioned the poorer nations against pessimism on this score, however, noting a growing role in services being provided competitively by the developing nations.

There are promising signs, Conable affirmed. World trade continues to expand, although at a rate far slower than in the 1960s. “In 1986, for the first time ever, more than half the developing countries’ exports were manufactures.”

“In spite of this buoyancy, there has been a strong move away from support for an open trading world,” according to Conable. “Some current statistics disguise this evolving crisis in world trade. It must be addressed by the Uruguay round.”

We agree with him. The next few days in Montreal will help discern if there is going to be a realistic response to the opportunity.