Failure of Uruguay Talks on Trade Would Be a Deficit for All Nations

What ever happened to the Uruguay Round to expand the scope of the General Agreement on Tariffs and Trade?

What started as the major trade initiative of the past decade is now almost dormant. Although negotiations must be completed in less than two months, there has been almost no public discussion of the round for months.

More seriously, there appears to be little effort to break the deadlock between the Europeans--mainly the French--and the United States. The President, the Secretary of State and the U.S. trade representative remain silent. Negotiations take place, but no progress is reported.

In contrast, there is clamor about the North American Free Trade Agreement. For both the world economy and the United States, NAFTA is small potatoes compared to the Uruguay Round. The latter covers most of the world’s trading nations, including some of the former communist bloc. It would expand current rules that apply mainly to manufactured goods by bringing agriculture, services and intellectual property under the GATT rules for trade.

The United States is a large and efficient producer of books, movies, TV programs, computer software, banking, insurance and other services. These industries will expand internationally if GATT rules are changed.

Much is at stake. If the GATT rules are extended to services, trade in that area would be more than $3 trillion a year. For the first time, there would be uniform, enforceable rules for patents, copyrights and software. These items are potential sources of profit and high-income jobs.

U.S. citizens would also benefit from the loosening of restrictions our government has put on trade. One example is the agreement that raises the prices of clothing and textiles in the United States--at the cost of billions of dollars to consumers. If the agreement was phased out as part of the Uruguay Round, clothing prices would fall.

I can think of four reasons why the Clinton Administration remains almost comatose about the Uruguay Round. First, trade agreements are not very popular politically. Several of President Clinton’s advisers don’t want him to fight for an issue that has limited political support.

Second, the Uruguay Round will not have labor and environmental sections to please the activist, domestic political groups promoting these issues or using them as a reason for opposing trade agreements.

Third, the Administration lacks a vision of the importance of trade for living standards and prosperity. Open, competitive markets lower prices and increase the choices for consumers and producers. The recent strengthening and restructuring of U.S. industry has been spurred by competition from abroad, just as competition from U.S. producers of goods and services has forced improvements abroad.

Fourth, discussion of NAFTA and GATT concentrates on the number of jobs created or lost. This is nonsense. The correct answer is that we neither gain nor lose jobs as a result of trade. The mix of jobs changes because opening trade permits all countries to specialize where their advantage is greatest. Specialization raises incomes. It is the reason all parties gain from trade.

Under U.S. leadership and GATT rules, trade and living standards increased for all countries that chose to participate in the open trading system. Since the 1950s, more people in more countries have experienced greater increases in living standards than in any period of recorded history. This remarkable progress has benefited rich and poor countries by expanding markets, encouraging efficient production and concentrating production where it can be done at lowest cost.

An intransigent French government, responding to pressures from French farmers, provides an opportunity for the Clinton Administration to let the Uruguay Round end in failure. By refusing to compromise further, it can blame the French for the failure and avoid the domestic political costs of pushing another trade agreement through Congress.

The Clintonites are not the only culprits. There is plenty of blame to go around. The French government is unwilling to accept the agricultural agreement negotiated by the United States and the European Community. The other members of the European Community are passive.

For the past 50 years, the United States has led the world toward freer trade. The evidence of growth and progress in the more open, developing economies has been decisive for China and Russia and for Eastern Europe, Latin America and parts of Africa. Just as they recognize the merits of our message--that open markets and competition raise living standards--we seem to lack the leadership and will to move the system forward for our benefit as well as theirs.