COUNTDOWN ON WORLD TRADE : Q & A : After NAFTA, Another Pact, Another Round of Questions
After years of squabbling among international trading partners, negotiators from the United States and the 12-nation European Community are struggling to hammer out the final kinks holding up a new version of GATT, or the General Agreement on Tariffs and Trade.
The world’s trading partners have until Wednesday to come up with a renewed and expanded version of GATT, a 46-year-old series of complicated rules that govern international commerce among 116 countries.
Negotiators have stumbled over several disputed areas, including entertainment programming quotas and aircraft subsidies.
Here are some key questions about the agreement.
Q: Just what is GATT?
A: GATT is the agreement that since 1948 has made the rules on international trade. It’s also the name of the relatively powerless Geneva-based organization that oversees the pact.
GATT regulates tariffs, duties, subsidies, quotas and market access for imported goods. A revamped GATT would lower trade barriers and make it easier for countries to sell products and services to each other. The average tariff on goods, now about 5% worldwide, is projected to drop by nearly half by the end of the century under a new GATT. The sweeping changes proposed for GATT make the North American Free Trade Agreement look like chump change.
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Q: What will a new GATT mean to the world economy?
A: High hopes have been pinned to this trade agreement. Prognosticators say a renewed GATT could revive the struggling economies of Germany and Japan, would bring new trading opportunities to developing nations and would be a nice shot in the pocketbook for the United States too. Studies have predicted an annual increase of anywhere from $200 billion to $275 billion in the world’s output of goods and services in the next decade, thanks to a pumped up GATT. Supporters say lots of jobs would be created.
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Q: How so?
A: Economists contend that when trade barriers are removed, each country specializes in the things it does best. Goods and services, therefore, are produced more cheaply. And products move around the world more easily without tariffs and quotas. More trade, proponents say, means more wealth and jobs worldwide.
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Q: So what’s not to like?
A: Plenty, opponents say. GATT-attackers in the United States contend that U.S. negotiators have given away more than they have received. They fear the loss of jobs in industries now protected from low-cost foreign competitors. They worry about the quality of foreign products and the environmental impact of unleashed growth.
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Q: If a new GATT is reached, will consumers notice?
A: Probably, but not right away. Most provisions will be phased in over years, if not decades. But eventually, the prices consumers pay for a variety of goods should decrease, thanks to reductions in tariffs and more efficient production. Quotas and tariffs on textiles and clothing cost a four-person household in the United States up to $420 a year, according to a report by the GATT organization. But it is also expected that some food prices--those for French wine and cheese, for example--might rise if export subsidies are cut.
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Q: Will workers notice?
A: Probably, but not right away. Workers in industries that lose protected status could face job losses as their employers attempt to compete in a new world of more open trade. GATT supporters say that U.S. industries are resilient enough to fight the competition.
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Q: Why is Dec. 15 so important?
A: After Wednesday, it would become more difficult to win congressional approval of any deal. Dec. 15 is the last day that President Clinton can alert Congress to a proposed trade accord under “fast track” rules prohibiting Congress from attaching amendments to the agreement. International trading partners don’t like the idea of Congress fiddling with GATT. If the United States and the EC come to an agreement by then, the accord will be taken to the other 103 members of GATT.
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Q: What if GATT fails?
A: It’s difficult to say, given the intricacies of international trade. But failing to reach an agreement by Wednesday’s deadline could be bad news for the world economy, proponents contend. Hardest to measure would be the opportunities lost and the confidence damaged by a GATT splat. And then there is the dicey question of retribution and trade wars.
