GATT Brings Mix of Relief, Regret for Asian Nations

The successful conclusion last week of world trade talks amounts to a bittersweet victory for East Asian countries that have built their prosperity on international trade.

Policy makers and analysts in Japan, South Korea and Taiwan generally agreed that collapse of the negotiations to extend the General Agreement on Tariffs and Trade would have severely damaged their economies. But there was more grumbling than rejoicing in these nations as negotiators in Geneva completed a sweeping liberalization of the rules of world trade.

On one hand, the advantages for the region would seem to be clear.

Japan, one of the world’s largest economies with a huge trade sector, is likely to be the largest single beneficiary from the overall reduction in tariffs and other trade barriers. According to an estimate by the Organization for Economic Cooperation and Development, Japan’s economy could be boosted by as much as $42 billion a year by the year 2002, or one-fifth of the total world benefit from the extension of GATT.

“Of course if you compare the successful conclusion . . . with a failure, this is a good thing for Japan,” noted Kunio Miyamoto, chief economist at Sumitomo Life Research Institute. “Failure would mean disaster.”

In South Korea, government officials and intellectuals insist that reduction of tariffs by major trading partners will more than outweigh the concessions it made.

Taiwan, although not a GATT member, expects to benefit from an expansion of world trade.

So why so much unhappiness? Simply put, many people do not think their own country got a particularly good deal.

A television reporter for the Tokyo Broadcasting System, ranking the outcome on a scale of 100, gave the United States a score of 90, the European Community a 90 and Japan only a 70. The scores, he said, reflected America’s success in holding on to its anti-dumping laws, Europe’s major victory in defending its film and television markets and Japan’s failure to protect its rice market.

Elimination of unilateral trade retaliation measures, such as the Section 301 provision of U.S. trade law, had been a major goal of Japan and other exporters to American markets. The new GATT agreement takes some steps toward moving trade disputes into a multilateral framework. But it does not go as far in this direction as Japan and other East Asian countries had originally hoped.

For example, Japan faces an early February deadline on the so-called U.S.-Japanese “framework” talks that were kicked off this summer and designed to increase U.S. exports of telecommunication, auto parts, supercomputers, medical equipment and financial services. The United States has threatened sanctions if an agreement is not reached.

In South Korea, official optimism about the GATT agreement was overshadowed by the anger of the nation’s farmers and frustration in service sectors newly threatened by GATT provisions under which developing countries agreed to open legal services, accounting and software markets.

Doomsayers predicted the collapse of agriculture, with growing numbers of farmers abandoning the land and drifting into cities to swell the ranks of urban poor. This in turn, critics charged, will bring a sharp increase in crime and other social problems and a collapse of traditional Korean values.

The anger over the rice decision prompted President Kim Young Sam to dismiss Prime Minister Hwang In Sung for mishandling the U.S.-led pressure to open the rice market.

Under the GATT agreement, South Korea will have to open 1% of its rice market, worth $25 million in 1995, and increase imports to 4% by 2004.

A Korean lawyer, who spoke on condition he not be identified, said the United States will now take steps to force open his nation’s legal service sector, and that “will destroy our value system.

“In Asia, litigation is avoided as much as possible,” he said. “You don’t sue someone unless you are prepared to make an eternal enemy of him and his family, both his present family and the next generation. In American culture, lawyers encourage lawsuits. . . . What’s good for America is not necessarily good for us.”

As a non-member of GATT, Taiwan is not automatically affected by the new agreement. But it is seeking membership, and as part of that effort, it is trying to bring its trade practices into conformity with international rules.

The new trade deal “is good news for every country and Taiwan as well,” said Huang Yen Tsao, director general of Taiwan’s Board of Foreign Trade. He noted, however, that like Japan and South Korea, Taiwan will be expected to open its agricultural sector to more foreign imports. “It is a most sensitive and difficult task,” he said.

“We will see how far we can go.”

Another Taiwan official, who insisted on anonymity, said the “wall” of tariff barriers protecting domestic industries is already fairly low. “Now we have to make it even lower,” he said. “Every industrial sector will be affected, but if the world trade system can be based on real competition, they are prepared to face it.”

Under the new trade pact, East Asian nations will see these effects:

* Export-oriented electronics and consumer goods industries will benefit from lower tariffs, particularly in Europe. Prospects also look good for Japanese manufacturers of construction machinery. South Korean industries due to benefit include chemicals, petroleum products, rubber and synthetic rubber, metals, electronics, textiles, leather and machinery.

* Asian industries producing products that are uncompetitive in world markets due to price or quality will suffer.

In Japan, this includes non-ferrous metals, liquor and textiles. South Korean industries facing new pressure include construction equipment, medical equipment and furniture. Taiwan’s auto industry will face more foreign imports.

* Financial sectors will face more competition and pressure to deregulate.

* Rice farmers will suffer throughout the region, although every government has pledged action to ease their burden. Many other agricultural sectors will face pressure, which could lead to broad structural changes.

South Korean cattle farmers say they see disaster looming, with quotas for imported beef, which now holds 44% of the market, due to rise enough by the year 2000 to give imports a 70% share. But consumers in every country should benefit from lower prices and greater variety.

* Export industries can foresee some benefits from strengthened multilateral procedures for settling trade disputes. But they will still face the threat of retaliatory sanctions imposed under U.S. law, without recourse to any international body of appeal, in alleged unfair trade practice cases.

* The agreement may provide an opportunity for Japan to formally end its 12-year-old program of voluntary restraint on automobile exports to the United States. This would have no immediate impact, however, because Japan is shipping fewer cars to the United States than allowed under the voluntary restraint ceiling. Similar restraint agreements are likely to be scrapped in other industries as well.

Southeast Asian countries with dynamic economies will be affected in similar ways by the trade accord--and their governments generally expressed relief that the talks did not fail.

Lee Kuan Yew, Singapore’s senior minister, said in Tokyo recently that if the GATT talks collapsed, Japan would “catch a cold,” while Singapore would get “double pneumonia.”

Times researcher Chi Jung Nam in Seoul contributed to this article.