| Plexus Consulting Group | Articles by Plexus Authors | ||
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Setting GATT Priorities: Growth or Protection? |
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Wall Street broker would not keep his job very long if he
consistently counseled his clients to invest in declining industries while
overlooking those experiencing strong growth. Yet this is exactly the
pitfall facing the trade negotiators of the 96 nations involved in the
current Uruguay Round of multilateral talks under the General Agreement on
Tariffs and Trade. Protectionist pressures The world's real growth businesses in the service industry risk becoming casualties of the protectionist pressures being brought to bear on GATT negotiations. The time for setting priorities is near: Do we opt for growth or protection? The coming weeks will prove critical in determining whether this current round of multilateral trade negotiations will reach a successful conclusion to its four years of deliberations. Some involved in the negotiations have indicated they feel they are as far away from an agreement now on-such tough issues as agricultural subsidies, textile quotas and trade in services as they were when the round was first launched in Puenta Del Este Uruguay, in 1986. Many international trade consultants who have been monitoring the process feel that there will probably never be another GATT round of this magnitude. Since the founding of GATT in 1947, there have been seven multilateral "trade rounds"-each one successful but each one increasingly difficult as the number of participating countries became greater and the issues more complex. Nevertheless, with Mr. Micawber-like complacency, many decision-makers feel that this round, like all of the others, will eventually reach a successful conclusion. This sense of the inevitability of success might well guarantee the opposite. Rear-guard action As the GATT ministers continue their meetings, the U.S. administration is fighting a rearguard action against protectionist forces at home. Recently, the White House had to veto a textile bill that even its supporters conceded was protectionist. Such a measure would certainly have hindered progress in the GATT round if not killing it outright. However, having cleared that hurdle, the administration is continuing to do battle with those who feel one or another segment of the U.S. economy needs protection during these increasingly difficult economic times. While this is happening in the U.S., the Europeans have returned from their summer holidays to consider what if any of the many subsidies European farmers receive should be ceded in order to unblock the Current impasse in the GATT agricultural negotiations. Whether arguments come from Dutch grain farmers (yes, they really do exist!) or American textile interests, the point is the same they need protection if their jobs and way of life are to continue. While there is nothing new about conducting multilateral trade negotiations on the issues of agricultural subsidies and textile quotas, what is particularly significant about this GATT round is that for the first time it includes talks on trade in services. Lest we forget, the trade negotiators of the previous U.S. administration had to fight long services on the agenda. That they succeeded in doing so was hailed as a major victory at that time, and it was a victory well worth celebrating. The figures are there for anybody to see. In 1970 the lion's share of the U.S. gross national product was accounted for by the production of goods, although even 20 years ago the service industry ranked a not-too-distant second. By as early as 1975 the service industry had slightly edged ahead of the manufacturers of goods as the sector producing the greatest share of the U.S. GNP. And by 1988 that lead expanded to the point where the service industry accounted for more than half of the total U.S. GNP-nearly 30 percent greater than the out put of the producers of goods. Service strength Although the United States championed the inclusion of services in this GATT round, most of the rest of the world has no less of a stake in this economic sector. In the European Community, for example, the service industry accounts for 65 percent of the community's gross domestic product. And, curiously enough, even those developing nations that resisted the inclusion of services in the GATT round have service sectors in their respective economies that ran.-le from 35 percent to 62 percent of their GDPS. In fact, the world's service industry including legal services, banking, accountancy, tourism, etc., accounts for $600 billion of world trade. These figures are all the more impressive when one realizes the world service industry as a whole represents the fastest growing part of our global economy. It is unfair to compare this burgeoning economy to those sectors that are shrinking in importance, both in absolute monetary terms and in terms of employment. But is it fair not to? The gigantic European service industry which is more than a match to compete in any market worldwide is in effect being held in abeyance while European trade policy makers fixate on agricultural policy issues-a heavily subsidized sector that accounts for less than 3 percent of the European Community's GDP. Is it right in general that less competitive and declining . industries should be allowed the Power to cause this GATT round to fail? Into perspective Of course critics will say it is easy to be for a successful conclusion to the Uruguay Round if it is not your ox that is being gored. However, when one looks at the fragility of the world economy today and considers what "a little bit of protectionism" did to the world in the 1930s it is easier to put some of these many problems into prospective. Say what you will, the much maligned GATT has been successful in working toward an ever more open global economy. And when the whole prospers, so do most of the individual parts. The question, it seems to me, is not so much whether the Uruguay Round will succeed but rather if we can afford to allow it to fail. On this point, a noted American comedian once said, "I don't know the key to success but the key to failure is trying to please everybody." This must be a nard thought right now for certain public policy makers. |
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Reprinted by Permission