US Sees Breakthrough In World Trade Talks
The United States and France differ over what agreement in Tokyo means for the future of the General Agreement on Tariffs and Trade
THE world trade negotiations are back on track.
That is the feeling among trade experts following the announcement in Tokyo Wednesday that trade ministers from the United States, Japan, Canada, and the European Community agreed to some dramatic tariff reductions. The reductions will be presented to the 111 member-General Agreement on Tariffs and Trade (GATT), which sets the rules governing international commerce. The talks, which have been ongoing for seven years, have been stalled for the last several years.
"I think it is a major breakthrough. If we didn't have something like this, the negotiations would have shuffled off to oblivion," says Harry Freeman, a Washington-based trade expert. Paula Stern, former chairwoman of the International Trade Commission, calls the agreement a positive litmus test on the success of the economic summit. "If this hadn't been achieved, it would have been a big failure," she says.
As part of the agreement, the four major trading powers proposed to eliminate tariffs on pharmaceuticals, construction, medical and farm equipment, steel, beer and liquor, and furniture. They would harmonize tariffs on chemicals and reduce them on textiles, ceramics, glass, and apparel by up to 50 percent. Other areas such as electronics and wood products would be cut a minimum of 33 percent - but these are open to further negotiation. All of these cuts would be phased in over five to 10 years. Final agreement uncertain
It is still not certain that this agreement will result in a final treaty. The negotiators made progress but did not reach agreement on market access for service providers, a major issue for th US. There also was no agreement on the protection of intellectual property rights or the unrestricted entry of rice into Japan. And agriculture issues still must be worked out. "There is an enormous amount of work to be done over the next five months," says Michael Aho, a trade expert at the Council on Foreign Rel ations.
The negotiators must convince other countries that the cuts in tariffs are worth bargaining over. "Now the US and other countries must go to places like Brazil and ask how the Brazilians intend to liberalize access for services and protect intellectual property rights," says Mr. Aho, who has written a book on the GATT. "The Brazilians are likely to respond that we haven't done much for them in agriculture."
There will not be much time for bargaining. The GATT negotiations, termed the Uruguay Round, must be wrapped up by Dec. 15 when President Clinton loses fast-track authority from Congress. Under fast-track provisions, Congress can only vote "yes" or "no" on the total treaty - it cannot add amendments. Congress recently renewed the fast-track process. After Dec. 15, Mr. Clinton will have 90 days to get the detailed treaty to Congress, which might finally approve it by the fall. Benefit to US industries
Some US industries could profit handsomely from the tariff cuts. The pharmaceutical, forest products, construction, and farm equipment businesses will have more competitive exports. Such forecasts prompted the White House Wednesday to predict the tariff cuts, if adopted, would add 1.4 million jobs in the US. "It will be a big deal for Americans - lots of jobs involved if it works," Clinton said.
Some executives are optimistic. Kenneth Kwit, chief executive officer of Expressions Inc., a Metairie, La., furniture manufacturer and distributor, says the tariff reduction will be "quite helpful" in the company's efforts to export to Canada. "Duties have been one of the primary considerations preventing us from going ahead with a franchise," he adds. The tariff reduction may also help Kwit expand sales in Mexico. Yet Mexico has an inefficient distribution system which is more of an inhibition than the
In the US, tariffs are generally low, but there are spikes in sensitive areas such as ceramics, glass, and textiles. The new agreement would flatten these out.
For the developing world, cuts in textile tariffs are considered essential. However, the textile caucus is very strong in Congress. "Every Congressman with an International Ladies Garment Workers Union unit in his district becomes a member of the caucus," says former Rep. Bill Frenzel, now at the Brookings Institution.
Mr. Frenzel says it is unlikely that an unfavorable impact on textiles would prevent the treaty from getting approved in Congress.
The steel industry is also a potent lobbyist but will not be dramatically hurt by the elimination of steel tariffs since it will be protected by high dumping duties recently imposed on imports by the Commerce Department. Those dumping duties have no sunset provision.
Negotiations will resume Monday in Geneva.