At All Costs, Save GATT
Past efforts by the US to go it alone with bilateral trade negotiations have not been successful. So, as unpopular as it may be in the short term, the US must stick it out with multilateralism
TRADE ministers are meeting this week in Brussels to wrap up the four-year long Uruguay Round of multilateral trade negotiations. All 100 GATT-member countries have an important stake in the success of the Uruguay Round, though no agreement can completely satisfy all members. The United States, as the largest trading nation and with interest in most of the 15 topics under negotiation, stands to benefit from virtually any ``reasonable'' agreement. Of course, the US should not blindly accept any proposal, but it is in the interest of the US to achieve an agreement, even if incomplete in terms of American negotiating objectives. The power of the multilateral process enshrined in the GATT has been the ability to maximize the gains and minimize the adjustment costs from mutual reductions in trade barriers - usually resulting in larger gains than were expected. Naturally, there has been frustration with the multilateral process in the GATT, mostly as a result of past successes. Disputes and negotiations are handled far too slowly. Many of the current problems are not covered by the rules. And over time, negotiations have become increasingly painful. The easy gains possible through tariff liberalizations have been achieved. Now, significant gains depend upon negotiating mutual modifications in member nations' domestic policies, leading to domestic political conflict as a result.
A successful GATT agreement would obligate all contracting parties to adapt their trade and industrial policies to the new international rules, providing an opportunity for the US to move away from relying on bilateral trade negotiations and return to a more multilateral approach. A multilateral process is far superior to bilateral actions as a basis for trade negotiation and dispute resolution. It minimizes competitive distortions among countries, making it easier for all to reduce barriers. It keeps pressure on all countries to abide by the same rules. By use of third party dispute resolution and common, i.e. multilateral, agreement on the rule of the game, trade problems can be dealt with less confrontationally. Moreover, a multilateral approach tends to reduce the us versus them, ``zero-sum,'' mentality that so dominates trade discussions in any event.
If the United States and other GATT members continue to pursue bilateral initiatives aggressively as the principal means of dealing with commercial disputes, international tensions will rise, jeopardizing multilateralism and a broad range of international relationships. In fact, extensive analysis concludes that bilateralism and selective protections has not effectively protected the long-term interests of the US, but mainly has served the narrow interests of those sectors powerful enough to mobilize domestic political support. The evidence is overwhelming that the main causes of our national economic problems lie at home. There are some important international trade problems that requir resolution. But you do not fix a leaky radiator by changing a tire - the remedy must fit the problem.
In this context, a Korean example is illustrative. America's growing trade deficit with South Korea has led to political pressures to open Korea's market. The Korean government has liberalized several hundreds of items at the specific request of the US government since 1985 - many for which US producers were considered to have a comparative advantage. US firms captured only some 16-18 percent of these new markets - well below America's overall Korean market share of 22-25 percent. Some market opening has resulted, but, bilateral pressures, especially through the use of Section 301, or the Super 301, also has produced tremendous political tensions - with no visible increase in US exports. Clearly, something besides market access is the key problem facing US exports.
Today, all GATT member nations need to take steps to open their markets that could be unpopular in the short-term, but will surely work to the long-term interests of all. Timing is critical, due to the approval process for a GATT agreement in the United States. The so-called ``fast-track'' procedure requires that implementing legislation be presented to the Congress by March 1, for a vote without amendments by June 1. If the March 1 deadline cannot be met, then the Congress has the authority to, and almost certainly will, amend the GATT document. Other GATT members, justifiably, would be unlikely to accept such unnegotiated amendments. This could result in a total collapse of the Uruguay Round, potentially challenging the GATT itself.
The various public statements and confrontational attitudes that threaten to destroy the prospects for agreement may merely represent a final jockeying for negotiating leverage. But, weakening global economic conditions and internal politics in Western Europe and the United States suggest very limited room for maneuver. The coming ministerial, therefore, could well mark a milestone for expanded trade and cooperation or alternatively raise the specter of growing protectionism and unilateralism in international trade. Even an incomplete agreement would address many of the trade disputes that have been so difficult to manage over the past solutions. A failure to reach agreement could well challenge the entire structure of trade policy developed since the end of World War II and, in turn, threaten a vital source of global economic dynamism. It is incumbent upon the leaders of the United States and other major economic powers to chart some compromise path. It is in their hands whether we are all winners or all losers.