More fight left in the Uruguay Round

Click to follow
The Independent Online
THE CHAMPAGNE should be flowing after seven years of negotiations, but there have already been riots in India and a threatened rebellion in the US Senate over the new global trade agreement. The signing of the Uruguay Round treaty signals not the end of trade conflict but the promise of more.

As in all significant rounds of the General Agreement on Tariffs and Trade (Gatt), there is unfinished business that will tie up negotiators for years to come. But this time, the unfinished agenda is so large and so encompassing that the seeds of conflict have already been sown. For starters, this round creates a new World Trade Organisation (WTO) that will supplant the Gatt as arbiter of global trade conflicts. Other contentious issues on the unfinished agenda are new provisions to 'green' the agreement, which will make environmental issues a prominent consideration for the WTO, and the final subsidies code. This allowed for so many exemptions that Clayton Yeutter, one of the round's originators, said: 'We may have shot ourselves in the foot.'

The WTO, as broadly conceived, can be described as a United Nations of international commerce but with more teeth. After it is established next year, more than 100 countries are expected to come under its governance as China and Taiwan, and Russia and other former Soviet republics become members.

Unlike the much narrower Gatt, it will not only be concerned with tariffs and quotas, but also with setting rules of competition in finance and services, integrating state-controlled economies such as China's into the world system, and ruling on matters as diverse as intellectual property rights and agriculture. In many ways, it is a response to the new trend of regional growth centres that subordinate themselves to supranational bureaucracies, be they in Brussels, Washington or Geneva. How it will be governed is, at this point, anyone's guess. But to some countries that have actually read the 22,000-page treaty, the WTO spells unacceptable loss of sovereignty.

As the US Congress begins to digest the agreement, all three concerns have come to the fore. US environmentalists are laying the ground for confrontation when the treaty comes up for congressional ratification. The consumer advocate Ralph Nader argues that faceless bureaucrats in Geneva will soon be able to decide whether US environmental laws can protect dolphins from tuna fishermen. If the WTO rules that US environmental or health laws are unfair trade barriers, they will have to go. Mr Nader contends this will pit 'Flipper against the Gattzilla bureaucrats' in a battle the former is bound to lose.

Already, influential US senators are threatening to vote against the treaty unless it contains important side agreements, most notably on the subsidies code. The final agreement exempts certain subsidies - for research and development for example, which Americans see as aiding hi-tech industries such as Europe's Airbus at the expense of their own. They fear other countries will flood this subsidies loophole with new protectionist devices.

In addition, the US Congress cannot figure out how to pay for the agreement. The Uruguay Round's crowning achievement is a multilateral reduction of trade barriers that is expected to boost world trade by thousands of millions of dollars over the next decade. The flip side, however, is reduced revenues from tariffs - the US stands to lose dollars 14bn (pounds 9.5bn) over five years.

Under US pay-as-you-go budget rules, such losses have to be offset either by spending cuts or tax increases. However, no one wants the treaty to go down over such a relatively small sum.

Some developing countries are also deeply concerned over the potential impact of the treaty. In Asia, Latin America and Africa there is fear that developed countries will attempt to retain prosperity at their expense, by imposing unduly harsh standards on emerging societies.

Vice-President Al Gore's impassioned appeal in Marrakesh to the Gatt signatories, urging protection of workers' rights and the environment as a top priority of the WTO, did little to allay these fears. According to one Indian delegate, the US and France only deepened concern that strict pollution controls and tough labour standards would be used as weapons to block imports from developing countries.

Despite the many difficulties, the final Uruguay Round has gone far beyond the expectations of delegates at the first meeting in Punta del Este in September 1986. The resulting reduction in world trade barriers is expected to generate dollars 5,000bn in new trade by 2005 and many thousands of new jobs globally.

Important breakthroughs were made in agriculture, intellectual property rights, anti- dumping codes, and even in investment and finance, which have been linked finally to trade. There is no question that the world will be better off as a result of this agreement.

(Photograph omitted)