The Gatt Deal: World waits to see who really gains: It took seven years to work out an agreement, but no one knows how long will it take to work out the consequences
Wednesday 15 December 1993
On one side, those like Peter Sutherland, the Gatt Director-General, say the deal will give a badly needed boost to the world economy and create millions of jobs in the industrialised world. On the other are critics and interest groups who fear it will lead to a massive haemorrhaging of skilled jobs from Europe to the low-wage economies of the Far East and elsewhere.
Others say the deal will speed up the damage to the environment by promoting industrialisation and making it more difficult to protect the environment through trade restrictions.
The Uruguay Round of negotiations on the General Agreement on Tariffs and Trade - the largest and most comprehensive to date - has been a seven-year marathon, finishing three years late.
The main beneficiaries will be export-driven businesses, many of them large transnational corporations. Duties paid at borders, the subsidies paid to competitors and many other barriers to trade will be reduced or eliminated, making world trade more competitive. But whether the deal will deliver the much-quoted pounds 143bn in additional annual world income remains to be seen.
The agreement will extend the scope, the scale and the authority of the world's commercial system, which should in turn bring down prices, boost trade and create jobs. Exporters of top European products - everything from quality French cheeses to Scottish whiskies and hi-tech goods - should find formerly inaccessable international markets opening up.
The agreement has been hailed by the Bureau of European Consumer Union (BEUC) as important for consumers in wealthy countries because it will give them 'greater choice and lower prices'. Consumers in poorer countries will benefit, the organisation says, 'from increased access to work in agriculture and industry, which is essential if they are to meet their basic needs.'
'We're not going to wake up tomorrow and find cheaper foods in our supermarkets,' said a spokeswoman, Victoria Graham, but over a period of years 'electronic goods will be up to 20 per cent cheaper, foods will be cheaper and a Japanese car could cost up to pounds 1,000 less than at present.' It will take up to 10 years for the present voluntary restraints on Japanese car imports to Europe and the US to go altogether.
Mr Sutherland has also taken up the cudgels on behalf of consumers. 'The effects of protection almost always fall most heavily on the poorest sections of society,' he said. 'It is they who, because of low income, have to spend the highest proportion of their household budget on necessities like clothing, footwear and basic food products.'
Two trenchant critics of the Gatt deal are Tim Lang, Director of Parents for Safe Food and Colin Hines, co-authors of The New Protectionism. Mr Hines believes that Gatt will lead to more unemployment in Europe as jobs go to cheaper-waged, more competitive economies with lower environmental and welfare standards.
'Some Europeans may get wealthier from a Gatt, but what good is that if more are out of work?' he asks. The prime beneficiaries of a free-trade deal he says, are the world's 35,000 transnational corporations, more than half of which are based in the US, Japan, Germany and Switzerland, according to the United Nations.
The most important part of any Gatt agreement has always been commitments on market access - the amount by which countries cut their tariffs on certain goods. Tariffs are to be cut from an average five per cent to three per cent, reducing the cost of products in the shops - if importers pass on the difference. In seven rounds of talks since 1948, tariffs have come down some 45 per cent.
But the achievement of this agreement, and its most difficult task, was to bring agriculture under the rules of the world trade system. Subsidies are to be brought down by 21 per cent over six years. In Europe, last year's redesign of the Common Agricultural Policy has already determined changes in subsidies, and one of the hardest fights was persuading France that CAP reform and the Gatt were compatible. Nonetheless, most studies suggest that the CAP will need a revamp in coming years.
Textiles, long one of the most protected sectors in the world trading system, will be revolutionised as quotas are removed over 10 years, and the cost of basic clothing items should slide. For many developing countries, this was the quid pro quo for the demands made of them in areas like services. It will hit textile-producing countries like Portugal hard.
Services - everything from telephone links to the sale of insurance policies - are a key feature of the deal for the developed countries, and those in Europe in particular. The EU - especially France and Britain - is a services superpower. But the financial services package produced in Geneva is weak: other areas, like shipping, have barely been touched or put to one side.
Perhaps the most important result of agreement, however, will be to instil greater order in the world trade system. For Europe, which is highly dependent on external trade, this is vital.
Despite its impressive scope, the final deal was more conservative than originally expected when the round began in the warm sunshine of Punta del Este in Uruguay back in 1986. Several sectors have fallen out of the deal, or were never in it, or were weakened or simply side- tracked, such as trade in audiovisual products, steel, aircraft subsidies and financial services.
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