Free trade wears well in all weathers: Leon Brittan urges negotiation instead of retaliation in solving Europe's disputes with the US

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The Independent Online
IT IS ironic that the language of free trade is considered less fashionable during a recession, the time when it is needed most. Free trade is not a summer outfit to be worn when the weather is bright and replaced by more protective clothing when the world economy hits a storm cloud. The world has thrived on it when times are good and survived on it when they are bad. It constitutes one of the surest ways out of recession, and attempts to suffocate it will surely deprive companies of the markets - and confidence - they so desperately need.

That is why the European Community remains resolutely committed to free trade, and to the General Agreement on Tariffs and Trade (Gatt) world trading system as the greatest current expression of it. The benefits are considerable: the Uruguay Round of trade liberalisation measures would add an estimated dollars 300bn of trade to the world economy, according to the Organisation for Economic Co-operation and Development. Failure to agree would deprive world trade of almost dollars 1bn a day.

The Gatt moves forward falteringly, and its deadlines for further liberalisation have a frustrating tendency to slip. None the less, the results achieved so far are impressive. Open trade in goods was unthinkable when the Gatt was created in 1947. Now we take it for granted. The Uruguay Round aims to bring rapidly expanding service industries into the free trade arena for the first time, as well as cutting trade-distorting farm subsidies worldwide. One day we may take these changes for granted, too.

Today, European companies exporting to the rest of the developed world face average duties of 4.7 per cent, a drop from 15 per cent in the Fifties. The Gatt is aiming to cut duties by one-third again, and to size down the crippling 'peak' tariffs that make some export markets impenetrable.

The Gatt thirsts for a fresh dose of political nourishment, for it cannot survive without strong support from its most powerful members. I therefore warmly welcome President Bill Clinton's decision to push for a renewal of the 'fast-track' authority by which Congress can accept a global Gatt deal. The president must nurse it through Congress with astute leadership so that talks can finish by the end of the year at the latest. Japan, too, must forgo the temptation to play its cards last. It must open its doors to rice and other foodstuffs and eliminate unnecessary non-tariff barriers.

The trade disputes that have marred the United States' relations with the Community, as well as with her other trading partners such as Japan, show all too starkly the need for something more than just a bold commitment to the long-term goals of the Gatt. What is needed is a common trade language for negotiating disputes on mutually acceptable terms, preferably defusing them before they flare out of control.

In recent weeks there has been a worrying abundance of threats and accusations - often delivered largely for domestic consumption - over issues that could readily have been resolved through negotiation. A war of words can easily spill over into harmful actions that damage both sides and, in most cases, can be avoided by negotiations. We have a duty to our consumers, industries and the future of free trade itself to defuse such disputes by all means at our disposal.

Take the issue of government contracts, where the US unexpectedly broke off negotiations, repeating its threat to retaliate against the way new Community procurement rules 'discriminate' against American bidders. Thankfully, we have the chance to seek a solution during top-level talks in Brussels next week. These new rules in fact open Europe's markets far wider than before, giving US companies opportunities they could only have dreamt of in the past. The Community cannot possibly open its doors wider without America allowing European firms to bid for lucrative contracts currently reserved for US companies.

In essence, we disagree over whose market is the more open; that is why the Commission is calling for an independent study to analyse objectively the simultaneous opening of our complex procurement markets. Rarely has there been a stronger case for negotiation, but the risk of unilateral US action is still very real.

In this case, as in others, the right reflex must always be to negotiate rather than retaliate. Retaliation invariably hits the innocent party as hard as the perceived aggressor. The consumer - in this case the US authorities themselves - would be the first victim of American sanctions against the Community, as the refusal of European bids would substantially reduce the US government's ability to choose the most suitable contractor at the lowest price, leaving the US taxpayer to foot the bill.

That does not stop either side of a trade dispute considering more drastic options if talks genuinely break down. Nor does it stop them taking a tough stance during negotiations. The Commission is already considering a response if America does retaliate. But the first reflex must be to seek redress through a multilateral dispute-settlement procedure that is impartial, non-discriminatory and transparent. The instruments of trade retaliation must be used only as weapons of last resort, rather than as the tools of a crusade whose aim is to enforce one's own vision of 'free' or 'fair' trade on the rest of the world.

Every trading bloc none the less has the right to defend itself against attempts to dominate its markets by unfair predatory means, and the European Community is no exception. But it is not the existence of trade armouries but the way they are used that matters most. If they are applied merely to fight recession, to meet the demands of domestic industry or to suit the political mood of the moment, they will draw fire from the victim and criticism from the world trading community. If they are used only against a clear breach of internationally accepted norms of commercial behaviour, and are as limited as possible in time and scope, then they may be compatible with a commitment to free trade. That is the way I intend to conduct the Community's trade defence policy, and that is the way I will urge America to deal with us.

Sir Leon Brittan is vice-president of the European Commission, responsible for external economic

affairs.

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