Problem with GATT talks: Trade has outgrown rules

November 28, 1990|By Clyde H. Farnsworth | Clyde H. Farnsworth,New York Times News Service

WASHINGTON -- In seven rounds of global trade talks over four decades, tariff rates have been slashed by more than 75 percent. As imports became so much cheaper, trade across frontiers surged, and workers the world over produced a staggering amount of wealth.

The problem for the eighth round of trade talks is precisely that success: World trade has outgrown the rules written for it.

The round is scheduled to end with a meeting in Brussels, Belgium, next week, if a bitter dispute on farm subsidies can be resolved.

The world's trade rules were written 43 years ago and codified as the General Agreement on Tariffs and Trade, known as GATT.

They define what fair trade is and set rules for settling disputes. They impose penalties for unfair pricing, unfair subsidies and other trade violations and encourage member nations to promote even more international trade.

The alternative to GATT is bilateral bashing, in which countries square off against others they consider to be trading unfairly.

In such cases, one government will curb the imports of certain goods, as the United States did in 1987, when it accused Japan of failing to comply with an agreement on fair trade in semiconductors and imposed $300 million in sanctions on a variety of Japanese electronics shipments.

Some of those restrictions have been lifted, but $165 million of Japanese products, including laptop computers and power hand tools, are still assessed a 100 percent retaliatory duty when imported into the United States.

Such steps invite counter-retaliation, and as nation after nation responds to grievances by erecting barriers, the danger grows that trade will dry up.

Today, more than a third of the world's trade of $4 trillion is not covered by GATT rules, or not covered adequately.

No rule, for example, forbids the piracy of Paul Simon cassette tapes, which sell for up to $10 in the United States. Unauthorized copies are sold in Thailand for $1.25.

As a result, U.S. entrepreneurs in entertainment, software, pharmaceuticals and scores of other industries lose more than $60 billion a year from the theft and counterfeiting of their ideas -- their "intellectual property" -- according to the tally of the International Trade Commission, a U.S. government agency.

Nor do the rules cover insurance, law, accounting, telecommunications, banking, advertising, tourism and other services that have become increasingly important categories of international trade.

When GATT was created, almost all world trade was in manufactured goods and raw materials.

Today, services provide a fifth of world trade. For the United States, services are especially important. They provide 70 percent of its total output and 90 percent of all new U.S. jobs.

The lack of GATT rules means that there is no international forum to hear complaints when the Japanese markets for architecture, engineering and construction are shut to the United States, or when German and French telecommunications monopolies bar competition from the United States or Canada.

On the other side, the Europeans and Japanese complain that the United States flouts international rules when it acts unilaterally to eliminate unfair trading practices by others.

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