Second Thoughts

June 27, 1994|By WILLIAM PFAFF

PARIS — It is distinctly possible that the United States will not accept the trading reforms won from Europe and Asia last year at the cost of much international uproar and reciprocal national blackmail. President Clinton told the Business Roundtable in Washington last week that its members -- top executives -- must do everything they can to get the GATT reform legislation through Congress this year, because if they don't, it may never pass in recognizable (or internationally acceptable) form.

Congress has decided that it doesn't like the looks of the new World Trade Organization that is to replace GATT and discipline world trade. They think it may prove too powerful. It will certainly limit U.S. ability to apply unilateral and arbitrary trade reprisals, as it does now. Republicans in particular are against changes that are supposed to take place in U.S. budget rules concerning lost tariff income.

Trade legislation is an extremely dull subject to those not professionally devoted to the matter, such as Washington lobbyists whose business clients want more free trade for themselves but less for their competitors. However, it would be a remarkable humiliation for the United States if Congress rejected the outcome of the intense and complicated Uruguay Round TC negotiations, which began eight years ago and were finally signed in Marrakesh early this year.

Two Republican presidencies and one Democratic administration have lectured and sometimes bullied the rest of the world about the necessity for freer international trade. They finally got approximately what the U.S. said it wanted. Now Congress is suggesting that we may not want it after all. Who has the last laugh now?

Those with the last laugh are those who have questioned the allegedly universal blessings of liberalized international trade. If Congress does reject the Uruguay Round agreements, this would be a wounding blow to the doctrinaire free-traders who dominate U.S. and West European economic theory and trade (( policy.

There is a rumbling revolt -- in Western Europe, at least -- against the trade orthodoxy of the Thatcher and Reagan years. In Asia, these ideas have never had the acceptance they enjoyed in the West. Japan and the new Asian industrial countries have very sensibly profited from America's enthusiasm for liberal trade while protecting their own markets in ingenious ways.

In Western Europe, opinions have been divided. Maritime Britain is a free-trader. Under Margaret Thatcher and her successor, JohnMajor, the British government has insisted that Britain benefits from having sold a large part of its manufacturing industry to foreign groups anxious to install trading bridgeheads in Europe. It would, they said, all come out for the best in the end (''in the long run,'' that is, when, as John Maynard Keynes observed, Mrs. Thatcher and her friends will be dead).

Germany is a free-trading country. France and the Latin countries to its south have always been more protectionist. The European Parliament elections earlier this month saw an unexpectedly strong showing by French parties critical of the conventional wisdom about free trade. Historically, the French have tended to associate free trade with falling living standards and the loss of social protection, whereas the opposite is true in Germany.

The conventional wisdom, though, says that trade raises living standards, the more of it the higher the standards. But that is theory, and trade is not conducted in the ivory tower. Competition-pressed Western manufacturers during the past decade have too often looked for their ''productivity'' increases in reduced wages and social protection for the labor force. This is antiseptically described as improved labor flexibility, but has in fact meant that workers have paid the cost of the undoubted other benefits of liberalized international trade.

A recent article by Michel Hansenne, director general of the International Labor Office in Geneva, proposes that admission to the new World Trade Organization -- and hence to Uruguay Round trade advantages -- be linked to the trade-union guarantees and free collective bargaining requirements of the International Labor Organization. That would provide some insurance against ''social dumping'' while protecting the developing countries' access to advanced markets in America and Europe.

However, Congress could solve the problem in its own way, by failing to pass the agreement. This would leave the world with its present trade regime, and probably in a drift toward large trading blocs in North America, Europe -- including Eastern Europe -- and at least a part of Asia.

It approaches heresy to suggest it, but perhaps that would not be such a bad thing. Holding back the pace of trade liberalization would give the world an opportunity to explore the costs as well as the benefits of the globalized economy -- a very recent development, about which we may know less than we think.

William Pfaff is a syndicated columnist.

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