Effect on U.S. uncertain if GATT isn't adopted

SUNDAY OUTLOOK

October 02, 1994|By David Conn

The fate of the General Agreement on Tariffs and Trade was threatened last week when Sen. Ernest Hollings, D-S.C., blocked consideration of the ratifying legislation until after Congress's scheduled adjournment this week.

Senate leaders now plan to debate the issue in a two-day post-election session with a vote set for Dec. 1.

Approval by the United States is considered essential to persuade other countries to ratify the agreement. What effect on the U.S. and world economies would result from passage of the new agreement?

Dr. Gerard Adams

Professor, economics and finance,

University of Pennsylvania

I think it's a tragedy if it doesn't go through. And it's a tragedy because GATT, of course, affects all the world's economies. And I must say it was something of a triumph, after much tugging and pulling, that something over 100 countries signed an agreement which would lower tariff barriers on industrial products -- we've .. done that before -- but now also on some agricultural products and some services. So GATT represents a significant step forward in the lowering of trade barriers.

I think that the world and our country too has gained a lot from free trade. The problem with Senator Hollings is that, sure, it may cost jobs in very specific industries, in very specific locations. There's no getting around that. But on the basis of the world's economy and our own economy, it's a very important forward step, and it would be tragic if we didn't pass it.

William Lovett

Joseph Merrick Jones professor

of law and economics,

Tulane University

If GATT 1994 fails implementation, the result will be a significant long-term gain for the U.S. economy. Unfortunately, the GATT 1994 deal involved excessive concessions by the U.S. with vague and largely predatory language as supposed gains.

The GATT deal put American industry and commerce into a one-way straitjacket. We greatly weakened U.S. trade law remedies against foreign subsidies, dumping, industrial policies or targeting, and opened up U.S. markets more than before.

You have to understand the reality. The major markets were partly opened already, and the new industrial countries only partly opened some of their markets in the GATT '94 deal. So, whatever gains in opening new industrial country markets occurred are equally available to Japan, East Asia, Europe, the U.S. and other new industrial countries.

The well-entrenched asymmetry in current trading relationships is aggravated, not alleviated, by the GATT '94 arrangements.

Joe Cobb

John M. Olin Senior Fellow

in Political Economy,

Heritage Foundation

[If the GATT failed] I would expect to find a great deal of turbulence in the financial markets, because it would represent a dramatic change from the trend of the past 50 years in the international economy if the United States seemed to be turning away from the role of leadership in opening trade.

If the United States is renouncing leadership on trade issues, other countries would begin to worry about the openness of U.S capital markets in the future.

Every international economist understands that open trade flows promote economic growth and employment. Job loss does occur in specific industries because of international trade, the same as it occurs in specific industries because of domestic interregional trade.

But the overall effect on employment is to increase jobs when you increase trade. Senator Hollings has it precisely backwards. The historical example is the tremendous loss of jobs following the closing of trade in 1930 with the Smoot-Hawley tariff.

Barry Bosworth

Brookings Institution economist

[If the GATT passes] I think the short-run effects will be very small. The reason is that the negotiators were unable to make large progress in immediate trade liberalization.

I think the way to look at the GATT is it's much stronger on procedure, laying out some rules and a format on how to proceed in the future on liberalization, than it is on immediate liberalization.

The preliminary studies, before the final agreement was made, suggested that it would have an effect after, say, a 10-year period, increasing incomes globally by about 1 percent of GDP, with most of those benefits accruing to the industrialized countries.

For U.S. consumers, any of these agreements are always a big positive. For American producers, there are always winners and losers. This helps people in high-tech industries, where the U.S. has always had a big advantage. It would help services. It will hurt apparel. If you're in that industry, you had better start thinking about retraining some of your employees.

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