General Agreement On Tariffs And Trade

General Agreement On Tariffs And Trade ELECTRONIC COMMERCE Washington in duty-free move The US is seeking to extend the duty-free status of international online transactions to protect the development of global electronic commerce, the Clinton administration said yesterday. Susan Esserman, deputy US trade representative, said the US wanted the World Trade Organization to agree at the earliest possible date to extend the current moratorium on customs duties for electronic trade. In testimony to the Senate foreign relations sub-committee on Europe, Ms Esserman said duty-free cyberspace was particularly valuable to US software companies that were seeking to distribute their products electronically. The US is also looking for WTO members to affirm that electronic commerce is subject to existing rules and agreements, and should not face unnecessary regulatory barriers to trade. However Ms Esserman said more time and work are necessary before electronic goods could be subject to final classification under WTO rules. Electronic commerce in the US is forecast to grow to $1,300bn by 2003, while in India it is expected to grow by $15bn within two years.

Richard Wolffe, Washington Protectionism, it seems, is always with us and it is useful to examine the intermittent attempts made to establish rules for its containment. This book is one such examination, on the conception, birth, and early years of the General Agreement on Tariffs and Trade (GATT); it is restricted to the years 1940–53. It is the work of an historian but one at the political, rather than economic, end of the spectrum. The heavy emphasis throughout is on the American role within an essentially Anglo-American tussle. The argument is that although trade was a relatively small proportion of US output it was used for political and diplomatic purposes.

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The general thrust is that the US was keen on a new liberal order and determined to break the British empire’s preferential trading arrangements. However, when we read that the central argument is that, ‘by liberalizing trade while protecting domestic economies — a bargain consistent with US trade law, practice, and history ..’, we might reasonably expect to be in for a roc ky ride. Politics is important and possibly even central in the process of trade protection, but will always be found to depend on economic forces. The politics here might well be overdone. The whole story is presented as a struggle between the US and Britain/British empire. Although this tension is an old story, Zeiler takes it further and argues that the Commonwealth had ‘a major hand in shaping the GATT order’ (p.197).

It is a complex story of negotiations taking place under conditions of extreme difficulty, and the author has worked diligently in the American, British and Commonwealth country archives. There is, however, a lot that raises the eyebrows of the economic historian. Within a few lines of the opening we read that, ‘global business leaders .. seek a commercial regime unfettered by barriers’. This is rather the antithesis of the conventional understanding of businessmen almost invariably (and nowhere more so than in the US), seeking protection.

And running against the conventional view (without seemingly noticing) is the idea that America is the home and inspiration of free trade. The British in the 1930s opted for, ‘Regulated, rather than American style market, capitalism .. ‘ (p.20). Or again, ‘Free trade frightened the British’ (p.39). And richest of all, ‘The British simply would not accept the free trade doctrine’ (p.24). Zeiler suggests that free trade was key to the American economy ignoring the fact that America had been one of the most protectionist countries for most of its history. This is unfortunate and results in a distortion of the argument, for of the GATT negotiations Zeiler say s the British were not willing partners in pursuit of lower trade barriers.

At certain times that may have been true but it did not derive from long-term hostility. Nevertheless, in the closing pages of the book the author does concede that the US was no unilateral free trader. Running alongside this idiosyncratic view is an account of the British economy that is surely at odds with the facts. It is a picture of pathetic feebleness: ‘Great Britain faced a future of decline and hardship. Its once predominant global position lay in tatters’ (p.2O).

‘Their economy was in a shambles ..’ (p.39). While the book is well written there is a danger of the story being presented in overly dramatic terms (hinted at in the title), and at times a frivolous and dismissive tone creeps in — ‘From his perch in the Treasury Department, Keynes ..’. And there are occasional lapses in accuracy such as that the Commonwealth had moved to a discriminatory trading system in the 1930s (the Dominions had been giving preferences from the 1890s), or, for example, that there were tariffs on meat. Too much of the story reads as if the world began around the time of the study. This is a pity for it is an important subject and one from which business historians can learn and to which they can contribute.

Prime Minister John Howard can claim a victory at the Commonwealth Heads of Government Meeting (CHOGM) with the summit embracing his call for a statement demanding freer world trade. Mr. Howard had been pushing for the Commonwealth to make a strong stand on the need to relax trade barriers ahead of this month’s World Trade Organization (WTO) ministerial talks in Seattle. Following their weekend retreat, Commonwealth leaders released a declaration calling on all nations to dismantle trade barriers and enhance export opportunities for poorer countries. We support efforts that would enable developing countries to build up their skills and manufacturing capacities, including the production and export of value-added goods, so as to enhance growth and achieve prosperity, the declaration said.

Likewise, we urge that the forthcoming ministerial meeting of WTO launch the next round of global negotiations on trade to be one with a pronounced developmental dimension, with the aim of achieving better market access in agriculture, industrial products and services in a way that provides benefits to all members, particularly developing countries. Mr. Howard, who has announced a series of Australian aid packages for Commonwealth countries, has argued trade restrictions need to be lifted in the more globalizes world economy. Globalization was a fact of life and could not be avoided, he said. It’s a question of understanding it and it’s a question of every community in its own way making certain that its citizens understand and that where we can even out the bumps and we soften the blow whilst continuing to go forward, he said. The challenge of globalization is the theme of this year’s CHOGM, which is also considering ways to strengthen democracy in the Commonwealth and what follow-up action to take against suspended member Pakistan after last month’s military coup. Briefing: Maybe It Is Free Trade: It Certainly Doesn’t Cost The Government Very Much The General Agreement on Tariffs and Trade (GATT), along with the Bretton Woods monetary agreement and the International Monetary Fund (IMF), were the cornerstones of international economic policy created at the end of World War II. All three institutions were designed to promote free trade, economic stability, and an end to the economic policies that led to the Great Depression and contributed to the coming of war.

The World Trade Organization (WTO) is, in effect, the supervising body for GATT, which is not one law, but a complex body of laws and regulations that have accumulated over a period of more than 50 years and covering a great many aspects of world trade and what signatories are and are not allowed to regulate for themselves. The basic WTO guidelines are that members should conduct their trade and economic relations with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of development. In addition, the charter of the WTO calls for it to enforce the following fundamental principles: ? Trade without discrimination. Members are bound to grant to the products of other members no less favorable treatment than that accorded to the products of any other country. Once goods have entered a market, they must be treated no less favorably than the equivalent domestically-produced good. ? Predictable and growing access to markets.

While quotas are generally outlawed, tariffs or customs duties are legal in the WTO. ? Promoting fair competition. The WTO extends and clarifies previous GATT rules controlling dumping (selling goods abroad at below-market prices) and subsidies (governments providing money to make local goods cheaper than imports). ? Encouraging development and economic reform. Developing countries are given transition periods to adjust to the more difficult WTO provisions. Less-developed countries are given even more flexibility and benefit from accelerated implementation of market access concessions for their goods.

The North American Free Trade Agreement (NAFTA) has been in place since the beginning of 1994. A pet project of former President George Bush, NAFTA is a three-way agreement among the United States, Canada, and Mexico designed to encourage trade and commerce throughout the three nations of North America. One World, One Trading Unit The arguments for free trade vs. protected national economies has been with us since the very beginning of trade between tribes. Drawn with the broadest brush, the argument comes down to how much we perceive ourselves part of the international community and how much we wish to keep our tribe/estate/city-state/country separate from, and richer than, its neighbors.

Most economists agree that, at least in principle, free trade results in the greatest good for the greatest number of people. Suppose Country A grows kumquats better than Country B, but Country B makes widgets more cheaply; if Country A specializes in kumquats and trades some with Country B in exchange for widgets and vice versa, both will be better off. According to this widely-accepted theory, both countries are better off under free trade rules even if one country is better at everything. In this case, the less efficient country will have lower wage rates than the more efficient one, but will specialize in the goods it produces most cheaply relative to others–and both will wind up richer through trade than through isolation. However, free trade does have a disadvantage: Even if it works for the benefit of everyone in the long term, in the short term there are often dislocations.

If America opens its textiles market to cheaper imports from Mexico, American textile workers lose jobs. Of course, American consumers benefit from cheaper clothes, and spend the money they save on other goods, thus creating jobs in other areas–but in the short term, a lot of textile workers have lost their jobs and have a hard time finding new ones. And the pain is concentrated, while the benefits are diffuse; the people who lose their jobs will complain bitterly, while the people who find slightly cheaper clothes at the mall may not even realize why prices have dropped. The argument for free trade has another disadvantage: It’s counterintuitive. People seem comfortable believing that exporting is good, while importing is bad. Of course, this is oversimplified; if the Japanese make better stereos, we do ourselves no favor if we force Americans to buy inferior American hi-fi equipment.

And we do the American hi-fi industry no good, because it will grow fat and happy in its protected market and will never develop into a viable competitor for Japanese manufacturers. What’s the alternative? In 1929, the United States passed the Smoot-Hawley Act, which drastically increased tariffs on imported goods, in the name of protecting American jobs. Many historians and economic theorists believe that the Stock Market Crash of 1929, the Great Depression, the rise of Hitler can be directly attributed to that one law. Proponents of GATT and NAFTA need only point to these economic and historical arguments to make their case. One Trading Unit, No National Sovereignty The principles of free trade may be hard to argue with, but the implementation of what we call free trade in the 1990s is another matter. NAFTA and GATT are extremely controversial among Americans, despite being perhaps the only thing Bill Clinton and George Bush agreed upon in the 1994 presidential election.

The WTO, …


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