OLD GATT, UNSOLVED PROBLEMS, NOW A HISTORY

7:11 AM Dec 13, 1995

OLD GATT, UNSOLVED PROBLEMS, NOW A HISTORY
Geneva 12 Dec (Chakravarthi Raghavan) -- The General Agreement of 1947 was despatched into history, after a short meeting of its Contracting Parties Tuesday morning -- with some speeches, and exaggerated claims of its achievements to push neo-liberal economics and trade policies.

With the disappearance of the old GATT by end 1995, many of its pending disputes and unimplemented panel rulings also disappear: no agreements could be reached to carry them into the new WTO.

The US has been particularly opposed to several panel rulings and disputes relating to its actions in the area of anti-dumping investigations and countervailing actions.

When the Marrakesh Agreement on the World Trade Organization was signed in April 1994, and the WTO was brought into being on 1 January 1995, the US and other major industrial powers made a concerted effort to make the WTO a new organization, rather than be a successor to the GATT 1947, but agreed to continue for a year the old GATT to give time for those of its contracting parties who needed a little more time to complete their ratification processes to join the WTO.

Despite their efforts to make a break, the rules of the new WTO and its GATT 1994, could only be read by going back to the old GATT 1947 -- simply because GATT 1994 is legislation by reference to the old GATT, with some changes spelt out as consensus 'decisions'.

The WTO Director-General, Renato Ruggiero, told the 51st session of the GATT 1947 Contracting Parties Tuesday: "That the economic prosperity and development achieved since the end of World War II, is to a large extent due to the quiet, persistent achievements of the GATT..."

Ruggiero spoke of the 4.2% annual rate of growth of world merchandise exports during the liberal period of world commercial policies from 1820-1870 (the English laissez faire era which prevailed in Europe only during 1860-1879) and the annual seven percent growth of the post-war (1950-1970) "Golden Age".

Ruggiero added: "The message is simple. Increasing globalization of the world economy through trade growth is here to stay. But if we want to enjoy the benefits that substantial trade growth brings then that process of globalization and enhanced interdependence of nations must be stimulated through new initiatives in trade and economic liberalization.."

The WTO head took the opportunity to advocate that next year's Singapore Ministerial meeting should undertake preliminary work on what he called new issues that will arise or have already arisen as a result of the complexity in managing world economic and trade relations. He did not spell them out, though in various speeches over the last several months he has been promoting negotiations on an Investment Treaty, on competition policy and even flagging the social clause issue.

Ruggiero, as GATT economists and its officials over these last few years, have tried to present the successive trade liberalization under the several GATT trade rounds as a causative factor for the achievements of the "Golden Age".

However there is quite a large number of books and other writings and publications by reputed scholars and economists who have viewed the Golden Age growth not as the effect of the GATT (and its liberal trade, laissez-faire advocacy), but rather the result of the Marshall Plan aid, an activist state interventionist role and Keynesian economics to tame and regulate the markets -- even if some of these got distorted in practice by right-wing ideologues.

In this view of the recent post-war economic history, GATT and its liberalisation process are seen as first having accommodated the establishment of production in Europe behind high tariff walls (about 40 percent) and quantitative restrictions on imports which were eliminated for industrialized countries only in 1956 -- in effect an import substitution strategy of sorts and trade restrictions that brought in US transnational investments, transfer of technology. Only thereafter, with increased production and competitive capacity did GATT liberalisation of imports and an export driven growth came in.

Successive GATT rounds cut tariffs and liberalised trade to the extent that production advanced and increased, with state policy maintaining full employment, rising wage incomes and a welfare state that induced the public to spend on consumption (rather than save for the future) and thus increase demand, and with very low real interest rates of a percentage point or two.

The post-war arrangements and Keynesian economics enabled Europe to create a productive apparatus during the reconstruction period and upto the Rome Treaty for the European Community - behind relatively high tariff walls, mutual preferential tariff with Europe and discrimination against the United States, encouraged by the latter, and even the Common Agricultural Policy which the US opposed only much later. At the beginning, the US got itself its own timeless agricultural waiver.

European countries which sought American capital and investments did not have the open regime that the European Union is now seeking for its own capital outflow nor the kind of investment liberalisation with a big bang approach that UNCTAD's investment division appears to be advocating in its various reports and papers.

Nor did they have the 'rules and disciplines' of the WTO. Ruggiero's own Italy did not have IPR protection for chemical and pharmaceutical products, for example, and this enabled it to expand its industry and export at cheaper prices, inside Europe and outside.

As the Chairman of the GATT CPs Amb. Mounir Zahran of Egypt, noted in the meeting, the average tariffs on industrial products in 1947 was around 40% and it was brought down to 10% only after the implementation of the Kennedy Round, and then to a average 6.4% only after the implementation of the Tokyo Round agreements.

It was thus a gradual process (and not the precipitate one being forced on developing countries by the IMF and the World Bank on the one side and the WTO on the other)

The GATT itself was conceived only as an arena for the US and Europe to discuss and negotiate on their trade policies. As new competition emerged, first in Japan, and then in developing countries, both joined to erect new barriers against competitors by bending the rules or derogating from them.

The special and preferential treatment promises of Part IV of the GATT became a "best endeavour clause", while departures and derogations from trade rules made developing countries recipients of trade discrimination.

Speeches at GATT over the years, and statements of GATT officials, often speak of need of transparency in trade policy instruments and measures. But the GATT bodies, as those of the WTO now, are all closed meetings, with public information 'managed' through the press office and its briefings which are mostly inadequate and sometimes misleading.

The WTO/GATT press office attempted Tuesday morning to get the media to be present at the last session of the CPs, implying large press attendance would encourage the CPs to open up to the press more in the future. The media generally saw it as an attempt to claim openness. Any event before the media representatives could troop down to the meeting place, the CPs had ended their meeting.

Judged by the year-long practice, the old GATT may die at year-end, but its non-transparent ways of functioning and decision-making, continues at the WTO and the new GATT.

Consultations and confabulations to cook up a new trade agenda and other issues affecting the public still continue to be in small groups, mostly outside the WTO, and beyond public scrutiny or information. This often enables the same trade diplomats to publicly take up one position, and privately at these confabulations take a different view or atleast refrain from pressing their views. The non-transparency thus helps governments to hide themselves from their public.