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Caught between self-destruction and reform

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  • GATT
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Intereconomics

Abstract

While neomercantilist policy measures, in the form of both import protection and export subsidization, are still gathering momentum and are just entering their second decade with evidently high growth rates, the dynamic post-war growth of world trade itself has at least temporarily come to a halt: trade fell in volume in 1981 by just under 1% and, in 1982, by about 2%. A new round of multilateral trade negotiations is in prospect for 1985, during which further tariff reductions will be on the agenda, but the main item for discussion will be questions surrounding a reform of GATT which emerged from the Tokyo Round. The following article seeks to establish the true significance of the GATT principles today, investigates the causes of the erosion of discipline within GATT, and deals with important aspects of present efforts to introduce reforms.

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References

  1. Cf. A. Sapir: Trade Benefits under the EEC Generalized System of Preferences, in: European Economic Review, Vol. 25 (1981), p. 339 ff.; R. E. Baldwin, T. Murray: MFN Tariff Reduction and Developing Country Trade Benefits under the GSP, in: The Economic Journal, Vol. 87 (1977), p. 33 ff.

  2. Cf. GATT, The Tokyo Round of Multilateral Trade Negotiations, Vol. II, Geneva 1980, p. 33.

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  4. Cf. UN, World Economic Survey 1983, New York 1983, p. 31.

  5. For a general overview, see J. de Miramon: Countertrade: A Modernized Barter System, in: OECD Observer, No. 114/1982, p. 12 ff.; J. I. Walsh: Countertrade: Not just for East-West any more, in: Journal of World Trade Law, Vol. 17 (1983), p. 3 ff.; G. Banks: The Economics and Politics of Countertrade, in: The World Economy, Vol. 6 (1983), p. 159 ff.; I. Outters-Jaeger: The Development Impact of Barter in Developing Countries, OECD, Paris 1979.

  6. For details, see W. Lütkenhorst: Trade Policy Approaches of Pacific Basin Developing Countries, (Institut für Entwicklungsforschung und Entwicklungspolitik, Materialien und kleine Schriften, No. 96) Bochum 1984, p. 22 ff.

  7. Cf. the remarks made by the Malaysian Premier Mahathir, in: Far Eastern Economic Review, March 17, 1983, p. 8.

  8. Cf. also L. Dunn et al.: In the Kingdom of the Blind. A Report on Protectionism in the Asian-Pacific Region, London 1983, p. 69.

  9. Cf. UNCTAD, op. cit., Protection, Trade Relations and Structural Adjustment. Report by the UNCTAD Secretariat (TD/274), January 7, 1983, p. 31, and also the remarks made by the Director General of GATT, Arthur Dunkel: “In the 1920s, the words ‘reciprocity’ and ‘non-discrimination’… denoted contradictions… The fact that in the GATT countries have been negotiating and contracting with each other on the basis of reciprocityand non-discrimination is due to their understanding that reciprocity is always a subjective notion which cannot be looked at in bilateral terms.” (GATT Press Release, No. 1312, March 5, 1982).

  10. Reciprocal Trade and Investment Act (Draft), quoted from P. Dymock, D. Vogt: Protectionist Pressures in the U.S. Congress, in: Journal of World Trade Law, Vol. 17 (1983), p. 507 (emphasis added).

  11. Cf. W. R. Cline: “Reciprocity”: A New Approach to World Trade Policy?, Washington 1982, p. 7 ff.

  12. H. Kitamura: International Division of Labor and Industrial Adjustment: Relevance of Theory to Policy Analysis, in: The Developing Economies, Vol. 18 (1980), p. 384.

  13. H. Körner: The New Protectionism and the Third World, in: INTERECONOMICS, Vol. 17 (1982), p. 183.

  14. Cf. K. W. Dam: The GATT Law and International Economic Organization, Chicago 1970, p. 270 ff.; G. Curzon: Multilateral Commercial Diplomacy, London 1965, p. 168 ff.; R. B. Reich, op. cit., Beyond Free Trade, in: Foreign Affairs, Vol. 61 (1983), p. 786. A more precise overall view of the relative frequency of price and volume-related NTBs under various product categories is provided by a relatively recent UNCTAD study; as might be expected, it points out the overriding significance of agricultural and textile protectionism. p. 779 ff.

  15. Cf. M. Wolf: Managed Trade in Practice: Implications of the Textile Agreements, in: W. R. Cline (ed.): Trade Policy in the 1980s, Washington 1983, p. 455 ff.

  16. cf. H. Müller-Godeffroy et al.: Der neue Protektionismus, Bonn 1983, p. 50 ff.

  17. Lorenz appropriately describes this phase as “international specialization ‘without tears’”. Cf. D. Lorenz: On the Crisis of the “Liberalization Policy” in the Economics of Interdependence, in: INTERECONOMICS, Vol. 13 (1978), p. 169.

  18. On the following points, cf. chiefly D. Lorenz: Ursachen und Konsequenzen des Neomerkantilismus, in: A. Woll (ed.): Internationale Anpassungsprozesse, Berlin 1981, p. 16 ff.

  19. D. Lorenz, Ursachen und Konsequenzen, op. cit., Ursachen und Konsequenzen des Neomerkantilismus, in: A. Woll (ed.): Internationale Anpassungsprozesse, Berlin 1981, p. 17.

  20. Cf. H. B. Malmgrem: Threats to the Multilateral System, in: W. R. Cline, Trade Policy, op. cit., Trade Policy in the 1980s, Washington 1983, p. 196 ff.

  21. Cf. W. R. Cline, “Reciprocity”, op. cit., “Reciprocity”: A New Approach to World Trade Policy?, Washington 1982, p. 38 ff.

  22. R. B. Reich, op. cit., Beyond Free Trade, in: Foreign Affairs, Vol. 61 (1983), p. 786. A more precise overall view of the relative frequency of price and volume-related NTBs under various product categories is provided by a relatively recent UNCTAD study; as might be expected, it points out the overriding significance of agricultural and textile protectionism. p. 782.

  23. W. Hager: Free Trade means Destabilization, in: INTERECONOMICS, Vol. 19 (1984), p. 30.

  24. Ibid. W. Hager: Free Trade means Destabilization, in: INTERECONOMICS, Vol. 19 (1984), p. 30.

  25. B. Nowzad: The Rise in Protectionism, IMF Pamphlet Series No. 24, Washington 1978, p. 108 ff.

  26. D. B. Yoffie, R. O. Keohane: Responding to the “New Protectionism”: Strategies for the Advanced Developing Countries in the Pacific Basin, in: W. Hong, L. B. Krause (eds.): Trade and Growth of the Advanced Developing Countries in the Pacific Basin, Seoul 1981, p. 583 ff.

  27. J. Tumlir: International Economic Order—Can the Trend be Reversed?, in: The World Economy, Vol. 5 (1982), p. 30.

  28. F. List: Das nationale System der politischen Ökonomie, Basle, Tübingen 1959 (first published in 1841), p. 30.

  29. Cf. for example: Global Strategy for Growth. A Report on North-South Issues by a Study Group under the Chairmanship of Lord McFadzean of Kelvinside, London 1981, p. 78 ff.

  30. Cf. W. Hager, op. cit.; Free Trade means Destabilization, in: INTERECONOMICS, Vol. 19 (1984), p. 30. W. Hager: Protectionism and Autonomy: How to Preserve Free Trade in Europe, in: International Affairs, Vol. 58 (1981/82), p. 413 ff.

  31. For a comprehensive account, cf. W. Kraus: Pazifische Zusammenarbeit und Europäische Gemeinschaft, in: Außenpolitik, April 1984; E. Rhein: Die pazifische Herausforderung: Gefahren und Chancen für Europa, in: Europa-Archiv, Vol. 39 (1984), p. 101 ff.

  32. A. W. Wolff: Need for new GATT Rules to Govern Safeguard Actions, in: W. R. Cline, Trade Policy, op. cit., Trade Policy in the 1980s, Washington 1983, p. 391.

  33. On detailed aspects, cf. the precise and comprehensive account in Wolff, op. cit. Managed Trade in Practice: Implications of the Textile Agreements, in: W. R. Cline (ed.): Trade Policy in the 1980s, Washington 1983, p. 455 ff.

  34. Cf. UN, op. cit., World Economic Survey 1983, New York 1983, p. 62, footnote 1; also, for a detailed account, S. J. Anjaria et al.: Developments in International Trade Policy, IMF Occasional Paper No. 16, Second Printing, July 1983, p. 122.

  35. L. Dunn et al., op. cit., In the Kingdom of the Blind. A Report on Protectionism in the Asian-Pacific Region, London 1983, p. 120, voice their opposition to “writing a rule in violation of a basic principle”.

  36. The controversy can actually be traced back to the mid-1950s when an ad hoc committee on the problem of the safeguard clause was formed in connection with Japan’s accession to GATT. On this point, and on the overall history of Art. XIX, cf. R. Quick: Exportselbstbeschränkungen und Art. XIX GATT, Cologne etc. 1983, p. 95 ff.

  37. (cf. K. Glaubitt, W. Lütkenhorst: Elemente einer neuen Weltwirtschaftsordnung, Tübingen, Basle 1979, p. 125 ff.)

  38. Cf. E. Minx: Von der Liberalisierungs- zur Wettbewerbspolitik, Berlin, New York 1980, p. 205. This proposal is fundamentally convincing, but putting it into operation could be expected to raise problems which would be difficult to overcome.

  39. H. Corbet: Importance of Being Earnest about Further GATT Negotiations, in: The World Economy, Vol. 2 (1979), p. 330.

  40. For an overall view, cf. I. Frank: The “Graduation” Issue for LDCs, in: Journal of World Trade Law, Vol. 13 (1979), p. 289 ff.; K. A. Koekkoek: On the Case for Graduation, in: INTERECONOMICS, Vol. 18 (1983), p. 225 ff.

  41. On this distinction, cf. P. P. Streeten: What New. International Economic Order?, in: U. E. Simonis (ed.): Ordnungspolitische Fragen zum Nord-Süd-Konflikt, Berlin 1983, p. 86 ff.

  42. Even now the average tariff level of 38% (1978) and a share of export subsidies in total export value amounting to 22% (1978) represent an explosive issue in trade policy. Cf. W. Lütkenhorst, op. cit., Elemente einer neuen Weltwirtschaftsordnung, Tübingen, Basle 1979, p. 10 and p. 30 ff.

  43. C. F. Diaz-Alejandro: Comment, in: W. R. Cline, Trade Policy, op. cit., “Reciprocity”: A New Approach to World Trade Policy?, Washington 1982, p. 305; cf. also the critique in UNCTAD, op. cit., Protection, Trade Relations and Structural Adjustment. Report by the UNCTAD Secretariat (TD/274), January 7, 1983, p. 32 ff.

  44. On the detailed contents of the codes, cf. B. Balassa: The Tokyo Round and the Developing Countries, in: Journal of World Trade Law, Vol. 14 (1980), p. 102 ff.

  45. For a more precise treatment, cf. J. H. Jackson: GATT Machinery and the Tokyo Round Agreements, in: W. R. Cline, Trade Policy, op. cit., Trade Policy in the 1980s, Washington 1983, p. 174 f.; W. R. Cline, “Reciprocity”, op. cit., “Reciprocity”: A New Approach to World Trade Policy?, Washington 1982, p. 19 f.

  46. R. Krishnamurti: Multilateral Trade Negotiations and the Developing Countries, in: Third World Quarterly, Vol. 2 (1980), p. 263.

  47. Cf. L. Dunn et al., op. cit., In the Kingdom of the Blind. A Report on Protectionism in the Asian-Pacific Region, London 1983, p. 116 ff. On this issue Lorenz points out the circular argument involved when renewed liberalisation is expected to solve the problems which were caused to a substantial degree by earlier rounds of liberalisation. Cf. D. Lorenz: International Division of Labour versus Closer Cooperation? With Special Regard to ASEAN-EC Economic Relations, (paper presented at the Third Conference on ASEAN-EEC Economic Relations, October 26–28, 1983, Bangkok), Revised Version, January 1984, p. 33 f.

  48. Cf. ibid. Cf. L. Dunn et al., op. cit., In the Kingdom of the Blind. A Report on Protectionism in the Asian-Pacific Region, London 1983, p. 116 ff. On this issue Lorenz points out the circular argument involved when renewed liberalisation is expected to solve the problems which were caused to a substantial degree by earlier rounds of liberalisation. Cf. D. Lorenz: International Division of Labour versus Closer Cooperation? With Special Regard to ASEAN-EC Economic Relations, (paper presented at the Third Conference on ASEAN-EEC Economic Relations, October 26–28, 1983, Bangkok), Revised Version, January 1984, p. 33 f.

  49. Cf. W. Lütkenhorst: Pacific Basin Interdependencies—A Case for Large-Scale Economic Cooperation?, in: INTERECONOMICS, Vol. 18 (1983), p. 28 ff.

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  1. Ruhr University, Bochum

    Wilfried Lütkenhorst

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Lütkenhorst, W. Caught between self-destruction and reform. Intereconomics 19, 178–187 (1984). https://doi.org/10.1007/BF02928333

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