bout de papier, Vol. 4, No. 3 (1986) — Fall 1986 // Automne 1986, pp. 28–29
Trade Policy in the 1980’s, edited by
William R. Cline, 796 pp.
World trade policy is a subject badly needing some fresh thinking and new clichés. Anyone interested in both understanding and reforming the current system can usefully study this work, which reports on a conference of international trade experts. Recent events, including the advent of a trillion dollar debt in the developing world and the growth of U.S. protectionism, make this book even more relevant today than when it was first published in 1983.
Separate chapters focus on major trade issues. In a section on American trade practices, Rodney Grey points out that GATT’s unconditional most-favoured-nation clause has taken a major battering from many quarters, including the U.S., on behalf of Canadian automotive products. He cites specific U.S. practices with respect to textiles, steel, automobiles and the DISCS, but concludes nonetheless that restoring coherence to the world trade system is in fact most likely to begin in Washington. He chapter on threats to our multilater stem is disturoino. Keaders are reminde that rapidly-growing merchandise trade among industrial countries was a large factor in economic growth between 1950 and 1975. The resurgence of neo-mercantalism, through which governments attempt to step up exports and slow down imports, has eroded the political will to rely on multilateral mechanisms. The GATT system has suffered while national governments have instituted protectionist programs in many sectors, including textiles, steel and agriculture. Both order and general prosperity in the world economy are threatened when governments replace nondiscrimination and global reciprocity with discrimination and sectoral policies. The riddle endures: how do we maximize the very large benefits of an interdependent world economy while preserving the degree of national autonomy necessary for national states to pursue their own legitimate goals?
Editor William Cline and Fred Bergsten make a compelling case for preserving the open trading system. Nations benefit from the law of comparative advantage by producing goods and services in which they are relatively more efficient and by importing those in which they are relatively less efficient. Economies of scale are easier to achieve through production for an international market (especially for smaller economies like our own). The incentive to adopt new technologies and to become more efficient is increased if a nation’s industry is exposed to the rigours of international competition. The editors con clude that an open trading system can best be enhanced by eliminating current exchange rate misalignments (most notably the overvaluation of the U.S. dollar) and by launching a new multilateral trade negotiation that will seek both a reduction in trade barriers and improved performance by the GATT in monitoring and managing the international trade system.
The chapters on old and new trade issues are interesting and useful. On the issue of trade in services, a practice still largely outside GATT trading rules, and now representing nearly one fifth of world trade, problems still exist. In areas such as art and music, accounting and consulting, liberalization is required. High technology trade is another new area requiring attention as it may well be the key determinant of national competitiveness over the coming decades.
The concluding chapters attempt to synthesize 729 pages of commentary. Some of the conclusions:
• Trade itself is an engine of economic growth. Developing countries that maintained an outward orientation, seizing the trading opportunity that the post war expansion of the world economy provided, performed substantially better than those that continued with an inward orientation. Developing countries should now be drawn more fully into the GATT system.
• The most-favoured nation, non-discri minatory provisions of GATT have clearly been “bent” in the direction of selectivity by member nations. However, leaving GATT Article XIX in its present form tends to reduce the impulse to protectionist interventions by governments.
• Export subsidies and dumping pose major threats to the GATT system because they violate the importing nation’s sense of fairness. “Aggressive reciprocity” measures have resulted, presupposing that access to one’s market will be determined by national criteria rather than agreed-upon GATT-type rules of law.
• World trade policy in the late 1980’s should include an immediate halt to the protectionist drift which began in the mid- 1970’s through the proposed Standstill Agreement.
• GATT’s role in world trade negotiations could be strengthened by becoming a full-fledged international institution like the World Bank and International Monetary Fund. Its mandate should be to seek out and publicize trade barriers in both goods and services wherever they occur. One of the conference assumptions appears to be that trade policy must move ahead. Editor Cline concludes that the upcoming round of GATT negotiations should focus on two problems likely to emerge over the next decade: 1) services, investment-related and high technology trade issues and 2) the key issues of the past which have not yet yielded satisfactory solutions, for example, textiles, agriculture, steel, subsidies and safeguards. One key to maintaining an open trading policy is for nations to deal effectively with adjustment problems by companies and industries affected by trading policy. The alternative, say Cline and Bergsten, is “to risk losing the
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Originally published in bout de papier, Vol. 4, No. 3 (1986) — Fall 1986 // Automne 1986, pp. 28–29. Read the rest of this issue →
