Two Cheers For GATT

Policy Backgrounders | Trade

No. 135
Friday, November 25, 1994
by James Bovard

GATT: The Wrong Way to Free Trade?

Almost everyone who claims that the WTO will become a one world dictatorship favors maintaining or increasing American politicians' dictatorial power over American consumers. Most opponents of the GATT have as much affection for free trade as Bill Clinton has for Newt Gingrich. But a few organizations have raised worthwhile questions about whether GATT is the best mechanism for reducing trade barriers.

Fred Smith, president of the Competitive Enterprise Institute, a Washington, D.C., think tank, argues, "The theory behind GATT's managed trade is that by carefully manipulating domestic trade barriers, we can encourage other countries to reduce their trade barriers - giving us a little less free trade at home in return for more free trade worldwide."44 But GATT will do nothing to reduce the amount of free trade the United States currently has. And for every member of Congress who opposes the pact because it does mangle textile rules of origin and make U.S. dumping law more protectionist, there are probably 30 opposed to the GATT because it reduces trade barriers.

Most importantly, there is nothing in the GATT mechanism that prevents nations from unilaterally lowering their own trade barriers. The GATT imposes a ceiling on protectionist actions but no floor on trade deregulation. Many nations already have tariffs far below their permitted levels. For example:

  • Under previous GATTs, Australia was entitled to charge an average tariff of 20 percent; thanks to some courageous politicians, its current tariffs average only 10 percent.45
  • Iceland was entitled to levy an average tariff of 18.2 percent; its current average tariff is 5.4 percent.46
  • Japan is entitled to levy an average tariff of 3.9 percent; its actual average tariff is 1.9 percent.47

"There is concern about the administration's proposal to add labor and environmental provisions to unfair trade practice definitions."

Another concern of free trade GATT critics is the Clinton administration's proposal to add labor and environmental provisions to the WTO's litany of unfair trade practice definitions. On April 14, 1994, Vice President Al Gore spoke to the closing meeting of the Uruguay Round GATT negotiations in Marrakesh, Morocco. Gore stated, "The United States realizes that many countries fear that folding labor standards into the world trade context exposes their exports to potential forms of concealed trade restrictions. The United States will resist any effort to convert the issue of improved labor standards into a form of protectionism."48

But any international labor standard would almost certainly be biased against low-income nations, where young teenagers must work or starve. Besides, Gore did not justify trade sanctions against blue jeans sewed by 14-year-old Pakistani girls - at the same time that the U.S. allows 11-year-olds to deliver newspapers at dawn. At a meeting in Geneva a few weeks ago, U.S. government officials who proposed including labor standards in the working agenda of the new WTO were soundly rebuffed. The Daily Labor Report recently noted, "The U.S. government and organized labor found themselves effectively isolated when the International Labor Organization governing body debated November 14 the question of embodying international labor standards in the future WTO. Apart from France and to a lesser degree Germany, other governments did not side with the United States in the debate ...."49 Gore's proposal to consider environmental standards in GATT rulings also has been rejected by most other nations.

In looking at the grim realities of American politics, one is reminded of an observation Georgia Governor Lester Maddox made in the 1960s. Maddox, when confronted with evidence of the pathetic living conditions in Georgia prisons, blamed the problem on the low quality of prisoners the state had. Similarly, a big problem with American trade policies is the low intellectual caliber of many American politicians. At present, the only way to dismantle U.S. trade barriers is to sign disingenuous treaties with foreign governments, in which each nation promises to lower its trade barriers. We wish that more politicians were wise enough to support trade liberalization as stark national economic self-interest. Since they are not, such liberalization must come wrapped in international agreements.

The GATT's passage in the United States is far more likely now that Clinton has dropped his demand for extended fast-track negotiating authority. Such authority can be an asset in the right hands, allowing a president to negotiate future trade liberalization pacts. But Clinton's and trade representative Mickey Kantor's are not the right hands.

Besides, the GATT package is much less of a protectionist danger now that the Republicans have control of both houses of Congress. In a historic reversal, the Republican Party is now far less protectionist than the Democratic Party. Congressional expert Tom Miller, who compiles an annual index of votes on trade for the Competitive Enterprise Institute, notes that:50

  • Since 1985, Republican senators have been more than twice as likely to vote for free trade or trade liberalization measures as have Democratic senators.
  • A similar pattern exists in the House of Representatives.

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