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Text File | 1994-05-09 | 6KB | 115 lines

<text> <title> German Says GATT Agreement "Victory for Free Trade" </title> <article> <hdr> Foreign Broadcast Information Service, December 17, 1993 German Says GATT Agreement "Victory for Free Trade" </hdr> <body> [Klaus Peter Krause commentary: "A Victory for More Free Trade"] [Text] The war of nerves is over. All can breathe a sigh of relief: states, their economies, and consumers. The eighth multilateral GATT round on the liberalization of world trade has been successfully concluded. The outcome, albeit not perfect, will be like a warm April shower for the global economy. It boosts optimism, and because it reduces restrictions on trade, it will give free rein to economic forces. The GATT agreement will give world trade an added boost. Customs tariffs will be lowered, subsidies reduced, and markets (gradually) opened up. The agreement has the effect of a state economic program. There cannot be a better one: no state economic program makes more sense or has a more sustained effect than a decision to promote free trade. Free and open markets are always necessary for economic well-being. Now, however, they are the order of the day if the economy is to receive the boost it requires. It will only be possible for this stimulus to develop after 1995, because the treaty first has to be ratified by the GATT states. It is an especially urgent requirement for the old industrialized states. They are not only stuck in a recession, but their economies are also experiencing a structural crisis that involves propping up uneconomic branches of industry, excessive protection from competitive imports, too much state intervention, and wage rate cartels. The music of economic progress is now to be heard in the Far East, not in Europe. Trade produces prosperity. More trade leads to more prosperity. However, the increase in prosperity will not be distributed evenly. The old industrial countries (OECD States) will benefit most, then the threshold states of the Far East, and Third World countries less so. The poorest of them will even benefit least from the increase in prosperity: They receive too little attention as the big players haggle over trade. Consumers can also breathe a sigh of relief--that is, all the people in the participating states: If those things that hinder the international exchange of goods are reduced or removed, the supply of goods will improve and all the participating countries will gain in prosperity. Adam Smith and David Ricardo, the classical free trade thinkers, already developed that theory in the 18th century. The immediate benefits to consumers will also be reflected in a tendency for prices to fall. This will, however, involve hard work. No previous round has last as long as the current, eighth round, which has gone on for seven years and has been accompanied by drama, serious crises, poker tactics, and a negotiating marathon. Progress was delayed by the two giants in world trade, the United States and the EU. What was particularly shocking was how openly and shamelessly the United States presented its protectionist side. In the case of France, one is already accustomed to its shamelessness regarding protectionism. Germany really allowed itself to be blackmailed by Paris, which operated in a consummately brutal fashion. The interests of certain groups among France's farmers were magnified into questions of national existence. Yet France's economy with its strong export sector is just as dependent on free trade as the German one. Paris made sure that it was paid several times over for approving GATT, although its economy is one of the main beneficiaries of the new agreement. It is depressing for the other participating states that seemingly only the United States and Europe count, whereas they themselves have to wait on the sidelines until the two big players reach agreement; they more or less have to remain obedient while the two agree or disagree. Even Japan remained somewhat in the background, and only attracted attention with its ban on imports of rice, which has now been slightly eased with the greatest apprehension. Without doubt, protectionism does not make economic sense in the long run and harms people's well-being. The free trade message is equally beyond dispute, and it is: With protectionism, one not only harms one's trading partner, but harms oneself the most. This makes what the free trade round failed to accomplish all the more depressing and painful. Namely, other ("nontariff") barriers to trade have replaced the old customs restrictions a long time ago; the protectionists' capacity for innovation is inexhaustible. As there are still too many restrictions, exuberance--although there is satisfaction with the moves toward liberalization that have now been achieved--is out of place. A battle against protectionism has been won, but by no means the war. In terms of its scope, however, this is the most significant GATT round so far. It is the first time that services extending across borders, textiles, and intellectual property (patents, licenses) have been included in GATT. A worldwide reduction of one-third in customs tariffs has been achieved. The United States has made concessions on its commercial law and is modifying it to conform to GATT regulations. Speaking about the latest European Commission white paper, Delors said: "The peoples of Europe need a message that gives hope." At least, the GATT agreement provides such a message. </body> </article> </text>