The new congressional majority has an early test of its rhetoric: the chance to approve a new General Agreement on Tariffs and Trade (GATT). This has nothing to do with partisan politics. Presidents Reagan and Bush worked for the deal before President Clinton took it up. It has everything to do with America's ability to prosper.
The proof is manifest both short and long term. The protectionists in the Democratic Party, the unions and Ross Perot tried to make our flesh crawl with that other free-trade acronym, NAFTA. The North American Free Trade Agreement would, they said, burden us with unemployment because of competition from low-wage Mexico. The scaremongering was unjustified -- in short order, demonstrably so. But if anyone has doubts about such short-term comparisons, take a longer view: The explosion of world trade over the past 40 years has taught the lesson that the more a country participates in global markets, the faster it grows. In the postwar era, those countries that have grown fastest domestically -- countries like Japan, South Korea, Germany and Sweden -- are those that have grown fastest globally. The slower growing countries, such as Great Britain, have been the least effective competitors in the world economy. Thus an axiom: The greater the trade, the greater the growth in jobs.
Free trade is not a luxury. The world could not work without it. Trade is no longer the horizontal exchange of finished products. It is a jigsaw of specialization beyond the dreams of Adam Smith. A product designed in America will have parts manufactured in Taiwan and China and assembled back in the United States.
Globalization means an increase in the company's trade in parts, components and semifinished goods. It is made possible in part by the revolution in transportation and communications that has enabled managers to plan across borders -- but it would all be theory without GATT. The agreement has made possible the international movement of components and semifinished goods with the minimum of penalties in the form of tariffs and red tape. The roughly $4 trillion global market could not work without GATT supplying the rules. It is GATT that prevents governments from granting their weaker industries special treatment to offset competitive disadvantage. It is GATT that enables companies to plan ahead with the assurance that nationalist politics will not interfere with market access.
GATT needs a regular tuneup and expansion to cover new areas such as services, intellectual property and investments. The new GATT does that very well, and we have the greatest stake in it. We are the world's largest exporter and the world's most competitive exporter. We are more dependent on exports than Japan. And for good reasons: Our export-based jobs are growing faster and pay 17 percent more than the national average in wages. The new agreement, which offers the largest tariff cut in history, represents a $19 billion gain in the form of lower prices annually for the American consumer. It will add as many as 700,000 high-skilled, high-paying jobs over the next decade.
If the GATT treaty dies in the current Congress, so-called fast-track authority dies with it. That would mean opening up GATT to amendment. The lobbyists would be thick as flies. If the treaty were passed in a different form, it would have to be renegotiated all over again. In that event, you can probably forget about a new agreement.
What is the alternative to approval? No trade agreements at all? A profusion of bilateral deals? Either way there would be an erosion of the prosperity from world trade. We would run the risk of drifting into massive trading blocs that would make economic war on each other. Things could get ugly. It was once said that if goods cannot cross borders, soldiers will. In the post-cold- war era, economics has taken over the central role in international relations. Failure by the United States to ratify would be on a par with our two great mistakes between World War I and World War II -- rejection of the League of Nations and the introduction of the Smoot-Hawley tariff in 1930, harbinger of the Great Depression. Now China and Russia are seeking to join GATT. Rejecting it and them would be as shortsighted as another great mistake, the decision by the Soviets to stay out of the Marshall Plan.
