Reagan, free trade, and GATT
In committing the United States to free trade at a time when worldwide protectionist sentiments are more pronounced than they have been since the 1930s , President Reagan has clearly spelled out the challenge for negotiators at the crucial world trade conference at Geneva beginning tomorrow. In Mr. Reagan's view free trade ''serves the cause of economic progress and it serves the cause of world peace.'' Thus, as the President correctly recognizes, nations must take all possible steps to expand - not restrict - trade as a way of furthering both world peace and economic recovery.Skip to next paragraph
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Unfortunately, the delicately structured world trading system is now under enormous strain, resulting in large measure from high unemployment in industrial nations - which leads to political pressures for protectionist legislation - as well as the sizable bank debts of many developing nations. For these reasons, negotiators at the Geneva trade talks this week held under the auspices of the General Agreement on Tariffs and Trade must bend every effort to put aside selfish nationalist interests in favor of seeking the greater global good.
Although few trading experts expect any major short-term agreements to come out of the gathering, delegates - given a sense of firmness and political will - could hammer out longer-range agreements liberalizing trade in service industries (such as insurance, information, finance) and high technology; put together a new code banning counterfeiting of brand-name products; and, considered less likely but still possible, reduce export subsidies on agricultural products.
What must be clearly kept in thought amidst all the tugging-and-pulling that will take place at Geneva this week is the importance of trade to the global economy. The West European, United States, and Japanese economies are increasingly built around exports. In the case of the US, exports now constitute 8.5 percent of gross national product, up from 4.4 percent in 1970. One out of every six jobs in manufacturing is linked to selling goods abroad. A collapse in that trading system would be disastrous not just for the US but all major trading nations.
At the very least, negotiators should seek a tentative agreement involving trade in services and sales of high technology, as sought by the US. Such an agreement would most likely involve a period of study and further negotiations aimed at producing an actual pact down the road, perhaps by the end of this decade.
But that in itself would be an achievement, given the fact that service trade , which now makes up some 30 percent of all world trade, is virtually outside the purview of GATT. Current GATT agreements essentially apply to trade in manufactured goods.
While recognizing the importance of seeking a liberalization of world trade laws, the US, for its part, should not hesitate to apply maximum pressure on its trading allies to curb those laws and customs restricting imports from America. In that sense, there is something to be said for a policy of calculated reciprocity - allowing imports into the giant US market in return for access to overseas markets.