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World takes small step toward freer trade in services

By David R. FrancisStaff writer of The Christian Science Monitor / December 3, 1984



Geneva

The world took a small step last week toward freer trade in services - banking and finance, engineering, architectural work, insurance, consulting, transport services, and so on.

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Over the past few decades, some of the barriers preventing international trade in goods have fallen, though with some setbacks. As a result, Americans and citizens of many other nations enjoy a wide choice of domestic and foreign goods that are often cheaper or of better quality. They can select a Mercedes or a Cadillac, a Tobler or a Hershey candy bar, a 7-Up or a Perrier.

Now the United States would like to see the world have more freedom of choice in services - say among Chase Manhattan, Barclays (of London), and Fuji (of Tokyo) for banking.

At the annual meeting of the governing group of the General Agreement on Tariffs and Trade (GATT) here, the 90 member nations broke a two-year logjam in dealing with trade in services, according to a top US trade official.

Each nation agreed to conduct a study of its own service industries and trade in services. (Eight have already done so, including the US.) The results will be reviewed at the next regular session of the governing Contracting Parties when they will consider ''whether any multilateral action in these matters is appropriate and desirable.''

The decision does not start bargaining on reducing national barriers to trade in services. That could only be decided a year hence at the earliest, officials say. Nonetheless, US officials considered the step progress. Each step in pruning trade barriers usually takes years.

Third-world GATT members resisted firmer action on services. Many feel their domestic service industries are not competitive by industrial-nation standards.

The developing countries also would prefer to have jurisdiction for trade in services fall under the United Nations Conference on Trade and Development, which they feel is more sympathetic to their concerns. It already has been working in the areas of shipping and insurance. US officials, for their part, are highly critical of UNCTAD, regarding it as too state-oriented and bureaucratic.

After much bargaining, the third-world members agreed to a statement that left undecided the question of final jurisdiction over services.

''This matter is not yet ripe for action,'' said Paulo Nogueira Batista, permanent representative of Brazil at the GATT. The start of negotiations on reducing barriers to trade in services, he argued, would allow the industrial countries to delay for years the removal of their obstacles to trade in goods, many of which are aimed at the products of developing countries.

But to the US, the GATT is now looking at trade in services ''formally and substantially.'' A US official noted that world trade in services already amounts to some $500 billion of the approximately $3 trillion total in world trade.

For industrial countries, the importance of trade in services is greater. Services, said the US official, account for more than 40 percent of US exports and some 46 percent of British exports.

Indeed, the US officials felt strongly enough about the need for dealing with trade in services to make a threat, as one observer put it, ''to pick up (their) ball and go play elsewhere.''

In a closing statement, US Deputy Trade Representative Michael Smith said: ''If we do not address these emerging issues within the GATT framework, some contracting parties will lose interest and they will inevitably turn to other means to pursue their national trade objectives.''

This suggests that if trade in services is added to the ''most favored nation'' provision of the GATT, under which any reduction in tariffs or other trade barriers is automatically granted all GATT members, the US will seek to negotiate special exclusive trade deals with one nation or a group of other nations. The US already is negotiating a free trade arrangement with Israel, and a more limited deal with Canada. These, US officials say, are within the provisions of the GATT.

The GATT meeting also dealt with other aspects of its ''working program'' for the next 12 months. These include looking at counterfeit goods (including intellectual property, such as copyrighted material), agriculture, quantitative restrictions, and so on.

The goal is preparation for another round of full-scale multilateral bargaining on trade liberalization, such as the Tokyo Round that was launched in 1973 and concluded in 1979. As a result, tariffs on manufactured goods in the world's nine major industrial markets will fall from a level of 7 percent to 4.7 percent by the start of 1987 or earlier.

The major industrial nations are talking about starting another round next year. Arthur Dunkel, director-general of the GATT, regarded the services agreement as the last key piece in the new trade round puzzle.

The developing countries are saying they may agree to another round if the atmosphere is improved by reductions in barriers against their goods.