As the world's trade ministers face a breakdown of the current international trade-liberalization negotiations in Brussels, a larger danger looms.
The 43-year-old basic framework for world trade, the General Agreement on Tariffs and Trade (GATT), rapidly is becoming obsolete, and, by and large, global support for trade liberalization is crumbling. The GATT system needs a full overhaul.The cumulative results of the last GATT round, which ended in 1979, by now should have taught U.S. officials that GATT agreements don't necessarily boost U.S. economic growth or narrow our trade deficit significantly.
America should press immediately for a new set of talks to bring old trade rules into line with new international economic realities. Three sets of issues require special attention.
First, the goal of freeing up world trade must be reconciled more sensibly with legitimate national regulatory practices. Today's trading system assumes liberalization is more important than environmental protection, occupational safety and other national regulatory objectives whenever these objectives interfere with international commerce.
The results are predictable. Countries balk when trade negotiators seek to curb their right to set their own economic, social and political priorities; they begin to disobey or ignore the rules; and cynicism about the value of any trade rules at all begins to grow.
Second, contrary to the assumptions of GATT's American founders, many signatories do not accept U.S. capitalism's laissez-faire economic principles.
Practices, such as government support of selected industries and officially sanctioned anti-competitive corporate behavior, are pervasive facts of international economic life. They are also major threats to U.S. industry, especially the manufacturing sector. No trade system can continue to ignore these predatory practices and expect to retain broad U.S. support.
Third, two central GATT principles need to be re-examined: "national treatment" (treatment of foreign businesses comparable to that received by native business in a host country) and most-favored-nation (which requires countries to grant equal trade concessions to all GATT members, no matter how restrictive those members' own practices remain).
Because countries treat their own corporations in dramatically different ways, national treatment in particular disadvantages GATT's most liberal members.
What is needed is a single standard - "GATT treatment" - that would help insure that all members contribute fully to the system and play by the same rules. Achieving this may require creating a "super-GATT," a smaller group of like-minded countries willing to take on the new obligations. Most current GATT benefits would remain for members who chose not to participate.
Continuing efforts to liberalize the worldwide flow of goods and services is vital, but preserving a particular system for doing so is not. The world trading system has to be brought into the 1990s.
(Clyde V. Prestowitz Jr. and Robert W. Jerome are president and research fellow, respectively, of the Economic Strategy Institute, a policy research organization.)