By P.D. Sharma
GATT is becoming a tough sell lurching from one confidence dissipating crisis to another. With the defeat of democrats in the U.S.A. many gates seem to be slamming. On GATT, It is Deja Vu all over again, the ratification is on holding after the Uruguay round crossed all grid locks during its long seven year’s journey. When many have started sympathizing with GATT mavericks and ultra conservatives get another opportunity to keep the ratification hanging. European Union is also struggling to break the impasse. Judicial fight in India may bring some surprise. So far only 26 out of 120 odd member countries have ratified the agreement; The GATT is thus getting continuously emasculated.
For any global economic treaty the USA forms comer stone. The defeat of its president’s party both in the House and senate speaks of hard times for him, although the U.S.A. ‘system tent amounts to. Having 536 presidents (435 members of House 100 senate and the president himself), yet there is lot of room for politicking and maneuvering. Under Fast track authority given to the president congress has simply to cast a yes or no vote to ratify any major agreement without any modification. The USA negotiated GATT under this procedure but the ratify action has been snarled in politics as at most other places. The fast track authority was granted after two years’ struggle in 1988.
‘The treaty was blocked 24 hours before the said time for its consideration in the House and it was postponed to some date after November elections. The Republican Party’s whip Newt Gingrich had earlier fully assured of its ratification. This sharp ‘U” tum was obstructionism and pandering to Protectionist’s lobbies. White House had calculated the GATT provisions would be an equivalent of $750 billion worldwide tax cut during the next 10 years due to reduced prices of imported goods. It also brought out a fact that an average American family shall get $1700 into its bank account during the next 10 years due to the various gains from the treaty. Failure to ratify is taken as losing the unlovable. If the treaty is not ratified in November it may be killed altogether. Republicans want to ratify but by making Clinton bleed for it. Other countries shall take cue from the USA. The GATT is also struggling in Europe between European Commission and Eu’s council of ministers representing 12 countries. Member countries are particular on their sovereign powers and Eu Commission’s automatic authority under common commercial policy is under, question, they do Not want to repeat the mistake on the Maastricht treaty where they signed first and debated later. They do not want the ‘democratic deficit’ to continue. The dispute about the authority has been referred to European court of justice and the decision is likely in this month, If this dispute is not settled in time and the schedule for ratification is disturbed the treaty may bias good as dead, Eu is the world’s biggest market and is likely to get a substantial share from $ 220 billion a year increase in world income due to GATT. An interesting situation is obtaining in our country too. Orissa Government has filed a suit in the Supreme Court challenging the signing of GATT by the Union Government. Supreme Court has directed ex parte hearing as the Union Government did not appear with in the stipulated Peond. The suit is filed under Article 131 of the Constitution. The final act is alleged to be signed in a clandestine manner and under pressure without consulting the states. It is further made out that though Parliament is permitted under Article 253 to sign the treaty the exclusive and concurrent powers of the states cannot be impaired; the outcome of the decision shall have far reaching consequences.
All the four ‘quadrilateral’ trade powers, the USA, Canada. Eu and Japan are yet to ratify the treaty. All other members are eyeing on them. It is almost certain that the schedule drawn for ratification and starting WTO shall be upset. If things do not go straight in U.S. A. as expected; global trade treaty shall get a shock.
Atmosphere of suspicion is thick ending; Talk of fair trade by the dominant economic powers is corrupted by the mercantile view considering exports as good and imports harmful. The U.S.A. and Eu use non-tariff instrument the most to boost their trade by keeping the tariff low. In U.S.A. ’textile, clothing, cars and steel industries the non-tariff barriers cause harm equivalent to that done by 24% tariff; which is six times the average. Voluntary restraints, countervailing duties and anti-dumping duties are commonly applied tools. If they are included
It he rule book of GATT the basic spirit of free trade shall be vitiated. Environmental aspects and
Worker’s rights are waiting their entry into GATT rule book. Interestingly last year a group of 40 top business leaders made anew innovation; GATT for investment. For Foreign Direct Investment they wanted three principles transparency; rights of establishment by foreign enterprises, national treatment at par with domestic companies. The trade in goods from one part of a company to other amounts to 40% of the total inters National merchandise trade; and was to the tune of $3.7 trillion in 1992. The new rule was sought to remove’_—s restrictions on Subsidiaries of MNC like the extent of local content. This is harmful to the developing countries and they stalled this idea. FDI from developing countries is galloping and it quadrupled to $ 9 billion a year between 198690_ Then America’s ‘Super 301 trade weapon is overriding GATT. This provision was revived in April last year; it is included for renewal in the bill for ratification of GATT. Japan is under U.S.A.’s pressure particularly on three areas of trade: insurance; government procurement of medical and telecommunication equipment’s and car market. America’s argument for this draconian. Provision looks hallow. After Japan it is aimed at Asian countries and India appears to be the next target. Frizzing open markets through rod Tather than agreed rules such bypassing the international dispute resolution systems is no fi trade regime. It is hegemony o: sorts. Rethinking on GATT may not after all be a bad idea.
Article extracted from this publication >> December 9, 1994
