A NOTABLE BATTLE AT GENEVA MEETING

Press, Volume LXXXIX, Issue 27165, 8 October 1953, Page 10

A NOTABLE BATTLE AT GENEVA MEETING

JAPAN AND G.A.T.T.

[By

“LYNCEUS”

of the “Economist”)

London, September 30.—The eighth meeting of the countries which havfe signed the General Agreement on Tariffs and Trade (G.A.T.T.) is rapidly becoming far more heated and controversial than had been expected. The battle rages round two dominant issues —the British demand for authority to increase tariffs on foreign goods without increasing those on Commonwealth goods and the Japanese request to join in the agreement, even on provisional terms. The British request is m a sense the more challenging of the two. To see it in }ts proper perspective, a little delving into history is necessary. The British customs tariff, as that of every other contracting party of G.A.T.T., may be divided into two sectiops: those items which have been subject to negotiations with other parties ana which are, therefore, “bound” at their existing level under the terms of the agreement. Then there are the "ununbound” items which Britain and all other contracting parties can raise at will. But for Britain, as for any other contracting party, there is another demarcation of the tariff, namely, between those goods on which there is a preferential Commonwealth duty, or even free entry for Commonwealth goods, and those for which there is no such preference. Under the agreement it is forbidden for any country to institute new preferences or to increase existing margins of preference. Since the British Government claims that it would be impossible for it to raise duties on Commonwealth goods, it is bound, therefore, by the agreement rules not to increase duties on foreign goods, even where the goods in question have not been “bound” in negotiations with other contracting parties. The British Government feels it is injured by this position and wishes to remove the anomaly by receiving a waiver from G.A.T.T. allowing it to raise duties on foreign goods. That is the “waiver” around which the nght now waxes fast and furious.

Logic Behind British Case The British case has some logic behind it and is powerfully reinforced by the argument that protection of the agricultural interests at home is now secured by quotas, embargoes, import licences and the whole range of quantitative restrictions which fall more harshly and capriciously on imports than would a tariff. The British representatives have also argued that In most of the goods involved there is at present little or no Commonwealth trade and that, therefore, the widening of the margins of preference would not have the effect of changing the pattern of international trade. This case has, however, been subject to deep suspicion by reason of the unwillingness of the British delegate to give any precise or even general indication either of the for which the waiver is being claimed or of the height of the tariff protection that would be provided under the waiver. The Dutch, Dahes, French, Italians and Turks, who are substantial exporters of fruit, and vegetables to Britain, are naturally distrustful of this request for a waiver from G.A.T.T. obligations. They have said that it is somewhat naive of the British to assure the other contracting parties that there is no intention of diverging from the basic philosophy of G.A.T/T. and theh to request a general waive;? which would

in effect provide an umbrellg under which a large number of new prefer, ences and the widening of many exist ing margins of preference could be secured. The matter is now being con. sidered by the working party to Geneva. If, as seems probable, the British initiative achieves some success, it wMI no doubt be on the basis of a much more precisely defined indication of intentions. It will probably achieve this objective because the British hav» in this matter received the support <tf the United States. The Americans have a tender conscience by reason of their own transgression against the spirit of G.A.T.T. through the use of the “escape clause” in the agreement to extend protection to their own agri, cultural interests. That fact may well have aroused considerable sympathy for the British cause, together with the hope that the British, for their part, will look tolerantly at the American peccadilloes. The Japan Question On the other main question, that of the accession of Japan, Britain and the United States stand in opposite camps. The Japanese request fop accession to the agreement is sponsored by the United States but resisted by the United Kingdom and other sterling countries, notably Australia. The American case for the inclusion of Japan among the parties to the agreement is that everything should be done to encourage trade between Japan and the free world, and so help to neutralise the economic damage which Japan has suffered from the loss of the Chinese and Manchurian markets. The Americans are prepared to ndrnjt that Japanese trade practices—pirating of trade marks, dumping, etc.—-havein the past been reprehensible and have left memories that must hamper the readiness of other countries to accept Japan in the bosom of the G.A.T.T family. But the answer to this—and it h convincing—is that there is much more likelihood of these practices being avoided and effectively banned in future if Japan becomes a member of G.A.T.T. and assumes the duties as well as the benefits of membership. The opposition to the plea, as voiced by Britain’s President of the Board of Trade, was largely based on fears grounded in the past and uncertainty about Japan’s behaviour in the future. Mr Thorneycroft argues that if Japan became a member of G.A.T.T., the other countries would be equally bound to increase their tariffs against Japanese goods, that these higher tariffs would automatically have to be extended to other members and that, therefore, the admission of Japan would run counter to the basic objectives of the agreement. r As an exercise in perverted logic, this reasoning takes a great deal of beating. There is something to be said in favour of delay in admitting new members when the G.A.T.T. is destined to undergo a fundamental review next year in the light of what the United States may by then have decided about the nature of its foreign economic policv. But the immediate fears on which the British and Australian attitudes are based/ seem somewhat exaggerated, given, the facts that Japan is exporting about half of what was exported before the war and that it is desperately short of sterling. AU these homilies which the sterling world hurls at the United States apply at the present moment to the pay-ments-relations between Japan ana the sterling area. If only we could see ourselves as we see others!