MOMENTUM OF TARIFF CUTTING MAINTAINED

Press, Volume XCIII, Issue 28001, 22 June 1956, Page 10

MOMENTUM OF TARIFF CUTTING MAINTAINED

SUCCESS OF GATT

[By

"LYNCEUS”

of the •• Economist’ ]

[From the ’’Economist” Intelligence Unit)

London, June 12.—A fourth round of tariff negotiations, conducted under the aegis of the General Agreement on Tariffs and Trade, was recently completed in Geneva and the results are now available in a formidable series of schedules of changed tariffs charged on imported goods by the countries that have signed the General A " r <-»e ment. tne length of the schedules betokening the width of the front on which tariffs have been lowered. The results of these successive attacks on world tariffs are almost bound, in the nature of things, to yield diminishing returns. The nrst assault, in the initial 1947 tariff negotiations conducted under GAII. was made against a tariff wall tha had been raised to inordinate heights during the great depression of the 1930'5. The second tariff negotiations held at Annecy in 1949 and the.third at Torquay in the winter of 1950-51. took place' at a time when tariffs were still among the lesser obstacles to world trade, and when -quantitive restrictions, such as quotas and impoit licensing, based for the most part on balance-of-pavments difficulties, were the real obstacle that international trade had to overcome. In these circumstances. tariff concessions tend to be more readily granted than in a climate of payments freedom, when the full protectionist cnaracter of ’ariff barriers begins to emerge again. Scepticism Rebutted For these reasons—the considerable breaches in tariff walls already agreed in three earlier tariff negotiations ana the new reality of tariffs in a world of slow liberalisation of international payments—it had been widely assumed that the fourth round of tariff negotiations. which opened at Geneva last January and ended on May 23 last, would yield negligible, if any, results. Indeed," there were many signatories of the GATT who would not have consented to the holding of a fourth round of tariff negotiations had it not been for the fact that this was a way of testing the tariff-reducing powers conferred on the President of the United States by the Trade Agreements Act of 1955. This pervading scepticism has been happilv rebutted by the actual outcome of the negotiations. The import trade of the 22 negotiating countries in the items affected by concessions in these latest negotiations is Estimated at about 2500 million dollars This includes concessions extended both by way of reduced tariffs and of guarantees that existing rates of duty will be held steady. The volume of trade involved is substantial.

Stabilitv of Tariff Secured Where the cynics and pessimists have been most nearly right in their prognostication is in the modesty of the concessions exchanged between the negotiating countries. The measure of these concessions was. to a large extent. dictated by the tariff-cutting powers wielded by the United States delegation, namely, the power to reduce tariffs by 15 per cent, over the next three years and to reduce to 50 per cent, anv ad valorem duty in excess of that figure. Under the Trade Agreements Act the right to reduc? tariffs by 15 per cent, is made subject to the reservation that it should be spread in three instalments of 5 per cent. each. The first of these instalments had, under the terms of this legislation, to be effected by July 1 of this year. That very fact determined the timing as well as the general nature and size of the concession extended during these latest tariff negotiations.

To say that the results of these negotiations have been modest is not, however, to disparage their contribution to international trade. What merchants and industrialists engaged in world trade need, above all. is some reliance on the stability of tariffs. That is precisely what the General Agreement on Tariffs and Trade helps to give them, not in perfect and complete measure, but to a degree that was not attained even in pre-war days when there was a complete absence of collective international obligations about the stability of tariffs. If the latest round of negotiations had done no more than “bind” or guarantee existing tariffs, it would have deserved well of those engaged in them. It has done a good deal more than that. The countries which participated in the Geneva discussions negotiated 57 bilateral agreements. The concessions exchanged under these were then extended to all the other contracting parties of the GATT by virtue of the most-favoured-nation clause, which remains the basic rule of the agreement. As a result of these agreements numerous, though modest, reductions in tariffs have been made. Their effect is to maintain the trend towards lower tariffs and freer trade. The momentum of the constructive movement that was begun immediately after the end of the war with the signature of the General

Agreement on Tariffs and Trade hai not been lost. Benefits to Britain For the United Kingdom, the results of this latest round of tariff negotiations should be beneficial. In its negotiations with the United States the United Kingdom has secured useful cuts which will more than compensate for the notorious increase in the United States tariff on bicycles. The duties on motor cars, planes, electric motors, linen goods, footwear, wool clothing, china clay, and, last but not least, whiskv have been reduced. The United Kingdom has also secured tariff reductions in its negotiations with Germany and the Scandinavian countries. The United Kingdom has given concessions in respect of trade which in 1954 amounted to £94.000.000. and on the other hand has secured benefits in respect of exports which in the same year amounted to £102.000.000. The main reductions in tariffs on imports coming into the United Kingdom are those on various types of paper imported from Scandinavia, motorvehicles, aircraft, and artificial silk yarns. In no case do the reduced tariffs impiene on Empire preferences contracted under the Ottawa Agreements The advantages to the United Kingdom. however, must be viewed not only in terms of direct benefits secured by reductions in tariffs levied on British goods. Britain as a world trader, banker, insurer, must benefit in a wider measure from anything that conduces to the freeing of the clogged channels of international commerce and to an expansion in world trade. The indirect benefits that will accrue from the latest of the GA’IT tariff negotiations may well outweigh the direct advantages secured by lower tariffs on British goods entering the United States and other markets. It should, however, be evident that this fourth round of tariff negotiations brings the possibility of further reductions to a close for at least three years. One reason for th’S is that the concessions made by the United States will be spread over three years and that little in the way of fresh tariff cuts can be expected while the latest batch is being worked off. Another reason is that manv of the countries adhering to the GATT have now worked their tariffs down to so low a level that thev have next to nothing left w’ith which to bargain. If three years of no more than consolidation and tariff stability lie ahead, that will still be cause for some gratitude to the Genera! Agreement.