ATLANTIC FREE TRADE IS THE KENNEDY ROUND GRINDING TO A HALT?

Press, Volume CV, Issue 30998, 2 March 1966, Page 16

ATLANTIC FREE TRADE IS THE KENNEDY ROUND GRINDING TO A HALT?

IBv

"Lynceus”

of the ' Economist "J

[From the "Economist” intelligence I’nit.J

The “Kennedy Round’’ was aptly named. It was launched by the late President Kennedy back in 1962 on a high tide of enthusiasm for Atlantic free trade. Ever since it seems to have been revolving ever more slowly on its own axis. Is there any point in its going on ?

There is now little more than a year before President Johnson’s Congressional mandate to bargain away his country’s tariffs will be exhausted. Yet the real horsetrading in Geneva, where these marathon negotiations are supposed to be taking place, has yet to begin.

Blows From The Start

The grand design incorporated in President Kennedy’s Trade Expansion Act has suffered one blow after another almost from the start. The Act assumed that Britain would join the Common Market and therefore proposed that tariffs should be abolished altogether on commodities for which the United States and the enlarged Common Market would account for 80 per cent of free world trade. Britain did not go into the Common Market, so this clause remained a dead letter. However there was still the provision authorising the American. President to cut United States tariffs in half provided European countries would do likewise. But then in 1963 it became known that they would do no such thing. They argued that a large number of American tariffs are very high indeed —40 per cent and upwards—whereas the Common Market tariff rarelv exceeds 30 per cent. A 20 per cent tariff cut in half ceased to offer any protection at all. the continentals claimed: while a 60 per cent tariff cut in half remain-' ed a formidable barrier. So eventually the Americans agreed that their highest tariffs would merit special treatment. Agricultural Hurdle Then came the agricultural hurdle. The Americans have always said that freer trade must not be confined to industrial goods, but must include agriculture. The Common Market countries agreed. Rut their suggestion has been that all the main participants in the “Kennedy round" should lay upon the negotiating table all the aspects of their national systems of farm ) support and protection. These) should then be analysed and' graded by degree of relative) protectionism, and conces-; sions traded between them. ; The Americans complain) that this would simply be a method of setting a seal of respectability on what they regard—with reason—as the highly protectionist system of farming policies devised by the Common Market. They want the Six to guarantee a certain share of their foodstuffs market to their traditional overseas sunpliers a suggestion which the Six have alwavs turned down out of hand. Meanwhile, while the tone between Washington and

Brussels got shriller, the civil servants in Geneva were labouring away drawing up and comparing lists of "exceptions’’—goods on which individual countries wished to preserve the existing levels of tariff protection. By last autumn these were just about ready for reduction by process of Ministerial haggling.

The French Walk Out Then the French walked out on their Common Market colleagues: and for seven long months the process of preparing a common front of the I Six for Geneva came to a dead halt. This side-effect of General de Gaulle’s intransigence can only have been a cause of quiet satisfaction to him: in French eyes Atlantic tariff-cutting is' generally objectionable in itself. How much it worried France's partners is a matter of debate.

Now however the French have made peace—or at least an armistice—with the other Common Market countries, and the “Kennedy round” preparations have resumed in Brussels. Given goodwill on all sides there is still time for at least a modest advance to freer trade before President Johnson's mandate runs out —but only just. The doubt is whether the goodwill exists. It is perhaps significant that as soon as discussions were taken up again in Brussels earlier this month, the Six Governments decided to transfer the preparation of the Common Market’s agricultural case from the Hallstein Commission to the Council of Ministers, where the reservations of individual countries can be more effectively voiced. Germany’s Wishes Certainly the French would be happy to see the Kennedy round finally abandoned—the sooner the better. The Germans, on the other hand, still regard success in Geneva as an essential political commitment. Yet even among the Germans there are divided counsels. German industry has lost most of any enthusi-

i asm it ever had for freer trade with the giant firms of the United States. It is however, very interested in freer access to Scandinavian markets—and at the moment the Kennedy round is the only way this could be achieved. Above all. perhaps, there is no possibility of compromise on the rules for freeing agricultural trade in sight. Unless the Americans are prepared in effect to drop agriculture altogether and concentrate on manufactured goods, it will in cricketing terminology, be only a question of "playing out time."

However, it seems just possible that the Americans may now after all be prepared to forget about agricultural trade. With their strategic grain reserves down below tolerable minimum levels for the first time in a generation, and with prospects of famine looming large in Asia, problems of disposal of food surpluses should not be taking up much time in Washington. Even if agriculture is put on one side, however, there is clearly now going to be no sweeping bonfire of tariffs. A series of individual tariff cuts, traded on a strict item-by-item basis, is the most that can be hoped for in the limited negotiating tune now available Time Wasted This will still leave the major problem of the tariff cleavage in western Europe largely unresolved. Of course it is possible that in the meantime a new British negotiation to enter the Common Market may have been successful, and that this would also involve the abolition of barriers to trade between the Common Market and Scandinavia. But if this has not happened, then the time spent on the remaining stages of the Kennedy round will be, from a European point of view at least, time largely wasted. The Kennedy round has be6n something of a bore for long enough: it is now in danger of becoming a positive nuisance.