WORLD TRADE TIME FAST RUNNING OUT FOR THE KENNEDY ROUND

Press, Volume CVI, Issue 31236, 7 December 1966, Page 20

WORLD TRADE TIME FAST RUNNING OUT FOR THE KENNEDY ROUND

(By JOHN MYERS, writing to the “Daily Telegraph”, London, from Geneva! (Reprinted from the “Daily Telegraph” by arrangement! Time is fast running out for the Kennedy Round of world trade negotiations in Geneva. Chances of achieving even moderate success can be rated no higher than 6-4.

Many bright delusions have been lost in three-and-a-half years of sporadic talks, which now show signs of degenerating into an angry shouting match between the United States and the European Common Market.

Britain, her partners in the European Free Trade Association, the Commonwealth countries and Japan are also heavily involved. But the two economic giants are calling the game. The crisis will reach a climax next spring. The Kennedy Round must be concluded by June 30. The United States Trade Expansion Act of 1962. initiated by President Kennedy, expires on that day and with it the negotiating authority of the present American Administration.

it can expect to get and the minimum concessions which it must give in return. Under the G.A.T.T. most-favoured nation rule, a tariff cut granted by any one country to another applies automatically to all members of the General Agreement. Delegations are now exchanging written assessments of their negotiating positions. They will state what improvements they might be able to make in their initial offers, what concessions they have requested in bilateral talks and what offers they might or must withdraw if those requests are not met.

scattered tariff cuts, too, or reduction of other trade barriers for tropical products of special interest to less developed countries, and possibly for other items including tinned fruit and vegetables, soya beans and tobacco. There could be undertakings to press ahead with drafting work already in hand for trade regulation agreements on dairy products and meat. France’s View

There is now said to be a unanimous political will to succeed in the Kennedy Round. This has yet to be tested against France’s view that the Common Market’s offers are quite good enough as they are. France, nevertheless, seems to share a general belief that failure would provoke an upsurge of protectionism in the United States. This would |have especially unfavourable economic and political repercussions in the countries of the Western Alliance.

Ambitious Project

The Kennedy Round is the most ambitious attempt ever made to reduce tariffs and other barriers to trade in industrial and agricultural products. It is also the most arduous and acrimonious in the series of negotiations held since 1947 in the framework of the General Agreement on Tariffs and Trade (G.A.T.T.). All forecasts about the outcome are obscured by the ifs and buts conditioning the offers of 54 nations taking part on differing terms. There is no need for an electronic brain, however, to see that a nasty international row is brewing, stirred mainly by American resentment at the Common Market’s massive inertia.

Final Stage

The general aim of this “alarm clock” procedure is to enable Governments to work out instructions for their delegations in Geneva for the final negotiating stage due to begin on January 15. The specific aim is to force the Common Market to lay better cards on the table.

By January the Common Market’s Ministerial Council will have seen the full extent of what the Common Market will lose unless it improves its own offers. If the Ministers can agree only to let the offers stand unchanged, the Kennedy Round will be in peril. If they agree to make improvements, these are unlikely to be more than just enough to secure a minimum package deal acceptable to the United States. The bare minimum for the United States must include an agreement on cereals. Details of the assessments will be kept secret. However, assuming that the Common Market does decide to go for a reasonable deal, it is now possible to deduce what the main components of the final Kennedy Round package should be. On the industrial side, tariff cuts averaging 20-25 per cent on thousands of products seem practicable. The biggest cuts, some reaching 50 per cent, would be on a wide range of machinery and engineering products, possibly including cars, and on consumer goods. The smallest cuts, or possibly none at all, would be on iron and steel, aluminium and pulp and paper.

It is worth remembering that President Kennedy saw a successful outcome of these negotiations primarily as vital for an Atlantic community of military, political and economic cohesion—with Britain in the Common Market and Western Europe united into a single Power. President de Gaulle may yet choose to smash all that he has left of those ideals, simply to assert his rival aims with the last ounce of disdain for the United States. Paradoxically, though, he must reflect that he might thereby impair his ability to keep Britain at arm’s length. The economic situation has evolved since he vetoed Britain’s application to join the Common Market in 1963. Tariff discrimination between the Common Market and E.F.T.A. (European Free Trade Association) has risen almost to its peak, threatening trade distortion to the great disadvantage of exporters in both groups. The less effective the Kennedy Round is in reducing the level of that discrimination, through mutual tariff cuts, the greater will be the general pressure to incorporate Britain in the Common Market.

The Common Market has undoubtedly made the least generous offers. It has tabled much the longest list of products totally or partially excepted from the basic aim of 50 per cent cuts in industrial tariffs. Its offers on agricultural trade, dictated by its own highly protectionist system, are extremely meagre. At this stage, each country is saying to the Common Market, in effect: “If you still refuse to lower your tariffs any further on these products of importance to my export trade, I shall withdraw my offers to cut my tariffs by the full 50 per cent on those products of importance to your export trade.” The Common Market is, of course, saying the same thing to other countries and other countries are saying it to each other.

The inevitable result will be an all-round scaling down of initial offers in the industrial and agricultural sectors. Each country will try to strike a balance between the maximum concessions which

Better opportunities for cotton textile exports to the United States and the Common Market, of special interest to less developed countries, should result from renewal of the current traderegulation agreement which expires next year. Tariff cuts on chemicals, if any, are bound up with the baffling problem of American Selling Price. This is an arbitrary system of raising often prohibited tariffs based on variable domestic prices. It has bedevilled the Kennedy Round probably more than any other single issue. Food Aid

A Half-Success

On balance, therefore, the Common Market is likely to settle for a half-success, looking rather more to maintaining the 37 per cent, of its total exports which go to E.F.T.A. than to increasing the 12 per cent, which go to the United States. Tariff discrimination within Europe would thus be alleviated during the four or five years when Britain and other E.F.T.A. countries would be negotiating for entry. This would give everyone a breathing space, while world trade would receive a considerable boost. Such a solution, however, will probably hang in the balance until the last minute.

The Common Market and Britain demand that it be abolished. The United States has offered to ask Congress to convert it into a system of fixed tariffs which could then be cut, but only if the Common Market meets American demands in other sectors. Both sides are keeping this issue as one of their last big bargaining counters. On the agricultural side, there could be a trade-regula-tion agreement on cereals, providing for minimum guaranteed access to export markets at somewhat higher world prices, and for the financing of surpluses and food aid to less developed countries. There might be some

The Kennedy Round is a major part of the unsettled background against which Mr Wilson will hold his exploratory talks with the heads of E.F.T.A. and Common Market Governments. If one unanimous point emerges, it will be that eventual negotiations for Britain’s entry into the Common Market cannot begin until the Kennedy Round Is over. Two negotiations of this importance and complexity cannot overlap. It may well be 1968 before the economic future looks clearer for Europe and the world in the aftermath of the Kennedy Round.