6:18 AM Mar 22, 1994
GATT HEAD WARNS AGAINST OVERLOADING WTOGeneva 21 Mar (Chakravarthi Raghavan) -- GATT Director-General Peter Sutherland cautioned industrialized countries against the concepts of 'eco-dumping' or 'social-dumping' which, he said, bore striking similarity to more conventional forms of protectionist rhetoric. Sutherland's warning came in a speech to the Canadian Club in Toronto. A copy of the speech was made available here by the GATT press office. Using trade restrictions as a "political club to wield around the global market place" and introducing them into the (proposed) World Trade Organization would place "the system at immediate risk of collapse", the GATT head warned. Developing countries and transition economies, he noted, had fought hard in the Uruguay Round to ensure "triumph for liberal, non-discriminatory world trade, not a shame-faced retreat into market sharing". While they had found support for this from their industrial country partners, it was ironic that resistance to creating just and stable market access and fair opportunities for all to compete in the global market place remained most marked in the industrialized world. "Protectionism was most evident in societies that have been quick in the past to lecture others about the advantages of a competitive market economy". Looking beyond Marrakesh, Sutherland said, was a pending new agenda including further liberalisation of trade in services and comprehensive work programme on trade and environment. "There is also a burgeoning list of other new issues being proposed", he noted and said that many unnecessary and destructive restrictions on trade flows and international economic activity should be addressed effectively on a multilateral basis. The Uruguay Round results, the GATT head noted, would cause restructuring at a quickening pace in the industrialized world. The prospect of global economic integration and restructuring implied adjustment on a scale unlike that ever encountered before or envisaged in a regional context (such as NAFTA and EC single market). The danger of overloading the industrialized world's economic and political circuit was all too apparent and should be firmly dealt with at an early stage. With high levels of unemployment, appeals to keep cheaper foreign products off the super market shelves and make taxpayers help exporters compete, raise living standards and save jobs was a "seductively easy way out", but entirely illusory. Resisting impoverishment on grounds of the discredited theories of "pauper labour" (imports from countries with relatively low wages being inimical to economic welfare of the importing countries) would impoverish industrial societies faster, and not lay the grounds for rejuvenation of economies or creation of well-paid new jobs, he added. The heterogeneity of new comers to the global market economy is creating pressure to resist integration and differing approaches to policy in areas of environment protection or social welfare, Sutherland said, "are proving to be a touchstone for claims that these countries wield unfair advantages in the global market place and that these must be met through trade restrictions if domestic industry is to survive and domestic standards are not to be dragged downwards." "Simplistic demands for drastic trade remedies against so-called eco-dumping or social-dumping sometimes bear a striking similarity to more conventional forms of protectionist rhetoric, but in many respects ill-thought out measures can be more dangerous because of the popular emotional appeal that they appear able to carry with them." Growth of world trade and the increased prosperity generated confirmed the validity of the economic principle that welfare of trading nations would increase if each played to its specific area of comparative advantage. Where there might good reasons for pursuing in specific cases harmonization of standards internationally, the need for a "cooperative, multilateral approach" was obvious. "But there is no general case to be made that heterogeneity is in and of itself a bad thing." Those who believed, generally from a privileged point of view, that free trade would lead to competitive deregulation and lowering of standards worldwide or to industries migrating to developing countries, argued that trade restrictions could be used to encourage countries to harmonise their standards upwards and penalise those which were felt to be lagging behind. "The dangers of protectionist capture inherent in this line of argument are manifold... it leads to a false policy prescription which in all likelihood will not achieve the underlying objective. The direct effect of trade restrictions against exports from a developing country or industry unable to meet industrialized country standards will fall first and foremost on the workers themselves, threatening their jobs and livelihood. "Where poverty is the principal cause of inability to invest in higher standards, which is very often the case, resource transfers to help raise the standards are called for, not trade restrictions in overseas markets that will cut away even further at the local resource base". Threat of trade restrictions could no doubt be a powerful political club to wield around the global market place. But like all clubs it was available "most readily to the powerful for use on the weak, not the other way round", Sutherland noted. "Such politicisation of trade policy-making turns it into the equivalent of breaking off diplomatic relations or suspending aircraft landing rights." Sutherland added: "It has had no place until now in the framework for multilateral economic cooperation maintained by the GATT, and introducing it into the new framework of the WTO would place the system into the new framework of the WTO would place the system at immediate risk of collapse."