The GATT Numbers Game

By Wheat, Andrew | Multinational Monitor, October 1994 | Go to article overview

The GATT Numbers Game


Wheat, Andrew, Multinational Monitor


THE PRO-GATT RESPONSE to arguments that the Uruguay Round would undermine consumer, worker and environmental health and safety laws is that the United States and the world cannot afford to turn down the economic growth that the Uruguay Round would deliver.

But how much of a rise in the economic tide can be expected from the Uruguay Round? And will that tide raise all boats or will it just raise some while capsizing others?

The figure of choice for most GATT fans in the Clinton administration, for example, is that approval of the Uruguay Round would yield $1 trillion in additional growth in the U.S. gross national product over the next 10 years. This is quite a dazzling figure, one that brings to mind the old consumer maxim: If it sounds too good to be true, it probably is.

Honest pro-GATT economists are willing to acknowledge that global tariff cuts are likely to have only a modest effect on the world economy. At a GATT conference at the Brookings Institution in July 1994, for instance, University of Michigan economist Alan V. Deardorff, said, "The [Uruguay] Round itself, at least in its economic effects, may not make a big difference. Its effects on the world economy will be largely beneficial, but those effects that economists have been able to quantify are rather small, while the sizes of other effects are necessarily uncertain."

The U.S. Trade Representative (USTR) does not seem to be not bound by such scholarly candor.

Compare the USTR's favored growth estimate, for example, with other estimates and you may wonder whether the figure that the Clinton administration hypes to Congress, the media and the public is based on anything firmer than wishful thinking. Dwarfed by the administration's 10-year $1 trillion growth figure are the Organization for Economic Cooperation and Development estimate of $160 billion, the Institute for International Economics estimate of $42 billion, and the Economic Policy Institute's (EPI) estimate of $7 billion. The administration's estimate is 525 percent higher than the next largest estimate and 14,186 percent higher than the EPI estimate for the same 10-year period. Yet trade reporters parrot the administration's numbers without question.

According to Dean Baker, an EPI economist who has analyzed the studies on which the USTR numbers are based, the administration had to go as far afield as Australia to find an estimate to its liking. It adopted a misleadingly optimistic economic model generated by the Centre for International Economics (CIE), an Australian think tank. Baker says a fundamental flaw of the CIE model is that it assumes that government spending, a hefty slice of the overall GNP pie, will not fall -- even though GATT reduces the tariff revenues governments collect. If government spending is to remain steady as treasuries collect less tariff revenue, governments will have to raise money elsewhere to offset these losses. …

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