GATT Revisited: Key Provisions of the Trade Pact

By Tursman, Cindy | Business Credit, March 1995 | Go to article overview

GATT Revisited: Key Provisions of the Trade Pact


Tursman, Cindy, Business Credit


Following eight years' of negotiations which make the U.S. baseball strike talks look like a piece of cake, Congress approved the General Agreement on Tariffs and Trade (GATT). The past slashes tariffs globally by roughly 40 percent, extends intellectual-property protection worldwide, and tightens rules on investment and trade in services. Organizers say the agreement could boost U.S. income by $122 billion by the year 2005; others predict more modest gains; but all show positive net effects.

With Congressional approval, the 47-year-old GATT went out of business on January 1, 1995, and its successor, the World Trade Organization (WTO), took charge. But despite U.S. approval, the new world trade accord will take months, if not years, to implement, and many of the 124 nations involved have yet to OK a final plan. Here's the lowdown on how the trade pact may affect U.S. industries as summarized from The Wall Street Journal, Friday, December 2, 1994.

World Trade Organization

The new World Trade Organization (WTO) oversees the trade agreement and sets up a dispute-resolution system with three-person arbitration panels. The panels follow strict schedules for rendering decisions; WTO members can't veto the findings, as was the case under GATT. That's a major plus for U.S. agriculture, which had won GATT rulings against European Union subsidies of soybeans and other produce, only to have the EU block them.

The major concern over environmental laws was addressed by enabling any members to withdraw after six months' notice. The U.S. will have its own panel of judges to review WTO decisions.

Tariffs

The U.S., E.U., Japan, Canada, and other industrialized nations agreed to eliminate tariffs on beer, construction equipment, distilled spirts, farm machinery, furniture, medical equipment, paper, pharmaceuticals, steel, and toys.

Dumping and Steel

The agreement allows tougher and quicker action to resolve disputes over use of antidumping laws by the U.S., EU, and developing countries. While steel industries use these laws to impose stiff penalties on foreign competitors that are found to sell steel "below cost," some say the calculations of cost are highly suspect. It is anticipated that the WTO dispute-resolution panels will review whether these provisions violate the trade pact.

Intellectual Property

The pact provides seven years of protection for trademarks, 20 years for patents, and up to 50 years for copyrights. That represents a big win for the book, software, film, and pharmaceutical industries, since piracy is often an issue. Solo inventors, however, call the new terms harmful. They prefer the current system which provides protection for 17 years once a patent is granted; the term can be longer than 20 years under WTO rules, which begins when a patent is filed. Congress is expected to review the patent question next year.

Subsidies

The agreement limits government subsidies for research in such goods as computer chips to 50 percent of applied research - the work leading to a first prototype - and 75 percent of basic research conducted in industry. It allows governments to average the two limits for research that is a combination of the two. That is a boon for the electronics and other high-tech industries, which are big recipients of government research grants.

Aviation

The agreement continues limitations on government subsidies to the civil-aircraft industry. That is a plus for U.S. aircraft makers, which want to restrict government handouts to Europe's Airbus Industrie and also deter Japan, China, and other nations from building aircraft industries through government grants.

Agriculture

The agreement requires countries that export farm goods to reduce the volume of subsidized exports by 21 percent over six years. Bans on rice imports in Japan and South Korea are to be lifted.

Quotas for imports of sugar, dairy products, and peanuts into the U.

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