The Uruguay Round of Trade Negotiations: Industrial and Geographic Effects in the United States

Fieleke, Norman S., New England Economic Review

History records many international trade negotiations, some trivial and some impressive, but no others so comprehensive as the Uruguay Round. As the negotiations peaked, on December 15, 1993, in Geneva, Switzerland, more countries--117 in all--reached a consensus on more issues than in any previous negotiation. Among other things, the Uruguay Round participants agreed to liberalize trade in agricultural products, to reduce tariffs on industrial products by an average of more than one-third, and to establish a World Trade Organization both to facilitate the implementation of multilateral trade agreements and to serve as a forum for future negotiations.(1)

The chief purpose of such trade agreements is to improve living standards. As trade barriers come down, countries will be stimulated to channel more of their resources into the activities they carry on relatively most efficiently in the world economy. Total exports, investment, and income will increase.

While this general outcome is widely expected from the Uruguay Round agreements, accurately quantifying their economic impact is a formidable undertaking, given their breadth and the number of countries involved. Evaluating the negotiated reductions in barriers against trade in services (such as accounting or legal services) is especially difficult. Those barriers are not readily measurable, and internationally comparable data on services imports are not available.

Fewer difficulties are encountered in appraising the agreements to liberalize trade in goods, and some fairly sophisticated estimates have been published of the effects of these agreements on world trade and income. Among the most recent and comprehensive are estimates by the Secretariat of the General Agreement on Tariffs and Trade. These estimates suggest that the agreements might raise annual world income by as much as $510 billion, measured in 1990 U.S. dollars, by the year 2005. Of this $510 billion, roughly $120 billion would accrue to the United States (GATT 1994, p. 34).

This article further examines the effects of the Uruguay Round agreements to liberalize trade in goods, focusing primarily on the United States. Following a very brief summary of the agreements, the article presents rough estimates of their impact on employment in manufacturing, both for the nation and for the individual states, and then examines how closely the estimated changes in employment correspond to the comparative advantages revealed by international trade patterns.

I. The Uruguay Round Agreements Liberalizing Trade in Goods: A Capsule Summary

Both tariff and nontariff barriers to trade are to be reduced as a result of the Uruguay Round. In general, the agreed liberalizations are to be completed by the year 2005.

For industrial products, the advanced countries committed to reduce their tariffs from an average level of 6.3 percent to 3.8 percent, and other countries also pledged noteworthy reductions. In addition, substantial decreases are to be made in nontariff barriers, which have proliferated in recent years. Prominent among these nontariff barriers are quantitative restrictions that place limits on the volume of goods--especially textiles and clothing--flowing from one country to another; these restrictions are to be relaxed considerably.

For agricultural products, the negotiators agreed, with some exceptions, to convert the substantial prevailing nontariff barriers into their tariff-equivalents, and then to lower all tariffs of advanced countries by an average of 36 percent and the tariffs of developing countries (except the least developed) by an average of 24 percent. In addition, measures were adopted to ensure that agricultural products will have access to importing countries at certain minimal levels, and significant reductions were agreed in both domestic and export subsidies.

II. Employment Effects

Many workers are engaged in the production of manufactures that the United States exports. Between 1981 and 1991 their number rose from about 4.8 million to 6.1 million, or from 4.7 percent to 5.1 percent of total civilian employment (U.S. Bureau of the Census 1983, p. 13; 1994, p. 19). As might be expected, the comparable percentage for the individual states varies widely (Figure 1).

As part of a major study of the impact of the Uruguay Round agreements, the U.S. International Trade Commission has estimated the long-term employment consequences of those agreements for the U.S. economy (U.S. ITC 1994). The estimates were presented as ranges and for sectors, or industry groups, that are defined differently from the industry groups in the Standard Industrial Classification (SIC). Our analysis …

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Publication information: Article title: The Uruguay Round of Trade Negotiations: Industrial and Geographic Effects in the United States. Contributors: Fieleke, Norman S. - Author. Journal title: New England Economic Review. Publication date: July-August 1995. Page number: 3+. © 1999 Federal Reserve Bank of Boston. COPYRIGHT 1995 Gale Group.

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