The Swelling Protectionist Tide

By Kenneth W. Banta

In Geneva, trade ministers gather for a slanging match

As the worldwide recession continues, warning bells are sounding for a fundamental element of the global economic system. Free trade, which has been a locomotive of prosperity since World War II, is in grave danger of derailment. The cause: a tendency by hard-pressed governments to erect trade barriers in attempts to safeguard their ailing industries at the expense of those of other countries. So serious is the problem that former Presidents Jimmy Carter and Gerald Ford issued a rare joint statement calling for a halt in "the drift toward economic anarchy." In his weekly radio address, President Reagan sounded a similar warning. Said he: "When governments get too involved in [hampering] trade, economic costs increase and disputes multiply. Peace is threatened."

Prompted by the same concerns, 88 trade and foreign ministers convened in Geneva last week for the first ministerial meeting in nine years of the General Agreement on Tariffs and Trade (GATT), a body formed after World War II to monitor rules for international commerce. After more than four days of acrimonious debate, the meeting ended in a virtual deadlock.

The crisis comes after more than three decades of freedom in international trade that produced unprecedented gains for the world economy. Chastened by the Great Depression, which was partly induced by rampant protectionism, GATT members have completed seven major negotiations that virtually eliminated tariffs among Western nations. Partly as a result, postwar trade grew at an annual rate of almost 7% in real terms from 1948 to 1973. In the U.S. alone, an estimated 5 million jobs depend on foreign trade, while last year exports accounted for 8% of the gross national product, up from 4.1% in 1960. But since 1980 the continuous upward curve has turned around and begun to drop. No improvement is expected this year.

Despite its pious homilies on the dangers of protectionism, the U.S. is one of the offenders. The Reagan Administration has forced Japan to accept a "voluntary" three-year quota on car exports and has limited steel imports from Western Europe. Some members of Congress, encouraged by organized labor, hope to go even further. A bill requiring a large percentage of American-made parts in imported cars has 220 co-sponsors in the House and the endorsement of Democratic Senators Edward Kennedy and John Glenn.

Instead of devising remedies against the growing protectionist peril, delegates in Geneva spent most of the time sniping at each other. Acting on the "bicycle theory" that only forward movement can prevent collapse, U.S. Trade Representative William Brock insisted that new reductions in trade barriers were essential, and pushed aggressively for major reductions in the European Community's agricultural export subsidies. Brock even threatened to start a trade war by dumping 200,000 metric tons of butter on the world market in an effort to undercut European prices. Angry Western European ministers called for scrutiny of the U.S.'s multibillion-dollar farm programs. Said Denmark's Foreign Minister Uffe Ellemann-Jensen: the U.S. is "trying to get us to give up a lot without giving anything in return." In the transatlantic dueling, the Japanese were overlooked, and Foreign Minister Yoshio Sakurauchi went unchallenged as he blandly pronounced his nation's largely inaccessible market "one of the most open in the world."

As accusations flew, only the French openly blamed GATT and the free trading systems for the world's current economic ills. With his nation stirring controversy in Europe over an ingenious new barrier against Japanese video recorders (see box), acerbic French Trade Minister Michel Jobert lambasted U.S. free trade principles as a "formula of dogmatic liberalism" yielding "subtle" forms of protectionism, and argued that in any case high interest rates and currency fluctuations, not trade barriers, caused joblessness.

Too busy shouting at each other over agricultural subsidies, import quotas and trade in services, the ministers who gathered in Geneva went into overtime through the weekend in an attempt to salvage their conference with a minimum pledge to set up formal studies of these fundamental questions. But it was still an inauspicious signal for the free trading system, without which the world economy will founder in the same destructive crossfire that marked last week's conference.

--By Kenneth W. Banta.

Reported by Lawrence Malkin/Geneva and Ross H. Munro/Washington

With reporting by Lawrence Malkin/Geneva, Ross H. Munro/Washington

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