GATT may be more trouble than treaty - Symposium - Column

0 Comments | Insight on the News, August 22, 1994 | by William R. Hawkins

Until now, changes in GATT rules have been negotiated in successive rounds of international talks. As trade competition has grown more fierce, however, the rounds have become more difficult to conclude. The Uruguay Round had essentially failed by 1990, with neither Presidents Reagan nor Bush willing to accept what was being offered by America's trading partners.

President Clinton came into office with a predisposition to favor "world" organizations, as evidenced by his deference to the United Nations in all areas of foreign policy. He was thus willing to accept GATT terms his Republican predecessors had not, including the creation of the World Trade Organization. The WTO will become a standing forum for continuous GATT revisions. Amendments to the GATT rules can be adopted by a two-thirds vote, and a three-fourths vote can make acceptance of the new rules mandatory even for those who oppose them. The WTO will decide trade issues democratically, based upon the one nation-one vote model with no vetoes. This is how the U.N. General Assembly operates. Cuba and Rwanda each will have the same vote as the United States.

Critics have wondered why President Clinton's negotiators did not press for something akin to a U.N. Security Council that would provide the United States with veto power. Or, failing that, a weighted-voting system similar to that of the International Monetary Fund.

U.S. Tkade Representative Mickey Kantor explained his objections to a trade-weighted voting system in an April letter to Sen. Jesse Helms, a Republican from North Carolina. Kantor conceded that such a system would have allowed the United States 15 percent of the total votes based on its share of GATT trade, but he noted that the 12-nation European Union would have a 3-to-1 advantage since it accounts for 45 percent of GATR trade. "Thus, the United States could be outvoted and the EU would have significantly greater influence on decision-making than we do," said Kantor, adding, "A trade-weighted voting approach ... could result in decisions being imposed on the United States." But if this is true under a weighted system, why is it not even more dangerous under a one nation-one vote system in which the EU would have 12 votes to the United States'one? Besides failing to rebut critics on the voting issue, Kantor conceded two major points to WTO opponents: that voting blocs will develop and that the WTO can "impose" decisions on the United States.

A forbidding scenario is only too easy to envision. Language describing member obligations is subject to interpretation by the GATT bureaucracy in Geneva. This bureaucracy will be headed by a director general elected by a simple majority, who will appoint all the members of the secretariat. Rather than blocking amendments, the United States could find itself trying to muster super majorities to overturn adverse administrative acts. For example, Article 11 of the Uruguay Round's final agreement allows for a sliding scale of compliance for developing nations. Suppose the WTO's director general accepted India's claim that, as a developing nation, it should be exempted from GATT's reduction of the tariffs protecting its chemical industry. The United States would need a two-thirds vote of all GATT members to overturn the director general's interpretation of the article.

Such an ongoing negotiation process of GATT rules will further remove Congress from its constitutional duty to regulate foreign commerce. Congress already has surrendered too much of its responsibility under successive "fast track" procedures that prevent it from amending agreements obtained by U.S. trade representatives. The prospect of votes in Geneva determining the terms of American trade and the viability of U.S. law is deplorable.

However, some WTO proponents welcome such a development. Writing in the November 1993 issue of Foreign Affairs, former EPA official Daniel Esty argued that "the creators of the GATT elevated the commitment to freer trade to a nearly constitutional level, thereby limiting the power of governments around the world (and legislatures in particular) to give into the pleadings of domestic special interests." Of course, one person's special interests are another person's constituents, fellow citizens and pillars of economic strength.

Congress will be pushed ever farther out of the loop. The ongoing evolution of GATT-WTO rules will be negotiated by the executive branch. Under "fast track" rules of ratification, Congress loses its ability to reconcile changes with domestic economic conditions. The executive branch decides what cases to bring before WTO dispute panels, how hard to push them and what to do if rulings go against American interests. Presidential pressure on Congress to change laws to comply with WTO rulings is already a reality. Kantor has started advising members against including provisions in various bills that might run afoul of predicted WTO behavior.

In the future, the administration may simply stop enforcing laws that run afoul of WTO trade rules. For example, a WTO dispute panel might decide that U.S. laws prohibiting imports of tuna from nations that do not protect mammals from fishing nets are an unfair restraint of trade. The administration might choose not to enforce the U.S. Mammal Protection Act in order to avoid receiving a costly trade sanction from Mexico. This would be, of course, an executive policy decision, as would be the rewriting of the regulations that carry out congressional mandates. Congressional desires could simply be ignored by an administration oriented more towards global than national forums.