Implication of the Uruguay Round Treaty of GATT

The Uruguay Round Treaty (URT) is a march ahead to a freer trade in the global economy. Trade barriers and the quota system of all the 117 participating nations will be reduced in the years to come and will be completely abolished of the year 2004.

Essentially, the Dunkel Draft is the center piece of the URT. TRIMs, TRIPs and MFA are the three crucially important agreements of the GATT negotiations at the Uruguay Round.

The Agreement on Trade Related Investment Measure (TRIMs) opens the gates of financial services sector, but member countries are permitted to adopt their own foreign investment policy. The Agreement on Trade Related Intellectual Property Rights (TRIPs) is comprehensive in giving cover to all areas of technology – property, patents, trademarks, copyrights, and so on.

TRIPs encroaches upon the member country’s sovereign right to frame its own legislation on intellectual property matters. Multi- Fibre Arrangement (MFA) regulated trade in textile and clothing since the last four decades.

Under this special arrangement, importing countries such as the US, Canada, Austria, Norway, Finland an<^ European Union (EU) could impose quota restrictions on exports from the developing countries on a selective basis. Hitherto, unrestricted trade was permitted among the developed countries. But the new treaty phases out MFA over a period of 10 years from 1995.

In the case of the US, the integration phase is to be 3 per cent in the initial three years, 10 per cent in the next four years, 32 per cent in the next three years and 55 per cent in the end of the tenth year. Under the new Treaty, thus, the process of liberalisation of MFA is stage-wise and slow which seems to be disadvantageous to the exporting nations. But the fact is that the US actually wanted the phase-out period to be stretched up to 15 years.

The Treaty, however, succeeded to have its commitment to dismantle the quota regime over the ten years’ time, which, of course, is a positive gain for the textile-exporting developing countries, including India. It is equally true that, the provision of 10 year phase-out period to open up textile quotas in full extent is rather a defensive gain for the US and other OECD economies. It gives them sufficient time for adjustment while the developing countries dodge the onslaught of OECD exports.

Despite its eventual goal for free world trade, the GATT has failed to restrain the formation of trade blocs. The new treaty, however, provides that trade restrictions among the bloc members must be scrapped and their common external tariffs should not be higher than the average level of tariffs levied prior to bloc formation. Upcoming regional blocs, such as EFTA, NAFTA and some other new ones’ in Asia and the Pacific countries which may emerge in future will lead to trade frictions as well as marginalisation of the trade of developing countries in the global trade economy.

In short, all these and other provisions in the new Treaty will have a far reaching impact on the growth and pattern of future world trade. By and large, the treaty is considered to be a bold step towards freer trade in the global economy in the 21^st century.

Many GATT economists are hopeful on the gains accruing due to specialisation based on comparative advantage under free trade in the long run. The IMF Report on World Economic Outlook (1993) envisages that the Uruguay Round Treaty on trade liberalisation would augment the annual world real income permanently by 200 billion US dollars. In this kind of visualisation, however, the distributional aspects are conveniently ignored by the IMF experts.

It is a matter of great concern to the Third World countries that the distribution of gains from the trade based on market strategy always keep the poor nations at a disadvantageous position while trading with the developed countries.

One serious implication of the new treaty is that when the industrial countries could strengthen their control over global agriculture by keeping their food security in tact, developing countries like India are called upon to ultimately dismantle their food security system. It is designed that the subsidies to farmers will go but subsidiary to agro-business will stand thereby, creating TNC monopoly in agriculture. The NIEO will eventually arouse conflicts between the citizens and TNC’s interests.

The issue of “Trade related intellectual property rights” including “Trade in Counterfeit goods” is a crucial area of the GATT in the Uruguay Round, where the industrial nations have made the most consolidated efforts to deploy against the Third World countries, by denying the latter’s access to knowledge and blocking their capacity for innovation and technological improvement, thus, obstructing any increase in their competitive skill.

The GATT’s new strategy at the Uruguay Round was based on using the economic strength of a few members against the weakness and dependence of other member countries, especially the developing ones.

It is a magnacharta of technologically advanced countries over the poor countries. Both in regard to the issues for negotiation and in its structure as well as plans, it is imbalanced, asymmetric and weighted against the poor nations. The international economic arrangement devised under the GATT treaty would result in the flow of wealth on a large scale all the time from the poor/ developing countries of the Third World to the rich/industrialised nations of the West.

The new treaty is a mixed bag of give and take of gains and losses. In the bargain, however, the Third World countries have not succeeded in getting much, since the rich countries of the North have tried their best very successfully in giving a shape to the emerging New International Economic Order (NIEO) from their angle.

This has been done by launching the new agenda of negotiations with new themes and new issues largely in their favour in a calculated manner and taking the advantage of the known weakness of the poor countries, who as usual have failed to bargain/ negotiate collectively inside the GATT.

In the years to come, the provisions of the treaty signed in the Uruguay Round will have far- reaching implications for the developing economies since it seeks to curb the right of governments to intervene in their economies for the benefit of their people, on the one hand and expanding the .’space’ for the Trade Negotiations Committee (TNC), on the other.

In reality, the Treaty of the Uruguay Round by its contents of Dunkel proposals in a whole package-deal will divide the world between the “Knowledge-rich” (in the North) and “Knowledge- poor” (in the South) in the years to follow and keeping the later group permanently at the mercy of knowledge-rich North. The new GATT, thus, is a step towards the creation of a Transnational World Order, rather than a NIEO in the global economy. This would eventually push the poor countries back to the colonial era.