What does GATT mean for Indonesia?<\/p>\n
The recent GATT ministerial conference in Morocco endorsed the
\nresults of the Uruguay Round of trade negotiations. Economist
\nMari Pangestu looks at what the endorsement means to Indonesia.<\/p>\n
JAKARTA (JP): The recently signed Final Act of the Uruguay
\nRound of Multilateral Trade Negotiations was hailed with
\njubilance as well as trepidation.<\/p>\n
Free traders and countries which rely on international trade
\nalso breathed a sigh of relief. After all one of the important
\nreasons for the initiation of the Uruguay Round in 1986 was to
\nthwart the increase of protectionist tendencies by both developed
\nand developing countries.<\/p>\n
Especially worrisome was, first, the acceleration of
\nunilateral actions to offset perceived \"unfair trade\" by the U.S.
\nand EU through anti-dumping laws, countervailing duties,
\nvoluntary export restraints and use of the Super 301.<\/p>\n
A second worrying development was the development of regional
\n(e.g. European Union) and bilateral (e.g. U.S.-Japan) trade
\nagreements.<\/p>\n
The collapse of the Round and the multilateral trading system
\nhad been weighing on the world economy since its initial due date
\nof completion was imposed for the end of 1990.<\/p>\n
A strengthened GATT system also provided additional relief to
\nthose who feared that there would be an increase in economic
\nfriction in the post cold war era as economic tensions that had
\nbeen muted due to the importance of cooperation on the security
\nfront were unleashed.<\/p>\n
As such, developing countries should rejoice because the
\ncompletion of the Round has removed one of the big dark clouds
\nthat have affected confidence with regard to the future of the
\nworld trading system.<\/p>\n
This, in turn, is expected to contribute to the recovery of
\nthe world economy which has moved sluggishly through the first
\nthree years of the 1990s.<\/p>\n
World trade is expected to grow at four to five percent per
\nyear for the remainder of the decade and one percent of this is
\nestimated to be a result successful completion of the Uruguay
\nRound (GATT Secretariat).<\/p>\n
The majority of the increase in trade will come from
\npreviously protected industries, mainly the textiles and
\nagriculture sectors -- both of which are important for developing
\ncountries.<\/p>\n
The trade liberalization that has come the Uruguay Round is
\nalso expected to contribute one percent to world income growth in
\nthe next 10 years because of increased efficiency in resource
\nallocation.<\/p>\n
And these estimates include just the static gains. There will
\nalso be dynamic gains from opening up of markets due to increased
\ninnovation, increased technological capability and economies of
\nscale which could mean higher growth in world trade and income.<\/p>\n
Other than the improved opportunities due to market opening
\nand income growth, developing countries such as Indonesia should
\ncelebrate the strengthened GATT and the accompanying
\ninstitutional changes.<\/p>\n
Such countries can now fall back on the GATT rules and
\nprinciples in fending off strong protectionist, often unilateral,
\nactions.<\/p>\n
Developing countries are in a weak bargaining position when
\nfacing large industrial nations bilaterally or regional groups of
\nindustrialized nations. Indeed the strengthened GATT was intended
\nto discipline trade practices that would take us away from the
\nprinciples of free trade.<\/p>\n
Another reason for the initiation of the Uruguay Round is to
\nmake GATT more relevant and responsive to changes in the
\ninternational trading environment by including new issues such as
\nservices, trade related investment and intellectual property
\nrights.<\/p>\n
The more credible GATT is founded on its ability to address
\nnew issues flexibly and fairly, otherwise once again there would
\nbe deviations from the multilateral trading system. Thus, while
\ndeveloping countries may feel that new issues are being
\nchampioned by developed countries, they should remember that the
\nalternative -- an escalation of unilateral, bilateral and
\nregional action -- is much less attractive than a strengthened
\nmultilateral system.<\/p>\n
These new issues will in the medium and long term be important
\nfor developing countries also.<\/p>\n
Of course we are not out of the woods yet. The Uruguay Round
\nagreement is far from perfect. It contains many weaknesses and
\ncompromises that are inevitable in negotiations between 125
\ncountries.<\/p>\n
The increased trade tensions between Japan and U.S., which
\npreceded the signing in mid-April, is sufficient to underscore
\nthat the multilateral system will continue to coexist with rules
\nof the game being determined at the regional, bilateral and
\nunilateral levels.<\/p>\n
The cynical are predicting that the emerging pattern will be
\none of GATT or no GATT, but this is partially true.<\/p>\n
Efforts to limit imports for various reasons such as
\nprotection, environmental considerations and labor rights, will
\ncontinue and there will be mechanisms to achieve this within and
\noutside of the GATT treaty.<\/p>\n
For instance while the rules on antidumping have been
\nimproved, there is still likely to be antidumping actions put
\ninto effect under the guise of protection.<\/p>\n
Despite its limitations, the GATT system is still the best to
\nensure a fair trading environment. Thus, it is really up to the
\ndeveloping countries to prepare so they can take advantage of the
\nimproved rules under the improved GATT.<\/p>\n
It is now especially important that all GATT nations
\nunderstand how to use the strengthened dispute settlement
\nmechanism so they can go through the WTO effectively. There is
\nalso a need to anticipate the new issues in the post Uruguay
\nRound with regard to trade and environment, labor standards and
\ncompetition policy.<\/p>\n
Finally, it is important to note that there will be no free
\nride for developing countries. For the first time developing
\ncountries are participating fully in the GATT negotiations and
\nwill have to commit to open their markets and follow GATT
\ndiscipline, as well as being monitored of the new GATT policeman,
\nthe WTO.<\/p>\n
Therefore, the process of opening up in the next ten years
\nwill mean increased competition in the domestic market. But this
\nis nothing new, since this has been the direction of policy since
\nderegulation and reforms were undertaken in 1986.<\/p>\n
Now, however, we cannot postpone this process because of our
\ncommitments. To be able to take advantage of new international
\ntrade opportunities, Indonesia will have to be competitive.<\/p>\n
Indonesia's homework to prepare for the new treaty is clear.
\nThere is no turning back, and many steps need to be taken to
\nensure our competitiveness. These range from improving the
\ninvestment climate, continued deregulation, alleviating
\ninfrastructure bottleneck, increasing our technological
\ncapability and so on.<\/p>\n
The writer is head of the economics department at the Center
\nfor Strategic and International Studies and a lecturer at
\nUniversity of Indonesia.<\/p>",
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