Faltering amidst high hopes

After the GATT text had laid down a framework for trade negotiations in 1947, both the substantive and procedural rules were generally accepted and used in subsequent rounds.

The Annecy Round was a short one, which began in 1949 and was concluded in the same year. The Torquay Round followed soon thereafter in 1950 and was concluded in 1951.

The Annecy Round

Two main events that happened at Annecy in France were the exchange of 5000 tariff concessions and the accession of ten countries. Many other issues related to the trade restrictions imposed by various countries were also discussed in the third session of ‘contracting parties’, which was happening at the same time as the Annecy Round. Some of these were:

* Review of import restrictions imposed by South Africa and their conformity to GATT provisions;

* The question of Japanese accession to the GATT;

* Customs union between South Africa and Southern Rhodesia;

* Czechoslovakia’s complaint against the USA on whether the export licenses of the latter were in conformity with GATT;

* Revised schedule of tariffs submitted by Australia;

* Examination of statements submitted by various countries in support of trade restrictions imposed under Article XXVIII;

* A special discussion to resolve the crisis of the Cuban textile industry;

* Formation of an ad hoc committee to discuss the imposition of trade restrictions under Article XII to safeguard balance of payments.

The US continued to be the main driver of the negotiations at Annecy. The main objective of the American negotiators was to get maximum concessions

from Scandinavian and Mediterranean countries, perhaps in lieu of the support extended to them under the Marshall Plan and the many bilateral concessions offered. The US ended up offering substantive tariff cuts on a range of goods.

The Annecy Round was also marked by intense negotiations between the USA and Britain on the issue of Japanese accession and the South African import restrictions. Both took opposing positions, but the British position prevailed: the issue of Japanese accession was dropped and South Africa was allowed to continue with import restrictions on grounds of adverse balance of payments.

The Torquay Round

This round, which was held in Torquay, England, began in September 1950, with 38 countries participating in over 298 bilateral sessions. Among other accessions, the Federal Republic of Germany acceded to GATT during this Round.

The Torquay Round was faced with two major dilemmas facing the two main protagonists, the USA and UK. While the USA was struggling with Congressional approval for adopting GATT, the UK was faced with the sterling balance crisis. We may recall that the UK pound was devalued by around 30 per cent in 1949, which, in turn, was because of a trade imbalance with the USA. Further, the devaluation was done after the consent of other Western European nations and the IMF. Many other countries followed suit and devalued their currencies.

At the onset of the Torquay Round, the UK made a request to the US that in view of the balance of payments situation in the UK and the shortage of dollars in Europe, the US should offer a unilateral cut in tariffs to promote free trade. The US, of course, refused and also came under criticism from Congressman back home. The USA countered and asked Britain to reduce tariffs and do away with the preferences given to the Commonwealth. Furthermore, the domestic politics in the USA at the time was one of caution from the point of national security. This was because of the Korean War, which broke out in June 1950 and the US intervened from the side of South Korea, while China and the Soviet Union were standing with North Korea. In China, Mao Zedong had taken over in October 1949 after the Communist revolution and there was a ‘red scare’ in the US and McCarthyism had taken hold. This suspicion of anything liberal spread into the trade field, making the US Congress reluctant to give away any tariff concessions.

The Torquay round also saw the ‘principal supplier’ basis becoming an important negotiating modality along with the ‘request-offer’ method. It may be recalled that these were first tried in the Geneva and Annecy Rounds. The ‘principal supplier’ basis meant that a country could be requested to make a tariff concession only by the trading partner if it provided the largest share of its imports. The request-offer method was basically a product-by-product bilateral negotiation in which both parties would make requests and offers of tariff concessions.

Another interesting development in Torquay was the demand from Belgium, Netherlands and Luxembourg (Benelux) and the Scandinavian countries to modify the methods of negotiation so that those with low tariffs could participate more substantively. They proposed that the binding low duties should be treated as equal to offering tariff cuts. This was however not accepted by the GATT members.

From the point of view of tariff concessions, it was the USA again that led the way. It reduced or did away with trade restrictions on USD 478 million of its imports, as Kendall Stiles wrote in The Ambivalent Hegemon: Explaining the “Lost Decade” in Multilateral Trade Talks, 1948-1958 in the Review of International Political Economy in 1995. Another important outcome was that France and Canada were prevented from continuing with trade restrictions. In general, all countries also agreed to preserve the tariff concessions agreed in Annecy for three years. In all, 38 countries had 298 bilateral discussions and offered 8,700 tariff concessions.

Conclusion

The Torquay Round is not considered a successful round by most. After the initial enthusiasm of the Geneva Round and the expansion of GATT in Annecy, the Torquay Round did not yield major tariff cuts. As the official Press Brief stated “the results of the Torquay conference are not as great as many had hoped”. This was mainly because of the differences between the two largest players, the USA and UK and the overall global environment discussed above. There was a

general disillusionment with GATT and many countries were moving towards bilateral discussions and Europe was discussing its own ‘economic area’. However, the Torquay Round also led to some positive outcomes: the tariff concessions made in Geneva were bound for a further three years, West Germany joined GATT along with six other countries and the principle of progressive trade liberalisation was widely accepted by all members.

The writer is Additional Chief Secretary, Department of Mass Education Extension and Library Services and Department of Cooperation, Government of West Bengal.