Groundbreaking reformations

The Kennedy Round was launched soon after the dust had settled on the Dillon Round and its outcomes. The Kennedy Round, as is obvious, took its name from President John Kennedy of the US, since it was under his administration that the main objective of American trade and foreign policy was visualized. This main objective was of European economic integration and of the UK to become a part of the European Economic community, along with a massive slashing of tariffs on American trade with Europe.

Main features

When the Kennedy Round was launched, it was expected that it would be concluded soon, even though the Trade Expansion Act of the USA had allowed a period of five years to conclude the negotiations. The end-date, as per Section 201(a)(1) of the Act, was set at June 30, 1967.

Sixty-Six countries participated in the Kennedy Round, but the four dominant players were the USA, EEC, the UK and Japan.

Some of the important developments that took place was the American push to fulfill its objective, or ‘Grand Design’ as Harry Johnson called it in an article in The World Today in August 1967: to get the UK a membership of the EEC. However, this ran into rough weather in early 1963 when France vetoed the proposal to let the UK into the EEC. The US position in this round had a lot to do with greater trade integration with the EEC. Apart from trying to get the UK into EEC, the US sought to liberalize part of the agricultural trade with the EEC. The US also wanted the EEC to do away with preferential tariffs that many European countries had granted to its existing or erstwhile colonies.

As it turned out, all the US objectives proved to be difficult to achieve. The French veto to the entry of the UK into EEC put paid to the first objective. On agricultural trade with EEC, negotiations proved intractable and continued for three years, and some concessions were agreed upon, right at the end. As for the EEC doing away with special preferential tariffs to its colonies, it simply refused to do so. The US itself was limited by the authority granted to the President under the Trade Expansion Act: that the negotiations should finish by June 30, 1967, that the US could not offer tariff cuts of more than 50 per cent, and that the US get reciprocal benefits.

Another important feature of the Kennedy Round was the change in trade negotiations from an item-by-item approach to an across-the-board linear tariff cut, to be committed by the participating countries. Most developed countries such as the US, the UK, EEC countries, and Japan retained the right to be exempted from taking tariff cuts on certain products of national importance. Developing and less developed countries took a stand that their participation would be on a non-reciprocal basis.

Another first in the Kennedy Round was the inclusion of anti-dumping measures in the negotiations.

The various agreements

Apart from the big powers jostling for importance, there were some important agreements in the Kennedy Round. The Final Act was signed by the 46 countries which were active participants. This Final Act consisted of the eight multilateral agreements, including four accession agreements which allowed the accession of Argentina, Ireland, Iceland and Poland.

The other important negotiations were in the four areas of industrial products, agriculture, non-tariff measures and treatment of less developed countries.

In the area of tariff on industrial products, the main drivers were the USA, EEC, Japan and the UK since these were the countries with developed industrial sectors, which were also exporting around the world. The negotiations led to an agreement that would reduce tariffs on industrial products by 50 per cent.

In trade in agriculture goods, the EEC had become an important producer as well as a competitor to the USA. Interestingly, in earlier rounds, it was the US which had reserved the right to exempt its agricultural products from concessional tariffs, but in the Kennedy Round, it was eager to put agriculture on the negotiating block. This was mainly because of the announcement of the Common Agricultural Policy by the EEC. The US wanted to ensure that it continued to export to European countries. The three main agricultural products in focus were cereals, dairy and meat products. Of these, there were some agreements only on trade in wheat and on food aid to less developed countries.

On non-tariff barriers, there seemed to be a wide consensus that these needed to be disciplined, or else, the gains from lowering tariffs would be in vain. One such barrier, which was widely criticized was the American Selling Price, according to which tariff on an imported article would be calculated on the basis of the price of a similar good made in America. For example, if the tariff on a particular good is 50 per cent of its price. If a British company made that good for USD 20 and an American company for USD 50, the American selling price standard would put the tariff on the British-made good at USD 25 (50 per cent of USD 50) rather than USD 10 (50 per cent of USD 20). This overestimated the tariff and led to a higher effective tariff. Another non-tariff barrier that was bothersome was the practice of dumping, which involved exporting goods at a price less than the production cost. This Round began the work on developing an anti-dumping code. And finally, it entailed the practice of imposing industrial standards to keep imports out.

On the issue of exports of less developed and developing countries, the Kennedy Round was criticized for doing too little. This even prompted a convening of the UNCTAD in 1964 to discuss issues of importance to less developed countries: overemphasis on cutting tariff on industrial products, which were of interest to developed countries, getting trade in tropical products on the table, and non-reciprocity in respect of tariff concessions.

The outcome of the Kennedy Round was an average 35 per cent reduction in tariffs on industrial products (except for textiles, chemicals, steel and other sensitive products); a 15 per cent to 18 per cent reduction in tariffs for agricultural and food products and the abolition of the American Selling Price (ASP).

These tariff cuts would be spread over five years from 1968-72. On the issue of exports from less developed countries, there was lesser progress and tariff cuts on some tropical products were offered.

Parallel to the trade negotiations, there were many developing countries acceding to GATT during the Kennedy Round. It was also during this Round that the Committee on Trade and Development was set up. This Committee was formed to discuss the new additions to GATT on Trade and Development. At this time, GATT also set up the International Trade Centre (ITC) whose role was to help developing countries in trade promotion.

Conclusion

The Kennedy Round was the most successful round of all the Rounds held till then. The average tariff cuts of 35 per cent on industrial products were much higher than the 7-8 per cent cuts achieved in the Dillon Round. There was success in other areas as well: the abolition of the American Selling Price, beginning of an anti-dumping code and recognition to work on non-tariff barriers. The next Round took a while to be set up and negotiations for the Tokyo Round began only in 1973.

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