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8/3/2019 Lectura Historia Trabajo Sem

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The GATT and internationalcommercial policy, 1947-90

. ~ TH E EARLY YEARS, 1947-60Despire rhe diversiry of interesrs among rhe contracring parries ro GATTand rhe variery of commercial policies rhey pursued, GATT achievedconsiderable success in a number of areas during rhe 1950s. While rhe earlysuccess recorded in rhe 1947 rariff-reducing negoriarions was nor againrepeared in rhe subsequent meerings ar Annecy (949), Torquay 0950-1),and Geneva 0955-6), sorne progress continued ro be made and, by rhemid-1950s, a ner reducrion in U.S. duries of 50 per cent had been achievedsince 193 4 by rariff concessions alone, rhe grearer parr of which hadoccurred afrer 1945. Even more striking was rhe growrh of membership ofGATT, from rwenty-rhree signarories in 1947 ro over seventy in 1960,comprising countries which accounted for over 80 per cenr of roral worldtrade. Equal1y significant ar rhe rime was rhe GATT's conrriburion ro rhepeaceful serrlement of commercial disputes. By providing a forum forconciliarion and discussion GATT resolved, ofren rhrough rhe use ofarbirrarion or adjudicarion, dispures which mighr orherwise have causedconrinuing bad feeling, reprisals, and even diplomaric breakdown.

Progress in dealing wirh quanrirarive trade resrricrions was much slowerrhan rhar wirh rariffs. This was parrly because rhe economic difficulries ofrhe lare 1940s and 1950s made ir imperarive rhar many countries rerainrheir conrrols over rheir trade. Moreover, GATT's powers over quantirariverestricrions were relarively weak, for ir could only consulr wirh members inan endeavour ro persuade rhem ro reduce rheir restricrive measures. Despirerhis limirarion, however, GATT's consrant review of rhe commercialpolicies of individual countries and irs persisrent attemprs ro obrain arelaxarion of trade restricrions musr have contributed somerhing ro rhegeneral, if gradual, eliminarion of resrricrions rhar rook place in rhe lare1950s. In addirion, GATT's exisrence may have prevented rhe introduerionof new preferential arrangements along rhe lines of rhose adopred in rhe1920s. Lare in rhe 1950s, however, rhe growrh of regional trading blocsunder rhe exceprions ro rhe no-new-preference rule did much ro erode rheGATT's powers.

U,.." I allU , " ,V l l l l l l t l l l , ; l a l POIICY, 1 9 4 7 - ~ U .lO

Th e Advent of Regional Trading BlocsA number of smal1 customs unions, France-Monaco, Italy-San Marino,Switzerland-Liechtenstein, and Belgium-Luxembourg, emerged unbrokenfram World War n. 1 After the war, rhe trend towards economic and/orpolitical integration gathered pace. The first step had been taken with theformation of Benelux in 1944, when Belgium, the Netherlands andLuxembourg agreed to establish a tariff community with a c o ~ m o n external tariff as a prelude ro complete economic integration in later years.

The Schuman Plan of 1950 tO set up a European Coal and SteelCommunity (ECSC) was adopted by the Benelux countries, France, WestGermany, and Italy. Under a waiver of GATT's no-new-preferences rule,the ECSC produced a gradual removal of duties on coal and steel, subsidiesand other restrictions and discriminarory devices between the membercountries, under the guidance of a supranational authority. The ECSC wasonly a prelude ro bigger things to come. In 1955, discussions began on theformation of a customs union embracing the members of the ECSC whichwas to have far-reaching implications for the international economy as awhole. The structure of the EC was final1y agreed upon in March 1957 andincorporated in the Treaty of Rome, the provisions of which came intooperation in 1958 after recognition of the regional trading bloc wasestablished in GATT.The aim of the EC, by establishing a common market and byprogressively harmonizing the economic policies of the member states, wasro promote the development of economic activities in the region, increaseeconomic stability, and accelerate improvements in the living standards ofthe population. Political unity formed a 10ng-term aim even if it was onlyimplied in the Treaty. Other features provided for the free movement ofpeople, services, and capital within the region, common agricultural andtransporr policies, and the setting up of a Social Fund and an InvestmentBank. The Treaty also provided for association of the EC with thedependent overseas territories of the member states.

While the creation of permanent regional entities was an acceptableexception ro the no-new-preferences rule at the time the GeneralAgreement was signed in 1947, no one expected such unions ro producemajor trading blocs of the size of the EC. In any case, it was consideredthat when formed they would prove beneficial to countries outside theunion by improving the welfare of the parricipants and creating additionalopporrunities for trade. But with the establishment of large customsunions, it was found necessary to consider not only their trade-creatingpotentialities, bu t also the trade-diverring effects of such unions, that is,the extent ro which the formation of a customs union will lead to adiversion of rhe trade of one member country from third countries toanother member of the union. Moreover, whi1e the rest of the world wouldbenefit from the setting up of the customs union on1y if the creation of new


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276 The post-1945 international economytrade opponunltles exceeded the extent of trade diversion, the tradecreating aspects may also be perverse ro the extent that only a few externalcountries could gain while the rest of the world did nor. The big danger );....from such a large union as the EC is the great temptation for it ro becomeinward-Iooking and that consequently any benefits ro be derived by externalcountries are only accidental.

Th e Haberler ReportThe general improvement in trading conditions between the Westernindustrial nations evident in the second half of the 1950s led ro increasingdissatisfaction among the primary-producing countries. They were inclinedro look upon GATT as an institution designed largely ro allow commercialpolicies which favoured the richest industrial contracting parties. Consequently, a panel of expens was appointed ro investigate and repon on theworking of the General Agreement since 1947. The Haberler Repon waspresented to GATT in 1958. lt emphasized two major points: thatagricultural protectionism in the industrial countries had minimized thebenefits that the traditional food-exponing countries could have expected roreceive from their membership of GATT, and that many of the developingcountries had also been disadvantaged by the commercial and other policiesof the industrial nations.

TH E GATT AND COMMERCIAL POLICY, 1960-90After the Haberler ReportOut of the deliberations on the Haberler Repon carne the setting up ofthree committees to consider funher the three areas of trade relationsstressed in the repon as requiring sorne action, namely, tariff negotiationrounds, agricultural protectionism, and the specific trade problems of thedeveloping countries. The first of these committees was responsible for theimplementation in the 1960s of the Dillon and Kennedy Rounds of 1961and 1963-7. The second committee, after investigating the agriculturalpolicies of all major trading countries, concluded that 'the extensive resonro non-tariff protection of agriculture had impaired or nullified tariffconcessions or other benefits which agricultural exponing countries expectro receive from the General Agreement'. The third GATT committee wasset up to consider the trade problems of the developing countries and wassuccessful in 1964 in achieving the incorporation of a new chapter in theGeneral Agreement allowing discriminaton in favour of the developingcountries. This paved the way for the establishment of the GeneralizedSystem of Preferences (GSP) which was introduced by most industrialnations in the 1970s, for example, by the EC in 1971 and the UnitedStates in 1976.

GATI and commercial policy, 1947-90 277UNCTADAs we have already seen, a major source of grievance within GATT in the1950s was the relatively poor expon performance of many primaryproducing countries. Whereas sorne of the reasons for this State of affairswere to be found in the domestic policies of the primary-producingcountries themselves, many of them nevertheless believed that theindustrial nations had used the exceptions in GATT to protect their ownrelatively inefficient agricultural industries ro the detriment of the exportsof foreign primary producers. Furthermore, until the Kennedy round in themid-1960s, agricultural products did not enter into discussions on tariffreductions. Rightly or wrongly, the less developed countries carne to lookupon GATT as a 'rich man's club' and, early in the 1960s, they turned tothe United Nations, the only forum in which they had considerable votingstrength, for an answer ro their trade problems. The result was the firstmeeting of UNCTAD, the United Nations Conference on Trade andDevelopment, in Geneva in 1964.

UNCTAD became institutionalized in much the same way as GATT andconferences have been held every three or four years since 1964. UNCTADmembership includes most developing countries while developed nationsmaintain observers at aH discussions. UNCTAD cannot force itsrecommendations on the industrial countries but, even so, by highlightingthe inequities of the trade system and other aspects of internationaleconomic relations which favour the economically powerful, it has ofteninfluenced the richer nations into offering concessions which otherwise maynot have been made. In the 1970s it highlighted the caH for a 'newinternational economic order' and for a 'North-South' debate on theexisting and mounting problems of the Third World. At Manila in 1979(UNCTAD V) there was widespread support for the introduction of anintegrated commodities programme (ICP) and the establishment of aCommon Fund, with a view ro stabilizing primary product prices, therebyeliminating sorne of the uncertainties surrounding the expon earnings ofmany of the developing countries. Despite the effons of UNCTAD,however, little progress has been made rowards solving sorne of the morepressing economic problems currently confronting the Third World.Discrimination in World TradeFrom the early 1960s the undermining of one of the basic principies uponwhich GATT had been founded-non-discrimination in trade and no newpreferences-was carried even funher than it had been in the 1950s withthe formation of the EC.In terms of Western European integration, the original six members ofthe EC were joined by United Kingdom, Ireland, and Denmark in 1973,by Greece in 1981, and by Spain and Portugal in 1986. By then the


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278 The post-1945 international economyComm unit y had become a very powerful' economic entity .In 1960, as a counter ro the formation of the EC, the European FreeTrade Association (EFTA) was formed by Austria, Denmark, Norway,Portugal, Sweden, Switzerland, and the United Kingdom. EFTA was amuch looser organization than the EC ro the extent that, while eachmember country was committed to a reduction of its tariffs on the othermember countries' goods, each country could follow an independent policywith regard ro its import duties on goods coming from other countries.EFTA was weakened by the entry of the United Kingdom, Denmark,Spain, and Portugal into the EC but strengthened by the free tradeagreement in non-agricultural goods arranged with the EC in 1972.

The example provided by the formation of the EC and EFTA paved theway for the establishment of regional trading blocs in other parts of theworld. By the end of the 1960s, seventeen regional arrangements of varyingdegrees of integration covering more than eighty contracting parties to theGATT had been negotiated. Among these were the Latin American FreeTrade Area (LAFTA), finalized in 1961 by Argentina, Brazil, Chile,Mexico, Paraguay, Peru, and Uruguay, and the Central American CommonMarket (CACM), comprising Costa Rica, El Salvador, Guatemala,Honduras, and Nicaragua, the aim of which was ro become an integratedcustoms union by 1967. In Africa, two regional trading blocs were agreedupon in 1959, one comprising the former French West African countries,namely, Dahomey, Ivory Coast, Mali, Mauritania, Niger, Senegal, andUpper Volta. The other was the Equatorial Cusroms Union, consisting ofChad, Gabon, and the Central African Republic. Later, other preferentialarrangements were agreed ro by a number of country groupings, all ofwhich were of importance only within their own region and many of whichdid not last for more than a decade. LAFTA existed until rowards the late1960s and was then replaced by the Andean Pact of 1968 covering Bolivia,Colombia, Chile, Ecuador, and Peru. By 1975 this organization was also indifficulties. Moreover the CACM disintegrated in the 1970s after Honduraslefr it.

At the instigation of France, the first Yaound Convention of the EC in1963 granted association status ro the former French, Belgian, and Italiancolonies in Africa. Under this Convention, which was extended in 1969,these newly-emerging African countries received preferential treatment fortheir exports within the EC and, as well, a European Development Fundwas set up ro offer them financial aid. These arrangements received a hostilereception from those other developing countries which were discriminatedagainst by the preferences granted. Subsequently, however, the adoption ofGSP by the EC in 1971 did much to reduce the degree of preferentialtreatment accorded ro the former colonies. In 1975, the YaoundConvention was superseded by the Lom Convention which extended thepreferential arrangements ro include the former colonies of Britain and

ano commer a , l ~ / - l : : I U " widened the area covered by including countries and colonies in Africa, theCaribbean and the Pacific (ACP countries). Given rhat the degree of tradepreferences afforded under this agreement would be small, the majorbenefit ro be derived by the countries in the ACP region from associationwith EC arose out of the STABEX scheme under which these countrieswere ro be compensated for any shortfall in their export earnings on severalcommodities sold ro the EC. Such compensation is financed out of theEuropean Development Fund.In addition ro these conventions, the EC negotiated preferential tradetreaties with numerous other countries, especially in the Mediterranean areaand in South America. In 1972, the preferential bilateral trade agreementswhich had been concluded by the EC with individual Mediterraneancountries after 1968 were multilateralized for the region and a highlypreferential system was created. All these arrangements (including the freeentry of non-agricultural goods from EFTA members after 1972) show upthe weaknesses of the GATT, more particularly its inability ro preventfurther erosion of one of the basic principles upon which it wasfounded-non-discrimination and no-new-preferences. They also illustratethe fact that the EC has not accepted these basic principles even if it stillpays lip service ro GATT. By 1973 fewer than half a dozen countries wereconfronted by the EC s most-favoured-nation (MFN) duties under thesearrangements.While the EC has been a major offender in terms of discriminarory tradepractices during the last three decades, the stalwart of non-discriminarorytrade dealings, the United States, reacted in the 1980s ro the ECsdisregard of the GATT rules by introducing tariff preferences on a list ofcommodities in favour of certain Caribbean countries and rook the firststeps rowards a free trade area with Israel. The possibility of similaragreements with Canada and Mexico would be more far-reaching in termsof their effects on world trade.

Agricultural ProtectionismThere are two other areas in which world trade has been even moredisrorted by the actions of the developed countries. By far the mostdamaging departure from the principles of GATT in the 1960s was theintroduction of the common agricultural policy (CAP) by the EC. The CAPaimed at ensuring t"hat farmers in the Community would be able ro enjoyincomes comparable ro those obtained in other domestic industries. Thiswas achieved through restrictions on the entry of foodstuffs from nonmember countries, the use of support prices for agricultural products, andthe disposal of agricultural surpluses when necessary. To resteict importS, avariable levy system was introduced and used in such a way that importS offoodstuffs were priced higher than the same commodities produced by EC


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280 The post-1945 international economyfarmers. The levy could chus be used as effeccively as quancicaciverescriccions on agricultural imporcs. The pricing policy was subjecc coannual review and as applied ro sorne commodicies ic led ro overproduccionand che accumulacion of surpluses, for example, in sugar and butter. Oneway of disposing of such surpluses was ro dump chem on world markecs,financing such disposals ouc of an agricultural fund (che FEOGA) whichwas fed by financial contribucions from che member governments.

Bricain's accession ro che EC in 1973 creaced almosc insuperabledifficulties for several countries chac had long-escablished markecs in Bricainfor a number of primary produccs. They were compelled ro racionalize cheirefficient agricultural secrors and/or cultivace new markecs elsewhere in cheworld. Ironically, chis search for new markecs was hampered by che ECsand, from che mid-1980s, by che U.S. policy of dumping agricultural isurpluses in world markecs.Non-Tariff Tracle RescriccionsThe second area of greac concern arose in che 1970s, when, for a number ofreasons, frequent and widespread reson ro non-cariff rescriccions on imporcsby che induscrial countries occurred. The cypes of measures used werevaried in characcer buc orderly markecing arrangements (OMAs) andvoluntary expon rescraints (VERs) were che mosc common. Theeffecciveness of Japan's penecracion of American and European markecs wasof major concern ro chose countries and was che inicial reason for suchrescriccions. Lacer, che cariff reduccions negociaced under che Kennedyround, finalized early in che 1970s, were soon found ro benefic che newlyinduscrializing countries (NICs), particularly in cexciles, cloching, andfoocwear, and sorne rescrictions on chese imports soon followed. Third,under che GSP int roduced in che early 1970s, cariff preferences wereexcended co a wide range of exporcs from che developing countries but, acche same cime, ic became common co fix annual maxima co che quanticiesof che commodicies allowed into che countries offering such preferentialcreacment. Finally, che worsening economic condicions which prevailed inall industrial countries afcer 1973 led ro a general claim by domescicproducers for greacer proceccion againsc imports. As a result, despice cheinauguracion of che Tokyo round, in which sorne accention had ro be paidro non-cariff rescriccions, chis form of proceccion became even morewidespread.

Multilaceral Tracle Negociacions (MTNs) since 1960Since 1960, four rounds of multilaceral trade negociacions (MTNs) havebeen concluded although che fourth has been aborced. The Dillon round of1961 achieved very littIe and ic became apparent chac che mechod of

ana eommere a p ey, - O lproducc-by-producc negociacions had finally reached ics practical limics andwas nO longer useful in bringing abouc subscancial reduccions in che levelsof procection in che negociacing nacions. As a resulc, che Kennedy round0964-7) was nocable because linear reduccions in cariffs on a wide variecyof produccs were negociaced which achieved an average reduccion inindustrial cariffs of becween 36 and 39 per cenc. Ac che same cime, over 60per cent of che reduccions were in excess of 50 per cene. Thus, sorne cariffharmonizacion also occurred. The Kennedy round favoured che trade of cheindustrial countries, alchough ic also beneficed some developing countriesro che excenC chac che lowering of cariffs on manufaccured goods allowed cherapid growch of manufaccured exporcs from NICs such as Brazil, Taiwan,Souch Korea, Hong Kong, and Singapore. Although che cerms ofnegociacion of che cariff round required chac sorne regard be paid co chereduccion of agriculcural proceccion, licele progress was made, given cheatticude of che major participants in che negociacions (che EC and cheUniced Scaces). A new Incernacional Grains Agreemenc was che onlyagriculcural ouccome of che negociacions, and chis Agreement lasced onlychree years.The chird round of MTNs since 1960 was che Tokyo round 0973-9).For che firsc cime ic appeared chac, in addicion co che usual reduccions incariffs on manufactures, che negociarors were committed ro a consideracionof ways of reducing che barriers co trade in agriculcural produccs and noncariff barriers ro trade, as well as a general consideracion of che tradeproblems of developing councries. While a number of facrors contribuced coa delay in che commencemenc of che negociacions uncil 1977, che TradeNegociacions Commiuee had by chen escablished chac discussions wouldproceed along seven lines: on cariffs on industrial produccs; non-cariffbarriers ro crade; che sectoral approach, chac is, che cechnique of coordinaced reduccion or eliminacion of trade barriers wichin parcicularproducc groups; agriculcural produccs; cropical produccs; che adequacy ofche mulcilaceral safeguards syscem; and special differencial treacmenc fordeveloping councries.The major negociacions occurred, as usual, becween che Uniced Scacesand che EC. Despice che original intencions of che round, developingcouncries and che ocher agriculcural exporters cook liule part in chedeliberacions. The ouccome included around 30 per cenC reduccions incariffs on industriaL produccs, including some cariff harmonizacion. Thereduccions were larger on finished goods chan on raw macerials orincermediace produccs and small reduccions in cariffs occurred for cemperacezone agriculcural commodicies on which non-cariff barriers remainedunchanged. On non-cariff barriers little progress was made. Acode onsubsidies and councervailing ducies was drawn up, and agreemenc on ocherrelacively minor aspeccs of trade which were of inceresc ro che EC and cheUniced Scaces, such as governmenc procuremenc, cusroms valuacion,


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282 The post-1945 international economytechnical trade barriers, and import licensing procedures, was al soachieved. Given the extent to which non-tariff barriers, in the forms of OMAs and VERs, had been introduced particularly in Europe to counrercompetition from Japan and the NICs, the relatively minor agreementsreached highlighted the manner in which many of the fundamenral tradeproblems which were supposed to receive the bulk of attention of the roundwere side-stepped in the negotiations. Agricultural protectionism emergedfrom the MT N virtually untouched. Scant regard was paid to theexcessively protectionist nature of the CAP or ro the dumping of surpluseson the fragile world market, both of which had severely curtailed theability of moce efficient agricultural producing counrries to increase, oreven maintain, their foreign markets. Ou t of this section cameinternational dairy and bovine meat arrangements and a multilateralagricultural framework, all of which were largely consultative. Finally,several developed counrries granred tariff and non-tariff concessions codeveloping counrries exporting specified tropical products, generally in theform of improvements in the GSP which these developed counrries hadpreviously introduced. ";f

Japan, the NICs, and some developing countries desired the introductionof acode of conduct to be followed by Countries inrroducing importcontrols aimed at preserving orderly marketing of certain products in theirdomestic markets, but the EC insisted on maintaining the right toimplement such controls on a unilateral basis when they became necessary.Given the rhetoric with which the Tokyo round was introduced, theround was a failure. Little was achieved of direct benefit ro contracringparties outside the industrial world and much that was achieved wasperipheral to the major issues upon which the round was justified. Largelythe industrial counrries, and especially the EC, set out to protect theirpositions, but the round was necessary precisely because che policies thenbeing followed by the EC and other Countries were contrary ro thephilosophy underpinning GATT.

Despite (or because of) the failure of the Tokyo round, a new set of MTNs was set in motion in 1986--the Uruguay round. With aprogramme similar ro that of its predecessor, but including trade inservices, negotiations were expected ro last for four years. This time, thedeveloping counrries and the primary exporting nations were determinedthat the results will not consist largely of bilateral trade-offs between theEC and the United States.

Commodity AgreemenrsWidely fluctuating export prices of primary products have remained amajor problem foc those developing counrries with a narrow primary IIproduct export base or those for whom these exports have constituted a IIII,

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GATI and commercial policy, 1947-90 283large part of their national incomes. After World War 11, several attemptswere made ro ensure orderly marketing of these primary products and theyresulted in international agreements covering such commodities as wheat,sugar, tin, coffee, and cocoa. The record of these commodity agreementshas not been good. Few have lasted very long and those that have lastedproduced only marginal improvements for the exporters of thosecommodities. This failure demonstrates only roo well the tremendousdifficulties surrounding any attempt to draw up such agreements, each ofwhich would have ro be satisfacrory ro the many exporting and importingcounrries covered and each of which countries would naturally be concernedwith the protection of its own interests.

The increased instability in the world economy during the 1970s led rofurther attempts ro deal with the problem of fluctuating export prices ofprimary produces. As part of the demand for a 'new international economicorder', UNCTAD pressed foc an integrated programme of commoditycontrol agreements (lPC) covering a group of eighteen commodities. To aidthe financing of the buffer stocks of commodities that these internationalcommodity agreements would give rise ro, a Common Fund of $6,000m.was advocated. Eventually in 1979, such a fund was set up, bu t its role wasless ambitious than that intended by UNCTAD foc its resources, made upof government contributions, were limited ro $470m. Even if severalinternational commodity agreements were negotiated successfully, the sizeof the Common Fund would place asevere limit on their effectiveness.CONCLUSIONImmediately after World War 11, a concerted effort was made ro set up amultilateral trade system through the elimination of controls over trade andcommerce and a reduction in the amount of protection afforded ro domesticindustries by member countries of GATT. The most-favoured-nationprincipIe and the no-new-preferences rule were intended to prevail in thetariff field. AIl discriminatocy devices were ro be scorned by participants inWestern trade. By 1960 the situation was, in practice, almost the completereverse. As a result of the escape clauses in GATT and the inclusion of whatwas considered at the time ro be a relatively minoc exception ro the generalrules governing trade liberalization, the international economy was headingtowards regionalization of the world economy to such an extent that,within each regional free trade area, the most-favoured-nation principIe andthe no-new-preferences rule were side-stepped as individual membercountries within these free trade regions discriminated in favour of othermember countries and against outsiders.Since 1960 the international economic power which has come with theeconomic union of several of the major trading nations of the world has ledto many of the original rules of GATT becoming inoperative and, despite


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284 The post-1945 international economythe limited success of the Tokyo round, the failure of GATT negotiators tocome ro grips with the major inequities which govern world trade at thepresent time demonstrates the fact that the record of GATI compared withits original basic objectives is one of failure. The major problemsconfronring GATT arise ou t of the increasingly protectionist policiespursued by the major trading counrries during the past three decades whichhave been adhered ro with total disregard for the principIes of multilateraltrade upon which GATI was founded.

That GATT has been partialIy successful is demonstrated by the degreero which tariffs on manufactured impores have been reduced over the yearsby the advanced industrial counrries, and by the ability of GATItorecognize the special trade problems of the developing counrries throughthe relaxation of the no-new-preferences rule as it affects these counrries.But this preferential treatmenr of the trade of deve!oping counrries has notyet gone far enough while, against its advanrages, must be set the impactof the many non-tariff barriers erected by the industrial counrries from theearly 1970s on the impores of manufactures from the NICs and Japan. Suchbarriers, the justification of which goes beyond the shore-term requirementsof counrries with high unemploymenr, demonstrate the unwillingness ofthe industrial counrries ro accept the changes in the world economy whichhave become more evidenr since the early 1970s and which will becomeeven more apparenr in the years to come. Given the presenr stalemate < : within GATT, which has been amply demonstrated by the inflexibility of '(the attitudes of the industrial counrries with respeet ro change during the . Tokyo round, ir is difficult to envisage any major advances being madeduring any extension of the present Uruguay round. While it is true thatthe GATI system worked reasonably well for the industrial countries up rothe early 1970s, once the rate of expansion of world trade slowed down inthe 1970s, the richer nations tended ro consider the usefulness of theinstitution as having declined. What has been completely forgotten are thereasons for the establishmenr of the non-discriminatory, no quantitativerestrictions system of trade in the 1940s and how desirable for the worldeconomy as a whole is a returo to those principIes.

NOTESA customs union involves rhe economic inregrarion of a number of counrries in such away as ca produce free trade among members of the union and a common external rarifflevied againsr aH non-members; a free trade area differs from a cusroms union in rharmember narions foHow independenr rariff policies wirh respecr ca orher countries.

SELECTED REFERENCESDavenporr, M., Trade Polity, ProleclionJm and Ihe Third World (London, 1986).Golr, S., Developing Counlries in Ihe GATT Syslem (London, 1978).

ano commer a p cy, -Langhammer, R. J., anJ Sapir, A" Ea!t/olllic llllpaet ofGeneraliud Tariff Prefm:nces (London,

1987).MacBean, A. l. , ami SnowJen, P. N. , 11llemalirmallnstilll/irms in Trade and Finana (London,198\).Pomfrer, F., Uneqllal Trade: Ihe Econolllics of Discrilllinalory lnlernational Trade Polira (Oxford,1988).Trade Policy Research Centre, Global Slralexy or GroU'lh (London, 1981).

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