GLOBAL FINANCE

KRUGMAN ON GATT AND THE WTO

``To make agreements work there has to be some kind of
quasi-judicial process that determines when ostensibly domestic
measures are de facto a reimposition of trade barriers and hence a
violation of treaty.

``Under the pre-WTO system, the General Agreement on Tariffs

and Trade, this process was slow and cumbersome. It has now
become swifter and more decisive . . . The raw fact is that every
successful example of economic development this past century
every case of a poor nation that worked its way up to a more or less
decent, or at least dramatically better, standard of living has taken
place via globalization; that is, by producing for the world market
rather than trying for self-sufficiency. Many of the workers who do
that production for the global market are very badly paid by First
World standards. But to claim that they have been impoverished
by globalization, you have to carefully ignore comparisons across
time and space namely, you have to forget that those workers
were even poorer before the new exporting jobs became available
and ignore the fact that those who do not have access to the global
market are far worse off than those who do.''

The Uruguay trade round tabled a number of important issues to
be resolved in the next round, notably the liberalization of trade
in agriculture and services. Doing so would bring huge economic
benefits according to Drusilla Brown of Tufts University and Alan
Deardorff and Robert Stern of the University of Michigan, a tariff
reduction on agricultural and industrial products and services by 33%
would increase world GDP by a one-off $600bn, more than eight times
what was achieved by the Uruguay round.

Although easing the trade barriers to services will be comparatively

easy, it will be much more difficult to obtain consensus on agriculture,
which has always been one of the world's most protected industries in
both rich and poor nations.