The GATT Uruguay Round Agreements (URA), recently passed by Congress, is good news for U.S. traders and shippers. Held under the auspices of the General Agreement on Tariffs and Trade (GATT), the URA phases out quotas, many other non-tariff barriers, and cuts duties by about one-third on most products traded globally.

GATT, the international body that governs approximately 90% of world trade, is responsible for reducing international tariffs from an average of 40% in 1947 to 5% in 1990. This has permitted international trade to expand enormously, national incomes to substantially increase and international competition to flourish resulting in higher quality, lower priced goods.

The impact will be extremely advantageous for the world and the United States. GATT economists believe that by the year 2002, the URA will result in annual world income gains of $235 billion and trade gains of $755 billion. By the year 2004, the United States will likely gain approximately 500,000 new jobs and see an annual increase of $100 to $200 billion in gross domestic product, $150 billion in exports, and $1,700 in income per family

U.S. Exporters and Importers Stand to Benefit

In 1993, the United States exported approximately $660 billion in goods and services, supporting about 10.5 million jobs. This is up 57% from 6.7 million in 1986. Over $100 billion in goods alone were exported to Canada. Under the URA, U.S. exports of a vast range of products, such as agricultural goods, computers and pharmaceuticals, to name a few, are expected to increase.

Canada, like the European Union, Norway, Mexico and Finland, have operated a system of supply management with respect to eggs, poultry and dairy products. In 1990, one study demonstrated that consumers in Toronto, Canada, paid substantially more for these goods than consumers in Buffalo, New York. In fact, Toronto consumers paid 42% more for a dozen eggs, 128% more for roughly the same volume of milk (.5 gallons/2 litres), 97% more for one kilogram of chicken, and 22% more for 500 grams of cheese.

Under the URA, systems of supply management will be phased out -- allowing cost-efficient producers to more easily sell their goods worldwide. This is good new U.S. exporters of agricultural goods.

U.S. producers of computers and office equipment are very competitive internationally. The world market for these goods reached $220 billion in 1993. Many developing countries, however, have applied excessive tariff barriers on North American computers that have essentially prevented exports. For example, Brazilian tariffs have ranged from 30 to 35% and their customs and other taxes have added an additional 40% on top of that. Some of India's tariffs on computers and office machines were 130%.

Under the new GATT agreement, these barriers are coming down. As a result, an increase of computer products, especially to developing countries such as India, Thailand and Indonesia, is anticipated. Additionally, the U.S. computer industry expects to save hundreds of millions of dollars from duty reductions in Europe.

In 1993 the U.S. exported over $7 billion in pharmaceuticals worldwide. This represented an increase of 32% over 1989. For pharmaceuticals as a group, GATT tariff reductions will average 72% in the industry's major export markets. This will undoubtedly result in more exports.

Additionally, improved patent protection under the URA will better guard the interests of U.S. firms from patent infringements. And better standard setting procedures will limit a foreign country's ability to keep U.S.-made pharmaceuticals out.

Since 1974, world trade in textiles and apparel had been governed by bilateral quotas established under the Multifibre Arrangement (MFA). Under the MFA, in 1993 the United States applied quotas on textile imports from 27 countries that supplied 40% of imports, and on apparel imports from 41 countries that supplied 70% of imports. Additionally, these products have been subject to some of the highest tariffs of any sector. This has changed.

Under the URA, GATT members have agreed to phase out quotas and reduce tariffs on textiles and apparel over a period of ten years. This means that imports of textiles and apparel will gradually become less expensive -- resulting in greater imports. According the U.S. International Trade Commission, apparel imports are projected to increase 5 to 15%. As this occurs, the level of traffic will rise commensurably.

Logistics Managers Will Wear Two Hats

For any company to survive in today's increasingly competitive global environment, international expansion is necessary. And according to David Richards, (asked not to state his company name) logistics manager for a U.S.-Based apparel manufacturer, apparel producers are no exception.

"I think GATT is going to push more American apparel manufacturers to take a risk and jump into the international arena", says Richards. He believes that the U.S. apparel market will become even more competitive with imports of foreign clothing, forcing apparel producers to export in an attempt to gain market share elsewhere.

As apparel imports and exports increase under GATT, Richards anticipates that the responsibilities of the logistics manager will become more technical, complex and more of a specialty. "This is good for my career. Logistics managers will become more valuable to their companies and have to wear two hats. They'll not only have to know how to move merchandise -- they'll have to know how to clear it."

According to Richards, logistics managers will need to become more familiar with domestic and foreign requirements for hang tags, care instructions, fiber content, country of origin requirements, and also will have to be aware of trade policy coming from Congress and the Federal Trade Commission. Richards also anticipates his company hiring more logistics managers to handle the increase in traffic.

This article appeared in Global Shipper, a publication of Emery Worldwide, February 1995.
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, emerging risks, and the latest economic trends. He's also founder of both the ManzellaReport.com and Manzella Trade Communications, Inc. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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