Twenty-One Countries Sign Agreement to Lower Tariffs

An international agreement to lower tariffs signed in Geneva last week, by 21 industrialized non-Communist countries represents an attempt to stimulate world trade although the effectiveness of the pact remains uncertain, trade experts said yesterday.

The agreement would require a 31 per cent reduction of tariffs among the signatories, who control 90 per cent of world trade.

Raymond Vernon, Johnson Professor of International Business Government, called the pact that resulted after five years of negotiations, "a very substantial agreement, almost a landmark."

"Most governments when considering specific trade questions usually respond to the pressure group affected, but this is one of those rare cases where governments have taken much larger view of international trade," Vernon said.

Vernon added that the agreement is novel because it also restricts non-tariff barriers to trade including government purchases from domestic firms, subsidies for domestic industry and import licensing.

Rachel McCulloch, associate professor of Economics, said yesterday the agreement "allows for greater productivity in areas that countries specialize in."

The agreement could reduce inflation by allowing competitively-priced import goods into the country, thus making the economy more export-oriented, McCulloch said.

"The shift will be small and widely dispersed, which would mean better jobs in a booming export industry rather than major unemployment in a shrinking import-geared industry," McCulloch predicted.

She added concessions made to protect some industries from tariff cuts, including steel, textiles and clothing, may hurt the effectiveness of the pact.

"One could think of this as a last-ditch attempt to shore up international trade, but until it goes into effect it is too early to judge its impact," Jagdish Bhagwati, professor of economics at the Massachusetts Institute of Technology said yesterday.

Bhagwati said the nations signed the agreement to ward off the protectionist sentiment in international trade and thereby increase productivity. The pact's effectiveness, however, will rely on trading countries' observance of its guidelines, he added.

He added the pact could meet opposition particularly from trade unions that inhibit labor mobility necessary to increase productivity.

John E. Ray, director of the office of international trade, said yesterday it remains to be seen how well the agreement will work and that the pact has a good chance for ratification in Congress.

"If everything works out, we will have a more efficient world economy, but unless countries take it seriously, it's just a piece of paper," Phillip H. Trezise, senior Fellow at the Brookings Institute, said yesterday.