ABSTRACT
Figure 39.1 The Multi-Fibre Arrangement between North and South 1974-2005 627 Figure 39.2 Intellectual property according to WIPO and WTO (TRIPS) 632 Figure 39.3 Topics of the Human Development Reports 1990-2007 642
Beggar thy neighbour
Because of his dedication to free trade promotion, Reagan becoming US President in 1981 also had an impact on the GATT. At the time the free trade agreement functioned poorly and, although it took years, Reagan succeeded in actuating it again. Despite initial successes in reductions in tariffs and in promoting free trade (see §25.3) the GATT had run into trouble during the 1970s, when states began to make undesirable market agreements, called ‘grey zones’ or ‘voluntary export restraints’. The GATT had not succeeded in concluding an arrangement for agricultural products and trade with the Third World advanced with difficulty. The causes of this paralysis in the early 1980s were partly structural, partly related to the absence of US leadership and the increased interdependence between industrially-developed states. The economies of OECD member states had become more and more similar. Imports from and labour in the Third World played an increasing role in the worldwide competition between the industrialized states, with strong pressure on governments from industrial business sectors in favour of protectionist policies. In the industrialized states new sectors and technologies, such as telecommunication and automation as well as growing services sectors, were becoming more important than traditional production. Due to international competition governments became more
involved in the direction of the economic development of their states. They generated national industrial policies with tax advantages, subsidies, cartels and other favourable arrangements for the ‘strategic’ sectors of their national businesses. However, as they were new forms of protectionism these politico-economic trends constituted obstacles to international trade. The breakdown of the international monetary regime in the 1970s had contributed to the weakening of the GATT, because governments had devised a number of trade measures to protect their balance of payments, such as exchange controls, exchange rate manipulation, special duties and capital controls. Economic recession and inflation had enticed governments into creating disruptive national action and international management breakdown by adopting beggar-thy-neighbour policies. But that was contrary to what the GATT was about (Spero 1985, 103).
