General Agreement on Tariffs and Trade

The Final Act resulting from the Uruguay Round of negotiations of the General Agreement on Tariffs and Trade was signed on April 15, 1994. Because Congress will be considering legislation to implement the Final Act for the United States, GAO reviewed the negotiating objectives for the round, assessed what was accomplished, and analyzed the projected impact the Final Act would have in a number of areas. The first of two volumes presents GAO's overall analysis and conclusions about the results of the negations. In GAO's view, the Final Act could produce overall economic gains for the United States, although some sectors of the U.S. economy would shoulder a disproportionate burden as a result of foreign competition. For example, four different studies have projected job losses, ranging from 72,000 to 255,000 over 10 years, for the textile and apparel industries under complete trade liberalization. Because the Final Act is expected to dislocate workers, their needs must be considered. Both deficit reduction and liberalized trade are important to the long-term health of the U.S. economy. Finding offsets to the 5-year tariff revenue losses as required by the Budget Enforcement Act would preserve the overall economic gains of the Final Act and maintain deficit neutrality.

GAO found that: (1) the act should produce overall economic gains for the United States and increase international trade, reduce tariffs, create stronger trade dispute settlement procedures, extend GATT principles, and strengthen GATT as an institution; (2) industry analysts believe that the act could increase U.S. national income by as much as $200 billion over a 10-year period; (3) the act may adversely affect certain sectors of the U.S. economy and dislocate up to 255,000 workers; (4) some industry organizations and domestic interest groups believe that the act could adversely affect U.S. interests because it establishes a World Trade Organization (WTO) in which the United States could be outvoted by other nations on important matters and subjected to stronger dispute settlement procedures that challenge U.S. laws and sovereignty; (5) it is difficult to predict how new WTO members will use the revised provisions for dispute settlement actions; (6) even if the United States becomes a member of WTO, it would still retain its trade laws and other domestic policies; (7) it is difficult to determine how foreign governments will employ the new subsidies agreement contained in the Final Act and how the agreement will impact U.S. firms; and (8) the United States must find ways to offset tariff revenue losses to maintain budget neutrality.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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