A proper answer to the question regarding which conclusions can be drawn from a detailed analysis of not directly linked up facts presupposes an understanding of the parameters that underpin the analysis itself.
Do the foregoing chapters allow us to conclude that the 1970s were marked by protectionism? Such a straightforward approach presents many difficulties. First, it would posit a definition of protectionism, which risks ending up in an alley of vague generalizations. Even if a common denominator could be agreed upon – for instance viewing protectionism as the complex of trade barriers or of those trade barriers intentionally directed at sheltering domestic industries from foreign competition – it would be necessary to prove that the measures in question actually had a protectionist bias or a protectionist intent. As was indeed the case, it could be re-joined that measures deemed protectionist actually were the necessary answer to trade-distorting practices by foreign competitors and were allowed by long-established international rules. Above all, this approach does not meet the rules of historical analysis: ‘protectionist’ compared to which period and to what extent? Leaving aside tariff barriers, which till the Kennedy Round could hinder imports effectively, the sheer fact that after the mentioned round the GATT parties spent about ten years debating and negotiating on non-tariff barriers means that there was plenty of choice and that quite a few of the measures in question could shelter domestic industries from foreign competition. Analogous difficulties would meet the rather simplistic statement that in the 1970s world trade was distorted by an upsurge of policies aimed at financially supporting the declining economies of some or most OECD countries.
Thus, even though this research, in dealing with the narrow period of the 1970s, does not cast aside the use of the term protectionism, it has focused on more specific questions the answer to which lends itself to a longer-term analysis: which kind of trade barriers were at play? Which factors contributed to strengthen the alleged grip of protectionism and government interventionism? Which were the sectors affected, their possible number ranging from a few industries to the whole economy? Did protectionist pressures grow proportionally or progressively when the economic environment became harsher? That is, were the same kind of measures simply applied to a growing number of sectors or was there a qualitative leap like a change in the law or in the administrative practice that made such measures more biting and hence more effective in discouraging the inflow of foreign products? Which were the counteracting agents and to what extent were they effective? Finally, what kind of relationship can be detected between protectionist measures and the new attention given to fair trade? Was there a constant contraposition or were some protectionist measures able to exploit the room for manoeuvre offered by the drive to establish fair trade? It must be emphasized that this research has focused on the United States and the European Community, only dealing with the policies of other trading partners in passing.
A commonly accepted premise is that until the second half of the 1960s the spotlight was on two kinds of trade barriers: tariffs, and in particular high tariffs, and quantitative restrictions. Tariffs were regarded as legitimate but were on a path of steady reduction, although with strong variations according to the sectors concerned, thanks to a series of GATT rounds. On the other hand, quotas, viewed by definition as a straightforward constraint to trade flow, were banned (GATT Article XI) although allowed in a limited range of cases (nominally, exceptions for primary product programmes and balance of payments safeguard). Notwithstanding the general ban, many states managed to preserve existing quantitative restrictions on imports. For instance, the GATT Contracting Parties allowed the United States to maintain quotas on some farm imports although such restrictions actually fell outside the exceptions envisaged by Article XI. At the margin of the picture there was a set of policies whose implementation was regarded as falling within the economic sovereignty of the states but, being viewed as exploitable for protectionist ends, were at the same time, quite loosely, regulated by the General Agreement. This would apply to GATT ArticleVI on antidumping and countervailing duties, and GATT Article VII on valuation for customs purposes. Other measures that could have a protectionist bias, such as preferences granted to domestic producers in public procurement, were left outside the picture.
This having been said, it is common knowledge that the post World War Two trend was in the first two decades definitely toward trade liberalization, being marked by tariff reduction and dismantlement of quotas. Yet, at least from the outset of the 1960s an opposite drift was detectable under the main trend. The Long Term Arrangement Regarding International Trade in Cotton Textiles (LTA) was an example, establishing, under the aegis of the GATT, a network of bilateral agreements limiting the amount of imports. The LTA regime had a certain amount of flexibility and took into account production growth in the exporting countries, but at the end of the day it boiled down to a series of quotas. From 1962, the year in which the Trade Expansion Act sailed through Congress leading to the Kennedy Round, the number of US industrial imports subject to restrictions, including voluntary restraints, rose almost tenfold. In the 1960s the EC Common Agricultural policy took final shape which, under the banner of community preference, established a variable levy system whose effects were even more severe than the imposition of quotas.
Thus, applying the criteria set out above, this research only demonstrates that the 1970s merely witnessed the strengthening of protectionist tendencies which were fostered by the less stable economic climate. The number of protected sectors increased along with the number of VERs and OMAs negotiated with overly dynamic exporting countries, which were a covert form of imposition of import quotas. Although such so-called grey-area measures were particularly frequent in the textile and steel sectors, they were used whenever the need arose to protect declining sectors from import competition, ranging from footwear to consumer electronics.
The introduction of rules and administrative practices which made the tools to protect domestic industries against foreign competition more aggressive was of greater importance. As illustrated in chapters 3 and 4, the Trade Act of 1974, while granting negotiating authority to the US executive, rendered more severe, more rapid and thus more effective the antidumping and countervailing regime; this allowed the US trade authorities to close the net around practices that probably did not deserve this destiny and indeed would not have been subjected to extra duties under the previous regime. On the other side of the Atlantic the answer to the steel crisis was an aggressive antidumping policy that either forced foreign exporters to review their export prices or compelled their states to accept ‘voluntary’ export restraints. It follows that on a large range of merchandise trade the progress toward liberalization of the preceding decades was impaired or nullified. The ban on quotas was dodged through negotiated VERs and OMAs. Tariff concessions were eroded or eliminated through the imposition of antidumping and countervailing duties.
On the other hand, the 1970s witnessed a growing drive among many trading partners to support struggling industries as well as those sectors that for political or economic reasons were viewed as worthy of support, whether to boost their competitive capacity in the international market or irrespective of the impact of such measures on international trade. As shown in the previous chapters, the measures in question could take several forms, including: price support, direct transfer of funds, provision of goods and services at prices lower than market prices and tax cuts. These policies, despite the claim of the United States, were present, perhaps with different weight, on both sides of the Atlantic. It is suggested that the term ‘special protection’ can be used as an umbrella to encompass both directly protectionist policies and measures directed at supporting domestic industries, whether declining or expanding, in the battle with foreign competitors.
The conclusion that during the 1970s international trade fell under the grip of protectionism as a result of the recession also calls for several caveats. Although international trade slowed down, it went on growing. In particular, the internationalization of the American economy showed a strong acceleration, even though it remained below the values of its OECD trading partners, which is explained by the different weight of domestic demand in the two areas. In the EC countries exports and imports went on growing, except regarding the latter during the 1975 recession. It is likely that the depression that followed the first oil shock induced the US lawmakers to seek a strict trade-off between the granting of trade authority and the safeguard of domestic industry from foreign competition. However, the actual implementation of trade restrictive measures took place mostly during a phase of general recovery of the US economy which showed a growth rate not lower than that of the previous decade. Although the unemployment rate strongly increased from the first oil crisis onwards, in the EC member countries, on average, the second half of the 1970s recorded a slow down in the growth of the economy but not a recession. On both sides of the Atlantic industrial production went on growing for the whole decade except during the 1975 slump. This implies that the difficulties of import competing industries were offset by the progress of other manufacturing industries along with the growth of the service sector. This research, however, does not venture to suggest that, in contrast to the declining sectors of the economy, the service and high-tech industries in the OECD countries were completely free from state interference and trade barriers.
If there was a quantitative and qualitative leap in protectionist and other trade-distorting policies, the 1970s also witnessed the successful conclusion of a GATT round directed at achieving fair and freer trade. The success was prevalently political. Looking back at its achievements, it is arguable that progress did not come up to initial expectations. Yet, some trade barriers were successfully tackled while in others the round provided the basis for future negotiations. On the other hand, the Tokyo Round in its effort to achieve an agreement failed to effectively discipline governmental support to domestic industries, from agriculture and import-competing industries to high-tech industries, while allowing each GATT Party to continue to apply countermeasures without the constraint of any effective multilateral supervision. Hence the accusation of unilateralism in the 1970s and in the following decade. Sectors like services of growing weight in international trade remained outside the scope of the negotiations.
In short, in the decade there was neither the outset nor the dominance of protectionism. What marked the 1970s was the growth in number and sophistication of measures directed at sheltering domestic industry from foreign competition. Correspondingly, the decade witnessed, in spite of the ambitious programmes of the Tokyo Round, a deceleration in the progress towards free trade. Whereas the previous decades saw the erosion of tariff barriers in successive rounds and the partial elimination of quotas, during the decade the main trading partners were able to find ways to re-establish under different names and in allegedly legitimate ways these kinds of barriers, although their actual application concerned limited sectors of the economy, while overall no significant progress was achieved in removing other trade obstacles. Thus, the legacy of the 1970s to the next decade could only be mixed and uncertain. As happens in these cases, the greatest part of the outcome depended on the receiver of the legacy. Factors like the general trend of the economy, the unemployment rate, the condition of industries having a particular economic or political importance and the attitudes of executive and lawmakers in the countries concerned all had their weight. As can be inferred from the last chapter, the conditions overall were not favourable to cooperation between the two sides of the Atlantic and to the curbing of policies aimed at protecting their industries.