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Will GATT help mechanical engineers?

The new trade pact will create thousands of high-tech jobs, say its supporters.

President Clinton and other supporters of the General Agreement on Tariffs and Trade (GATT), which Congress passed in November, say the trade agreement will boost the U.S. economy by creating more jobs and protecting intellectual property. Unlike the North American Free Trade Agreement (NAFTA), which eliminates tariffs and other trade barriers, GATT will only reduce them. How will GATT affect mechanical engineers specifically?

No ASME group yet has made any recommendations regarding GATT, but several ASME groups, including the Board on Government Relations, have supported legislative measures that encourage international partnerships. In addition, the Committee on Issues Identification plans to release an Issue Brief on NAFTA and the engineering profession in a global economy.

The major points of the GATT agreement include establishing the World Trade Organization (WTO), which will be responsible for enforcing the provisions of the agreement; reducing tariffs (by about a third) on thousands of manufactured items; phasing out quotas on textiles and clothing over a 10-year period; and reducing agricultural tariffs over six years.

The WTO, because it will have enforcement powers, will have more influence than the GATT secretariat did. Under the WTO, dispute-resolution panels can rule that a law or action by a member nation violates that nation's trade commitments and request that the offending law or practice be revoked. The WTO can also empower the complainant nation to issue trade sanctions against the violating country if it refuses to rescind the offending law or practice.

The WTO's power has created opposition in the U.S. Congress. Critics such as Sen. Bob Dole (R-Kan.) say the new system will create an international bureaucracy that will carry out the will of other nations seeking to damage the U.S. economy. As a compromise, the Clinton administration promised, at Sen. Dole's urging, to establish a panel of five federal appellate judges to review WTO rulings in cases involving the United States. If the review panel finds that WTO panels have unfairly treated U.S. interests three times during a five-year period, then Congress would have the right to pass a resolution to withdraw the United States from the WTO.

Supporters of the multilateral trade agreement say the provisions to reduce tariffs will boost business and create thousands of high-paying jobs, especially in the high-technology industries that employ engineers. GATT is "good for manufacturing, good for jobs, and good for the U.S. economy," said Jerry Jasinowski, the president of the National Association of Manufacturers (NAM). According to NAM, 49 percent of communications equipment, 46 percent of aircraft, and 37 percent of construction equipment produced in the United States are bound for foreign markets.

Other features of GATT that will affect mechanical engineers are the controversial changes it makes to domestic intellectual property law. In particular, patent terms will now be 20 years from the date of filing, rather than the current 17 years from the date of granting. This reform aims to harmonize U.S. patent law with that of other GATT member nations. Supporters of the change - mostly big manufacturers - view the change as an effective weapon against "submarine" patents. Under the old system, patent applicants could postpone the issuance of a patent for many years and then, when the government finally issued the patent, reap substantial royalties from industries that had developed around the patent technology.

Opponents of the patent reform - generally independent inventors and small companies - do not want the life of the patent to begin until the patent is actually issued because they claim the government sometimes takes a decade or more to issue patents, especially for highly advanced technologies. The patent term length debate is likely to continue. Sen. Bob Dole is considering introducing legislation to establish a patent term of 20 years from the time of filing or 17 years from the date the patent is granted, whichever is longer.

To offset the losses in revenue from reducing tariffs under GATT, the law includes several financing provisions. For example, included is a limit on the amount of money American employees can contribute to 401(k) plans in 1995. Contributions to traditional pension plans will also be frozen. This year, the maximum contribution employees can make to a 401 (k) plan will be restricted - for at least a year - at 1994's limit of $9240. However, GATT also contains a provision to strengthen pension funding, as it allows the federal Pension Benefit Guaranty Corp. to collect higher premiums from those companies that are not adequately funding their pensions.

The trade agreement took effect on January 1, when the new World Trade Organization replaced the informal GATT secretariat. Controversies remain on the trade agreement, including how to make the transition from the old GATT structure to the new WTO, and how to deal with two huge economies - China and Russia - that were not GATT members, but want to be part of the WTO.
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Author:Becker, Pamela
Publication:Mechanical Engineering-CIME
Date:Jan 1, 1995
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