THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Monday, October 10, 1994 TAG: 9410080170
SECTION: BUSINESS WEEKLY PAGE: 2 EDITION: FINAL
TYPE: Opinion
SOURCE: BY J.R. BULLINGTON, SPECIAL TO BUSINESS WEEKLY
LENGTH: Medium: 81 lines
What do peanut farmers in Suffolk have in common with Hampton machinery maker Pressure Systems Inc.?
The common thread is GATT, an acronym for world trade rules set up in the 1940s.
A decade ago, the United States began pushing for a revision in GATT rules. The change would reduce further the trade barriers erected by governments around the world to protect home industries. Congress recently delayed a vote on the matter until after the November elections.
Bringing down those barriers would create winners and losers in Tidewater. As this commentary reminds us, peanut farmers would be hurt, and Pressure Systems would be helped.
Virginians have a major stake in the congressional battle over international trade.
The issue is ratification of a trade pact known as the General Agreement on Tariffs and Trade.
This accord, signed by representatives of the United States and 116 other countries last April, is clearly the most important and far-reaching global trade pact since the original GATT was concluded in 1948.
GATT would cut tariffs by a third and eliminate barriers such as quotas.
For the first time, trade in services, agriculture and intellectual property would come under international trade rules.
A new World Trade Organization would be created to help assure fair competition.
Virginia industries likely to be seriously affected are apparel and peanuts. Clothing and peanut prices should fall as quotas decline on cheaper foreign imports.
Meanwhile, many export industries will benefit. In Virginia, these include soybeans and some processed food products, computer peripherals, renewable energy technology, chemicals, paper and paper products, distilled spirits, textiles, fishing and furniture.
GATT will have little direct impact on coal and tobacco, against which there are currently few barriers.
Exports are vital to Virginia's economy. According to the Virginia Department of Economic Development, manufacturers in the state last year exported $9.3 billion worth of products. These exports supported 130,000 jobs and accounted for 13 percent of the state's total manufacturing output.
In sharp contrast to peanuts and apparel, these export industries are growing. Between 1987 and 1993, Virginia's merchandise exports rose by 159 percent, compared to the nation's 90 percent.
Benefiting from exports are port operators, transportation companies, shipping agents, freight forwarders, insurers and banks and international airports, especially Dulles. Their business will grow directly with increased trade volume.
This is significant in Hampton Roads. The area already has more than 30,000 port-related jobs.
Additionally, Virginia's service exporters - legal services, engineering, insurance, accounting, consulting - were estimated at about $3 billion in 1993. Those who produce these exports, which are largely outside current trade rules, will benefit enormously.
In 1987, there were 1,633 Virginia businesses engaged in exporting, not including service firms. Today, that number probably exceeds 2,000, including small firms as well.
One example is Pressure Systems Inc., an 80-employee Hampton manufacturer of pressure measurement instruments. PSI exports $1.2 million worth of products annually and expects to increase that volume by 10 percent a year as a result of the GATT agreement.
Another example is Amadas Industries of Suffolk, a 160-employee manufacturer of agricultural and solid-waste recycling machinery. It exports more than $1 million worth of machinery annually and expects increases of between 10 percent and 50 percent a year with a GATT accord.
Such companies as these are clearly able to compete successfully in the global economy, and their workers will benefit greatly from the new business the GATT accord will make possible. MEMO: The writer, J.R. Bullington, directs the Center for Global Business
and Executive Education at Old Dominion University.
by CNB