The volume and value of international trade have grown at exceptional rates in the years since World War II, rates of growth that are significantly higher than those for population or production. In a substantial measure the gains in global welfare that have been achieved during this period are attributable to the growth in international trade. The reduction of barriers to trade, accomplished through the instrumentality of a modest international institution, the General Agreement on Tariffs and Trade (GATT), has played a major role in facilitating the growth of international trade. GATT is currently, however, at a critical juncture. The issue that GATT faces is: can the liberalized conditions for international trade that have been achieved through complicated and time-consuming negotiations be maintained and extended or will the world drift—or perhaps even rush—toward protectionism?

The trade ministers of GATT's 88 member states meeting in Geneva last November sought to promote further progress toward liberalization or at least to prevent backsliding. Whether or not their efforts will succeed remains to be seen. The obstacles in the way of success are formidable, and the instruments for overcoming them are fragile.

The meeting of the ministers of the General Agreement on Tariffs and Trade (GATT) in Geneva last November produced a little-noted but significant accomplishment. In the final hours of difficult, and at times acrimonious, debate, the ministers agreed to initiate a study on international trade in services–industries such as banking, insurance, communications, data processing, engineering and shipping. In the text of the final communique, GATT's contracting parties agreed to:

• Recommend that each contracting party undertake a national examination of service sector issues;

• Invite contracting parties to exchange this information among themselves and through international organizations, such as the GATT, on as uniform a basis as possible; and

• Review the information at their 1984 session to determine whether a multilateral framework on services is desirable, and, if so, how to proceed.

Although a modest step, the accord marks an economic milestone, for it is the first time that GATT's contracting parties have agreed to examine trade in services with the possibility of expanding international trade rules to cover services as well as goods.

A rising protectionist tide is threatening to undermine the domestic political foundation necessary to sustain America's liberal trade posture through the 1980s. U.S. trade officials and recent administrations remain committed to a liberal trade order, but severe crises in key economic sectors of the economy, regionally concentrated in the traditional industrial region of the country, are cutting the ground from beneath them internationally and domestically.

At the recent GATT ministerial meeting in Geneva, for example, the United States pressed hard for expanding international trade liberalization in agriculture, services, and high technology industries—all areas of economic activity in which the United States enjoys a strong competitiye position and trade surpluses. American trade officials in Geneva had the burden of advancing their arguments for further trade liberalization against the backdrop of recent U.S. actions, taken in response to domestic pressures, which imposed import quotas on European steel and Japanese automobiles and which adopted a more restrictive trade regime for textiles and apparel in the renewal of the Multi-Fiber Agreement. While the GATT meeting was in progress, the U.S. Congress was considering a domestic content bill that would require auto-makers selling over 900,000 vehicles in the American market to use 90 percent U.S. labor and parts by 1985. U.S. trade representative William Brock III called this “the worst piece of economic legislation since the 1930s.” The House passed the bill with 215 votes, but it died in the Senate. The bill will certainly be re-introduced in the more protectionist 98th Congress.