Economic Effects of the Tokyo Round

Abstract

The conclusion of the Tokyo Round of Multilateral Trade Negotiations (MTN) in April 1979 was an important milestone in international commercial diplomacy. It marked the seventh round of multilateral reductions in international trade barriers negotiated under the General Agreement on Tariffs and Trade (GATT) since World War II. Tariffs on industrial products had last been reduced on a major scale in the Kennedy Round, which concluded in 1967 and was implemented over the following five years. Tariffs are being reduced even further by the Tokyo Round, the reductions being phased in over eight years beginning 1980. An even more noteworthy accomplishment of the Tokyo Round is the negotiation of a series of codes covering nontariff barriers (NTBs). Depending on how these codes are interpreted and adhered to they will mean some significant reductions in NTBs and will clarify and harmonize government policies involving international trade. This paper provides an economic analysis of the effects of the Tokyo Round. It is organized as follows. In Section II, we examine the Tokyo Round negotiations, including the initial tariffs by country and sector, the tariff-cutting procedure and tariff offers and the NTB codes. In Section III, we present the combined effects of the reductions in tariffs and NTBs calculated using the Michigan model of world production and trade that we have developed for this and related purposes. In Section IV, we consider the possible effects of NTB codes that we were unable to quantify and also look at trade policies that were excluded from the Tokyo Round. In Section V, we offer concluding comments.