ENCHANTÉ – Border Taxes a Boring Issue?


You have to climb high to see the border, any border. It’s fascinating to see how world affairs repeat themselves in circles. This picture of mine was taken by a dear girlfriend in Switzerland when I dealt with “Border Taxes” at the GATT (General Agreement on Tariffs and Trade) in Geneva. How did I get there from Amsterdam? Because I was heading a Dutch delegation from the Ministry of Economic Affairs as the Netherlands’ Member of the GATT to the Border Tax Working Party.

It was a big issue around 1969/70.  The GATT was established in 1947 to reduce and harmonize import tariffs to promote multilateral trade and encourage consumption. The GATT was part of the UN complex in Geneva as a Special Agency. Its meetings were held in the “Palais des Nations” which was built as of 1929 to serve as the home of the “League of Nations.” It is best known for “the Kennedy Round” (1964-1967), the sixth multilateral tariff negotiation named after President Kennedy, who was assassinated six months before the Round started in Geneva.



Photographs of the Palais des Nations from Wikipedia

Photographs of the Villa Bocage which housed the GATT Secretariat (Kris Terauds-krisageneve.wordpress.com).


From the terrace at the back, you could see the Mont Blanc, and we often had lunch outside in the spring and summer, enjoying the view. In 1975-77, the Gatt Secretariat moved to the historic building “Centre William Rappard” at the Lake of Geneva.

The Border Tax Working Party met regularly over a couple of years. Delegates from some eighty GATT Member States from all over the world descended onto Geneva to discuss the issue to abolish unfair taxes at the border to eliminate their nefarious impact on fair trade.

Believe it or not, some of these delegations included charming and smart women, who posed testosterone problems for the men far away from home. In addition, the GATT Secretariat which organized and supported the GATT Committees or Workgroups included charming young ladies. They paraded through the meeting rooms like divas, delivering papers or sitting at the chairman’s head table, spiriting the gentlemen in the audience into wistful dreams far remote from border tax issues and “Rules of the GATT.”




And the discussions often turned into acrimonious “diplotalk.” I still remember how an annoyed US delegate accused me of hypocrisy because the European Economic Union (as it was called at that time) allowed exporters from the EEC to deduct the Value Added Tax at export to make their products cheaper. Conversely, products imported from the US were subjected to tariff adjustments or non-tariff barriers (because of environmental concerns or for health reasons) to make them less competitive in the EEC.  Then afterward during the inevitable cocktail parties in the halls of the “Palais” of the United Nations or a reputable hotel downtown, we forgot all about that and were the best of friends among all the charming people.

The issue became so intense that the GATT Secretariat offered me to join their staff to help keep members out of each other’s hair by writing “balanced meeting reports” and trying to iron out differences at individual face to face encounters. So I joined the GATT Secretariat to reflect everybody’s opinions uttered in long meetings that sometimes lasted till deep into the night. Standard phrases that began with “There was general agreement that,” “Most Members argued that” “It was pointed out” “It was remarked” “It was observed,” “The question was raised,” without mentioning the Member Delegation by name while everybody knew who’d said what. In the end, some agreements were listed. These drafts were then discussed and amended during endless banter. Every delegation wanted some other “word” or “phrasing” until a final report was agreed according to the Rules of the GATT.

Example from the Report by the Working Party on Border Tax Adjustments (GATT Secretariat, 20 November 1970)

“36. It was pointed out that certain products of interest to developing countries
were subject to very high and sometimes excessive rates of taxation. An example
was tea which in some developed countries was taxed at the same rate as wine.
Such rates of taxation were excessive and should be reduced as these had adverse
effects on consumption.”

Those were the days that Member Countries still more or less applied the “Rules” of the GATT Agreement. In many ways, it was a “gentleman’s agreement.” Not to say that from time to time serious trade-wars erupted.  These were euphemistically called “Disputes” which would, sometimes after years, result in a “Dispute Resolution.” Well-known trade disputes between the US and the EEC went by the names of the “Ham and Cheese War,” the “Chicken War,” the “Banana War,” the “Beef War,” and so on.


In all these “wars” hundreds of millions of dollars were at stake affecting farmers and other producers on both sides of the Atlantic. The national political impact of these negotiations often caused substantial delays in reaching final agreements. Eventually, I got bored as I could not create anything in the GATT Secretariat. I felt like a lifeless non-person. My lackluster was felt all around, and we agreed to say farewell. Then I joined the World Bank in Washington D.C. where I could focus far more actively on project generation, management and implementation.

Subsequent multilateral rounds included the Tokyo Round (which started in Tokyo in 1973 and continued in Geneva as of 1975), focusing more and more on “non-tariff barriers” (NTBs), followed by the Uruguay Round in 1994. The latter Round changed the GATT into the World Trade Organization (WTO), with 193 Member States, including Russia (admitted after 15 years) and China (admitted after 13 years). In my view, this ambitious move killed the original good intentions embedded in the GATT.

As often happens, when organizations become too large (e.g. the European Union),  solidarity, esprit de corps and trustworthiness fall victim to national political considerations and open cheating. Some Member States don’t play by the rules and use non-tariff barriers ( e.g. excessive import documentation required, slow approval process) to prevent competitive imports from entering while subsidizing exports. This is what happened with China’s currency manipulation and multiple administrative import requirements (same for Japan). Low-cost labor and lack of environmental protection control attracted multinational companies to manufacture in China or Mexico and then ship it back to the home countries, virtually eliminating the home industry. As a result, the original good idea of multilateral trade negotiations to increase wealth for all was undermined by unfair play.

No wonder that the Trump Administration now favors a return to bilateral trade agreements and even though I was initially a strong supporter of the multilateral spirit of the GATT, coming from the ruins of World War II, I now regret to admit that it has lost its usefulness. NAFTA and TPP were dinosaurs of international trade tramping American business. Free-traders say that’s good for lower consumption prices. But that happens at the cost of lost labor opportunities and unemployment nationally.



That is a big MINUS to the overall socio-economic health of the nation, which translates itself into higher taxes needed for social welfare and unemployment benefits. So, what the consumer “wins” on one side, the consumer is losing on the other by having to pay higher taxes. And it makes those who lost labor poor and desperate and dampens the national spirit. That despair did not appear on the radar of the Democrats (it did on Bernie Sanders’ but his socialist proposals would only make a bad situation worse), and that’s why they lost the election. It is then also not surprising that the use of border taxes has resurfaced as a means to protect a nation from unfair practices by its trading partners.

So it looks that, unfortunately, the bad guys have spoiled the fair game rules once more; which means back to square one after seventy years. It’s the same with border “control.” The bad guys spoiled it for the good people and in final analysis, home is best and you must protect it if the others don’t play ball.



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