Leading Article: Swallowing the Tokyo medicine

JOHN MAJOR calls it 'a great prize . . . bigger than anything we have seen

before' and claims it will create 400,000 jobs in Britain over 13 years. 'Good news for America and good news for the world,' crows President Clinton. 'We all won,' exults Mickey Kantor, the American trade representative. 'It's only a procedural step,' mutters the French trade minister sourly.

So who is right about the Tokyo summit agreement on lower tariffs? Reached on Wednesday - or possibly delayed until then for political effect - it is a statement by the United States, Japan, the European Community and Canada of their intention to eliminate tariffs in eight sectors including pharmaceuticals, construction equipment, steel and spirits, and to cut tariffs by varying amounts on other goods.

This does not sound like the stuff of international drama. Nor is it, in itself. The reason for the rejoicing is threefold. First, the agreement seems to break a log jam on the road towards wider agreement among the more than 100 nations that have been involved in seven years of talks under the General Agreement on Tariffs and Trade (Gatt).

Second, it is a victory for the principle of freer trade. This has been under growing threat from governments beset by the domestic pressures of recession. Third, it ought to contribute to global confidence by showing that differences can be bridged, that negotiations can work and that rules can be applied, even by weak governments in a climate of economic anxiety.

But all this presupposes that the agreement will in fact be implemented and followed by progress in the Gatt talks. This cannot be taken for granted. The breakthrough was achieved only after concessions on whisky and brandy tariffs by a weak, outgoing Japanese prime minister with no power to follow through. The French are still dragging their feet, particularly over agriculture, and refuse to accept last year's Blair House agreement between the EC and the US on cutting farm export subsidies. A host of other problems remain, such as resistance among some countries to liberalising trade in services, and unresolved disputes over anti-dumping rules and steel. The Tokyo statement itself is, moreover, hedged around with qualifications and conditions.

Tired and unpopular politicians cannot be expected to forgo the opportunity to construct a success out of flimsy material, but the proper response to the Tokyo statement is cautious optimism tempered with scepticism. Any progress towards freer trade is better than none, and this is progress, but it is still a long way from signatures on the dotted line.

In present conditions, free trade is difficult for governments to sell to their peoples. Imports of cheap foreign goods pose an immediate and visible threat to domestic industries. The benefits to consumers and to long-term competitiveness, and the advantages of reciprocal openings by trading partners, take longer to identify. Governments need courage to insist that seemingly bitter medicine is good for the patient. The politicians at Tokyo deserve praise for grasping the bottle, but they still have to make the patient drink.

Meanwhile, it will do no harm to remember that even a Gatt agreement will not provide a full answer to the challenge now facing the old world from the newly industrialising countries. Small ones, such as Singapore and Taiwan, are just about manageable, but what will be the response when China takes off? That is when dedication to free trade will be truly tested, and when present wrangles will seem puny.