US TOBACCO LOCAL CONTENT RULE FOR GATT PANEL

6:53 AM Jan 26, 1994

US TOBACCO LOCAL CONTENT RULE FOR GATT PANEL
Geneva 25 Jan (Chakravarthi Raghavan) -- The GATT Contracting Parties agreed Tuesday to establish a panel to go into the complaint against the United States over its legislation requiring US cigarette manufacturers to use a minimum of 75 percent of US grown tobacco in their products.

This violates Art. III.5 of the General Agreement which expressly prohibits such local content requirements.

The complaint had been brought up by Brazil, Chile, Colombia, El Salvador, Guatemala, Thailand and Zimbabwe and were joined by Canada.

The US legislation had been adopted last year as part of the Budget package law. Since then the complainants, after several consultations, have been unable to get the US to withdraw the measure.

The parties have 20 days to agree upon the Chairman and members of the panel and the terms of reference, failing which the GATT Director-General is to name the panellists and the panel will have standard terms of reference.

The panel has 90 days to present its report and recommendations.

In another action, the CPs also agreed to name a working party to go into the accession request of Jordan.

The CPs also heard a proposal from the European Community and the United States for a review of the Trade Policy Review Mechanism which, in terms of the decisions taken at the time of the Uruguay Round mid-term review, provides for the trade policies of the four major trading partners (US, EC, Japan and Canada) to be reviewed every two years, with two of the majors figuring in one year.

The EC suggested that this frequency, and the production of the necessary reports, involved too much of a work load and there was a need for review.

While the US backed the move, noting that in terms of the midterm accord under which it was set up, the TPRM exercise and its scope should be reviewed, Australia expressed reservations over lengthening the period between reports and review of the majors, noting that their policies had an impact on the world trade and thus was of interest to all the contracting parties.

The CPs decided that the both the frequency of the TPRM and its scope should be the subject of further consultations by the Chairman of the GATT Council.

In introducing the report of the GATT Council, the Chairman Amb. Andras Szepesi of Hungary focused on need for improving procedures for considering requests for accessions and examining increasing number of agreements for customs unions, free trade areas and regional arrangements to ensure GATT compatibility.

Szepesi noted the large number of requests for accession to GATT and said the large number of working parties looking into accession requests posed a challenge to the CPs. It was worthwhile, he suggested, for the CPs to reflect in the period ahead on how best to reconcile the will of a number of countries to accede to GATT and become thereafter WTO members, and the difficulties that may arise in some of these countries in adjusting immediately and fully their economic and trade policies to GATT standards.

"If one would like to avoid extremely lengthy, multi-year accession negotiations, traditional methods perhaps should be bypassed in certain cases and innovative approaches worked out," he suggested.

On the increasing work load in dispute settlement, Szepesi said that apart from the lack of consensus on possible actions on certain panel reports, the main problem in this area continued to be the failure on the part of some contracting parties to implement specific panel recommendations or to do so only partially.

However, the integrated dispute settlement mechanism agreed to as part of the final package of the Uruguay Round would go a long way towards solving the problems and shortcomings in the functioning of the present system, he added.

On the TPRM exercises, Szepesi said the challenge for the future would be how to develop the TPRM to take into account all the new policy issues included in the scope of the WTO, "without unduly overloading the boat". This might require important adjustments in the structure of the reports and further improvement in the review procedures alike.

There was a continuing trend towards establishing free trade areas and regional trading arrangements which had become a "significant phenomenon in international trade", as illustrated in the number and scope of the agreements, and the diversity of countries and regions involved. This trend would have a strong bearing on the future activities and operation of the multilateral trading system.

It was necessary to review current procedures of the GATT Council for the examination and review of such arrangements. Biennial reporting requirements had not been followed for quite some time, and no calendar for such reports had been established since 1987. The GATT Council should focus on these issues in the near future, because of the increasing trend towards negotiating customs unions, free trade areas and regional arrangements, and the need to maintain consistency and unity between these arrangements and the multilateral trading system as a whole.