6:52 AM Sep 23, 1993

TOBACCO PRODUCERS PROTEST US CIGARETTE LAW IN GATT

Geneva Sep 22 (Chakravarthi Raghavan) -- A number of countries exporting tobacco to the US market assailed in the GATT Council Wednesday the new US legislation requiring US cigarette manufacturers to use no more than 25 percent of imported tobacco.

Brazil, which voiced the complaint on its own behalf and on behalf of Colombia, El Salvador, Guatemala, Thailand, Venezuela and Zimbabwe, said that the US new law violated the GATT's Art II and III and the domestic content requirement was illegal.

All these countries have sought consultations in the GATT with the US, an essential preliminary step towards formal raising of the dispute and seeking a panel to adjudicate on the dispute.

Consultations by these nations in Washington has proved fruitless.

The complaint was supported by Argentina, Chile and the EC.

The new US legislative requirement was put into the Congressional Budget law, at the instance of Kentucky Democratic Senator, Wendell Ford representing the interests of that State's tobacco growers.

It was part of the price that the administration paid as part of the 'horse-trading' to narrowly win its Budget.

Though it was a clear violation of US obligations under the GATT, which requires its members not to stipulate any local content requirement in manufacturing, President Clinton signed it into law.

The US, in its response at the Council, confirmed the provisions of the law and said it had agreed to hold consultations.

Brazil said at the meeting that the complaining countries have sought official consultations and if this failed they reserved their GATT rights. Sources within the group said if the consultations produced no positive results, and they did not expect any since it is a mandatory legislation, at the next meeting of the Council (Oct 27-28), they would seek and get establishment of a panel.

In other actions, the Council also named a panel to go into the complaint of Chile over the EC's licensing and surveillance system on apples imported from Chile.

The Council was unable to act on the report of the panel which ruled in favour of Latin American banana exporters and against the banana import restrictions (that prevailed until end of June this year) in several members of the EC, and the preferential tariffs (favouring the ACP imports) throughout the EC.

The EC and a number of Caribbean and African nations, grouped in the Lome accord with the EC, again objected to the adoption of the Report. An informal show of hands count showed the Council divided equally.

The old banana regime (that the panel held illegal) has been replaced by a new EC-wide banana regime, providing for a two-million tonne tariff quota on Latin bananas at a 30 percent MFN rate and prohibitive duties above this figure. This new regime too has been challenged and is now before another GATT panel.

Some GATT sources said that the EC is now planning to seek consultations with the Latin American complainants and seek to renegotiate the banana tariff concession under Art XXVIII, but it was not at all clear to them how this could be done and how, beyond gaining time, the fundamental issue posed by the panel, namely the GATT illegality of ACP preferences without a specific GATT waiver, and trying to treat it as a customs and free trade area agreement, could be resolved by this renegotiation process.