6:26 AM Nov 2, 1993

TNC FINGER-POINTING AT US, AND QUAD

Geneva 1 November (TWN) -- The Trade Negotiations Committee Monday agreed on a work programme of sorts till mid-November (agreed upon at last Friday's meetings of the market access and services negotiators), heard some exhortations (though without clear focus) from its Chairman and agreed to meet again sometime next to decide on a process for further work.

The meeting heard another review from the GATT Director-General and TNC chairman, Peter Sutherland which though seemed to lack any clear focus, but contained the exhortations about the need to conclude the Round by 15 December and the "great responsibility" resting on shoulders of negotiators to make rapid and substantial progress.

Sutherland cited the various Ministerial declarations outside the GATT for speedy conclusion of the Round and stressed the need to speed the various negotiating processes -- since there were only 45 days to complete substantive negotiations.

Assessing the state of play since the last TNC meeting in October, Sutherland said in market access there had been many positive movements, with a number of participants making new offers as well as revision and improvements of earlier offers.

There were 66 comprehensive offers and six non-comprehensive draft schedules of concessions which represented "the great bulk of world trade," he claimed.

He then went on to talk of the "lamentable failure" on the part of the Quad (Canada, EC, Japan and the US) to define fully their understandings developed at Tokyo in July.

Major issues related to sectoral proposals and high tariffs stand in the way of completing a substantial and balanced package and the obstacles have to be overcome, he complained.

Sutherland claimed that there had been "some quiet progress" on related issues of the DFA in agriculture "among some participants, he said, but qualifying it that "there is no breakthrough yet".

In Textiles, concrete solutions have not yet emerged, he acknowledged, encouraging Germain Denis to intensify his efforts to make progress.

"Unless there is a substantial outcome on natural resource-based products, a number of participating countries may not see the basis of a satisfactory market-access package," he added.

Sutherland also saw some "constructive engagement" between major trading partners and the developing countries since the last TNC meeting, but stressed that much more progress was needed.

The Quad countries, especially the US and EC, had a particular responsibility to provide leadership by completing the negotiations among themselves and by negotiating market access offers with others, he exhorted, adding: "mutual recrimination is neither useful nor helpful".

"One way or another, the multilateral process on market access will have to move forward. too much is at stake to allow the difficulties to deprive us of the Round."

There was need over the next two weeks to see visible and concrete improvement in the market access area and a well defined approximation of the content, size and final shape of the overall market access package would be needed by 15 November, he said, endorsing the view of the chairman of the market access group, and urging all participants to comply with this.

On Services he noted progress on finalising a text, but stressed the concerns expressed at last Friday's GNS meeting about "the intentions of a major participant to insert in its schedule a horizontal limitation on national treatment covering all forms of direct taxation" -- a reference to the US move to place beyond multilateral disciplines or scrutiny its taxation laws or rules that could discriminate between domestic and foreign service suppliers.

On the institutional issues (the MTO and the integrated dispute settlement mechanism), being looked at in an informal group under Lacarte, Sutherland said issues needing resolution had been identified. He suggested that Lacarte should organize discussions to address all issues related to MTO and dispute settlement and submit revised texts by 15 November.

Sutherland also said he hoped to have the evaluation of the results, to be undertaken in terms of the implementation of the Punta del Este mandate visavis the developing countries and the special and differential treatment assured to them, to be conducted during the week of 25 November.

On the process for concluding the Round, Sutherland said the time was rapidly approaching when the TNC would need to meet more frequently to monitor and steer the final phase of the negotiations. This, he said, would need the full-time presence in Geneva of all chief negotiators.

In addition, he said, the TNC might also need to consider whether an open-ended working group should be established or some other specific groups to resolve all outstanding issues.

His own consultations had revealed alternative possible approaches to the final process, but he believed further consultations were needed to refine the ideas and he would hence consult with delegations over the next few days and hold a TNC meeting next week to further define the process

In the discussions and comments that followed, while there was what was described as general support for Sutherland's analysis and some optimism that the conclusion of the Round was at last within their grasp, there were concerns over the lack of progress among the Quad or visavis individual Quad countries and others on market access.

There was also a near unanimity (except for the US) over the positions and new points being raised by the US over the last few weeks: on its move for a two-tier approach to financial services sector and the notion of a 'tax carve-out' in respect of financial services and national treatment commitments in its schedules; and its position on the Multilateral Trade Organization and the Integrated Dispute Settlement Mechanism.

Some participants later said that the US was isolated in the discussions inside the Lacarte group and that it had now circulated informally to a few delegations a paper spelling out in detail its alternative approach of a protocol for a GATT-II, inviting delegations for consultations to be held by the US, but that most of the key countries involved were unlikely to participate in these.

Mexico, speaking for the Latin American and Caribbean Group (Grula) nations, expressed concern at the failure so far of the major trading entities to come forward with specific answers to the tariff offers and requests from Grula participants and complained that on the other hand Grula countries were being asked to agree to sectoral commitments where they had no trading interests. Mexico also complained over the US position on the MTO and favouring instead the protocol approach and said the Latin American countries strongly favoured an institutional structure with multilateral disciplines and credible dispute settlement mechanisms that would block unilateralism.

Mexico also voiced concerns over the US new positions for a two-tier approach to financial services and a tax carve-out on direct taxation of service enterprises.

Malaysia, for the informal developing country group, stressed the need for market access and for lack of substantial progress in areas of particular interest to the developing world including textiles, agriculture, tropical products, natural resource and fishery products, electronics. Malaysia also stressed the need to address the other issues in the DFA.

Brazil said while it was confident that the 15 November deadline for the market access schedules could be achieved, complained of lack of positive responses from its trading partners on its priority requests. Brazil also laid stress on the institutional questions.

The Brazilian delegate took a critical stand over the US pressures and the new positions on financial services and warned that these might ultimately lead to reversal of direction of the reform process in many countries and less, rather than more, of market access.

Canada stressed the need for clarification of the Tokyo package and need for market access openings on natural resource-based products. The new Canadian government to take office on Thursday would have as its highest priority the review of progress in the Round and what could be done to bring it to a successful conclusion, he said.

Japan raised the question whether, if the Quad process was blocked, other approaches need to be explored. Japan too had interest in some natural resource-based products, paper and pulp, and the tariff peaks in textiles. Japan had serious reservations on the US position on taxation in services or its two-tier approach to liberalisation of financial services and commitments.

Egypt underlined the problems of the net food importing countries and need to address them. It also complained of the attempts to change the rules of the game at the late stage. the MTO, Egypt said, would provide a strong multilateral basis to protect the interests of the small countries.

The US said it too was disappointed over the market access negotiations and the problems in the services area and the MTO question that could not be resolved. This had prompted the US to put forward its ideas on all these and hoped to have consultations to find a compromise.

Korea complained that the discussions in agriculture had not addressed its own concerns. It would also be difficult for Korea to accept an agriculture text in the DFA that would not command the overwhelming support of the Korean people.

Sweden, for the Nordics, stressed the need for clarifications of the Tokyo package and expressed concern over the US position on financial services and the tax carve-out.

India said that Sutherland, during his last week's visit to India, had been acquainted at the highest levels of the particular concerns of India. Nothing had so far happened on textiles, clarifications on the agriculture texts. The Indian delegate joined others in expressing concerns over the non-MFN approach to financial services and the proposed tax carve-out.

The EC said the Tokyo outcome was difficult to put in place fully and hence its latest 'illustrative offer' which represented substantial tariff concessions to non-quad members.

It would result in a tariff cut on Mexican exports of 34 percent, of 40 percent for Argentina, of 56 percent for Australia and 40 percent for the US and Canada, the EC delegate claimed, adding that the EC had received positive responses from the non-Quad countries.

It was now up to the EC's trading partners to match these substantial offers. However, the tariff negotiations could not be considered in isolation and it was necessary to look at non-tariff barriers too, and for participants to bind their tariffs to provide security.

On services, the EC joined others in expressing satisfaction over progress achieved so far on textual issues, but shared the concerns of others over the position of the US on taxation and non-MFN based commitments on financial services. For the EC, at the end of the day, any result not based on MFN would not be acceptable and this was both in goods and services.

On institutional questions, without spelling them out again, the EC reiterated its objectives of strengthening the rules and disciplines of the multilateral trading system.

EC sources later said that this was a reiteration of its stand on an MTO and said the EC was unlikely to enter into consultations with the US over its latest draft proposals for a protocol approach. However, the US and EC are also due to meet towards end of the week on further negotiations on market access.