Jun 15, 1989

MFA END TIED TO TARIFFS, SAFEGUARDS, SUBSIDIES AND ...

GENEVA, JUN 13 (BY CHAKRAVARTHI RAGHAVAN)— Judged by the remarks and interventions of the European Community and the United States in GATT last week, the end to the discriminatory trading arrangements in textiles and clothing is contingent on solutions to a host of other trading problems.

This is the assessment of observers after last week's meeting of the Uruguay round negotiations group on textiles and clothing.

Under the mid-tern review package agreement at the Uruguay round trade negotiations committee meeting in April substantive negotiations were to have begun in April in order to reach agreement within the time-frame of the Uruguay round on modalities for the integration of trade in this sector into GATT.

The meeting of the textiles negotiating group last week was its second after the April TNC meetings.

While third world countries have put on the table their own proposals for phasing out of the MFA and integration of the trade, none of the major importing countries have so far done so.

Even at last week's meeting, neither the EEC nor the USA formulated their proposals in this area.

The EEC has said it is still in the process of formulating its proposals, but hopes to present them at the next meeting set for July 24-23. The United States has said it may not be able to come up with any proposals of its own, at least not before the September meeting set for 21-22.

The slow pace being set by these two for the textiles negotiations is in sharp contrast to the pace set by them and by the GATT secretariat in the negotiations on services, intellectual property and other areas of interest to the industrialised countries.

However, in their interventions in the negotiating group last week, the EEC and the U.S. to some extent would appear to have indicated the approach they would follow.

The EEC said that the "strengthened" GATT rules and disciplines envisaged for the integration of this trade into GATT would have to assure equality and equalisation of competition rules, provide for tariff bindings by all countries, deal with subsidies and dumping in this trade, and also subject to a "provisional" safeguards agreement.

The United States for its part added another condition, namely, phasing out of restrictions on access to markets or non-tariff barriers, an issue that has defied solutions in GATT and among OECD countries so far, and where within the non-tariff barriers negotiating group there has been no agreement on how to proceed.

In the U.S. view, these barriers to be phased out in the textiles trade cover both those sanctioned by GATT, including such matters like value added tax, licensing etc and those outside.

Earlier, at the negotiating group, Indonesia on behalf of the third world textile exporting countries (in the international textiles and clothing bureau) put forward a proposal for phasing out of restrictions under the MFA through a number of complementary approaches.

The ITCB members suggest that no further restrictions should be imposed under the MFA during the phasing out of the restrictions.

Other proposals call for reduction of restrictions adopting several approaches - on the basis of the fibre (removing restrictions on classes of textiles and clothing like those made of cotton, wool man-made fibres etc), supplier approach (least developed, small suppliers and new entrants, wool producing and cotton producing countries), degree of processing, specific product groups and those where there is no domestic production.

Other ideas put forward include abolition of the concept of so-called minimum viable production and aggregate and group limits, and removal of limitations on flexibility including cumulative limits in quotas and their use.

The ITCB members' proposals for integration of trade in this sector into GATT and for liberalisation of the trade also suggest enlargement of quotas prevailing at the beginning of the phase out with a minimum of six percent, progressive increase in growth rates for quotas for products where quotas are not abolished.

Pakistan, in an intervention reportedly discounted ideas such as those put forward by Canada) for global quotas and tariff quotas as a way of liberalising the trade, and suggested that these ideas were basically intended to distract attention from the call for phasing out of the MFA.

Such ideas, Pakistan reportedly said, should not be taken seriously but should be rejected out of hand.

In Pakistan’s view any modality evolved for integration of the sector into GATT should satisfy three tests: the modalities should be simple, should be technically feasible, and should contribute to liberalisation.

The community reportedly saw the three tests suggested as a good basis, and spelt out some of its preliminary ideas, and providing some specificity.

Any modality for liberalisation and integration, the community said, should provide for what it called "equality and equalisation of competition rules", including in respect of subsidies and dumping.

It should also be contingent oft all countries undertaking to bind their tariffs in GATT.

All these are issues being dealt with in different negotiating groups, and do not merely relate to the textiles trade.

The agreement on textiles, the EEC said, should be based on what it called a "provisional" safeguards agreement.

While the community did not spell out the nature of this "provisional safeguards agreement", it would appear to have referred in this connection to its ideas on safeguards being put forward before the safeguards group.

In the paper it has put forward, and to be discussed in the safeguards group later this month, the EEC has said that the general rules proposed by it in the safeguards agreement would be applicable to the textiles sector "at the end" of the process of integration of trade in this sector into GATT,

But during the period of such progressive integration, problems in the textiles sector should be dealt with through specific provisions that take account of the particular conditions characterising the trade in textiles.

The specific safeguard rules to apply to textiles during the process of integration were thus of fundamental importance, the EEC has said.

In its general proposals on safeguards besides different provisions relating to situations where temporary or short-term safeguard actions might be required and those where longer-term measures with structural adjustment would be required, the EEC has also envisaged some undefined circumstances where solutions safeguard actions) would have to be "selective" but with adequate guarantees for exporting countries.