TMB BATTING FOR US AGAINST COSTA RICA?

9:23 AM Oct 23, 1995

TMB BATTING FOR US AGAINST COSTA RICA?
Geneva 23 Oct (Chakravarthi Raghavan) -- The United States appears to have successfully stalled this week hearings before the Textile Monitoring Body (TMB) of the World Trade Organization (WTO) of two complaints by Costa Rica over US restraints on exports of underwear and nightwear from Costa Rica.

At an earlier hearing, the TMB decided that the was no serious injury to US producers by the Costa Rican exports, but said there was no consensus on whether or not there was serious threat of such injury. The TMB recommended that Costa Rica and the US hold further bilateral consultations. Costa Rica subsequently reported that its bilateral consultations had failed and came back to the TMB which had fixed the hearings for Monday, and then adjourned it to Friday and without any hearings, merely reaffirmed its previous decision, namely no consensus.

But the way the TMB has handled the Costa Rica vs US case, in violation of rules and procedures, and behind the back of one of the parties, Costa Rica, has been 'the talk of the town' among WTO members, particularly the textiles and clothing exporting developing countries and private trade interests.

This episode, one trade official said, has reduced even further the already low credibility of WTO process, and that of the TMB in particular, in its ability and willingness to uphold and protect the rights of the small trading nations against the majors like the United States.

"It is as if there has been no Uruguay Round, no WTO, and no Agreement on Textiles and Clothing, but a continuance of the old GATT and its Multifibre Agreement (MFA) and its much weaker Textile Surveillance Body," one trade official commented.

According to trade sources familiar with the case, the TMB acted procedurally on the basis of misleading information provided by the US, and without giving Costa Rica an opportunity to rebut it.

As a result, a delegation from Costa Rica which had come to Geneva at considerable expense to present its case, was forced to cool its heels here for a week, and then told TMB would take up the case at some future date. The delegation has returned home without any relief, while the US imposed quotas continue and hit Costa Rica.

While the TMB functions in 'secrecy' and total non-transparency and no official information on it is provided by the WTO secretariat and its press office, the picture that emerges, from information pieced together from private trade sources and diplomats, about the way the TMB has handled the Costa Rican case, in violation of rules and procedures, and behind the back of Costa Rica, is not an edifying one.

Running into the seventh month of the totally unjustified quota limitations imposed by the US, Costa Rican industry and exporters are already about to run into the ceilings imposed, and continuance of the US action will result in great losses to them. The TMB inaction puts heavy pressure on Costa Rica to cry 'Uncle' and negotiate bilaterally with the US to settle.

Under Art 6.2 of the Agreement on Textiles and Clothing, the US was required to make a two-stage determination before applying transitionary safeguard measures: first ascertain facts demonstrating' that the increased quantities of imports of a product was causing serious injury or actual threat thereof to US domestic industry and then go on to establish the source of the problem is due to imports from a particular source.

On the basis of these two determinations, the US issued "calls" to Costa Rica for consultations for a bilateral accord, and failing that acted unilaterally to impose restraints on its exports to the US of the two product items. Simultaneously, the US was required to refer the matter to the TMB, which it did.

The tenor of the ATC would imply that an importing country taking action could not plead both a case of serious injury having been caused and a threat existing. But the US has been routinely pleading both grounds, and the TMB so far has been holding that there is no injury, but that it is unable to reach a consensus on whether there is a threat.

The TMB, under Art 6.10, is required to promptly conduct an examination of the matter, including the determination of serious damage or threat thereof, and its causes, and make appropriate recommendations to the members concerned within 30 days.

This should mean that the TMB should decide that the case of the importing country is justified or that it is not justified and make its recommendations.

But the way the TMB has been functioning ensures that the exporting countries get no relief, that the TMB acts as a process to delay any relief to the exporters, bringing them under considerable pressure to yield to the major importers.

According to trade sources, apart from its substantive failures, in the case of Costa Rica, the TMB also acted unfairly to Costa Rica on procedural grounds too. The hearing of the case was set for 3 PM on Monday 16 October. It was on the TMB agenda and was known to both parties well in advance.

But on Monday afternoon, the hearing was put off at the US instance, with the United States claiming "miscommunication" resulting in their experts and delegation not being present in Geneva.

The "miscommunication" was that US thought Costa Rica would be seeking a postponement.

Costa Rica though denied any such move. According to the trade sources, the US ambassador had met the Costa Rican minister who made clear that Costa Rica would press ahead with the appeal to the TMB.

But the TMB did not allow Costa Rica to present its case, and locked them out of its own procedural discussions on what to do in the light of the US "absence", and decided to put off hearings till Friday.

According to trade sources, in the procedural discussions in which neither side to a dispute participates or is present, the TMB member from the US, Bill Tagliani, who functions in an ad personam capacity sought postponement because of 'miscommunication'. But Costa Rica, not being present, could not rebut it.

On Friday, the US delegation turned up, but said that it was still getting together its "facts" and was not yet ready to justify the restrictions it had placed in March. And the TMB put off hearings in the case, merely reconfirming its earlier decision about a lack of consensus within the TMB.

While it is open to Costa Rica in this circumstance to bring up the issue as a dispute, small countries face considerable handicaps.

Trade observers note that whether related or not to the US stalling in the TMB, Costa Rica is also under tremendous pressure from the US to rescind its agreement with the EU on the tariff quotas for its banana exports under the EU single-market regime.

The EU regime is being assailed by the US transnational, Chiquita Brands International. Chiquita's multimillionaire owner, Carl Lindner, is a large contributor to both parties in the US, having given during the 1993-1994 election cycle (according to the International Herald Tribune which has cited Common Cause, a voting reform advocacy group) $525,000 to the Democrats and $430,000 to the Republicans.

As a result the Republicans who control the Congress and the Democratic administration of President Bill Clinton are pushing the Chiquita case.

The Senate Republican majority Leader, Bob Dole, has been trying to get legislation through Congress to penalise Costa Rica and Colombia for their deal with EU, while US Trade Representative, Micky Kantor, last month has filed a complaint at the WTO against the EU over this.

Trade observers said that in the Costa Rica case on underwear and nightwear, given that the US could have acted under Art 6.10 to impose restraints, only after a "determination" demonstrating (on the basis of facts) the serious injury or actual threat thereof and attributing this to imports from Costa Rica, for the US to first get the hearing put off on 16 October on a plea of 'miscommunication' about the dates, and then after its delegation arrived in Geneva to get the hearings put off on the ground that it has not had time to get all the facts to present its case to the TMB was strange enough.

But for the TMB, to decide in this situation not to make any recommendation, either way, but to merely reconfirm its earlier one of no consensus was stranger indeed, trade sources said.

"All this is possible," one trade diplomat said, "because of a weak chairman and the five importing country members being always present and acting together (in a kind of solidarity) while the exporting country members are fitful in attendance.

"And since the consensus rule for decision-making in the TMB has been interpreted to mean that without a consensus even a failure to decide can't be taken, the entire TMB process becoming a stalling and delaying exercise by the importing countries to put pressure one the exporting countries to accommodate."

There is little doubt that if an aggrieved country raises a regular WTO dispute over the TMB's rulings and procedures, and takes the issue to a Dispute Settlement panel, and on to the appellate body for a ruling on the WTO/ATC rules and interpretation, some respect for rules and law can be established.

But the developing countries face the dilemma whether they should fight for a principle or safeguard their trade and earnings by compromising.

Meanwhile the majors are going around trying to bring new issues on the WTO agenda, with the WTO Director-General welcoming such a move. Over the week-end the Quad countries (US, EU, Canada and Japan) agreed that the issues of social clause, competition policy and investments should be pursued at the WTO at the December 1996 Ministerial meeting.

And promptly, the WTO Director-General, Renato Ruggiero issued a statement welcoming the recommitment to the WTO of the Quad and their looking ahead for an ambitious first WTO ministerial Conference in Singapore and their shared view that new issues should be considered.

Ruggiero added: "As the Ministers point out, there is a vital and urgent need to broaden support for the multilateral system and trade liberalisation."

And developing country diplomats, including the host country for the 1996 meeting, are going around consulting how to attract large numbers of ministers and make it a success. Some of the Latin American countries also appear to have lent support to the EU idea of negotiating a WTO agreement on investments.

But the WTO secretariat and its press office would not comment officially on the TMB functioning or the Costa Rican case, and the wider problem of the way the WTO agreements are being implemented.

And developing countries seem to be fighting shy of meeting among themselves to review how the WTO has been functioning or countering the North's new demands by bringing up such issues at Singapore.