6:37 AM Dec 13, 1993

MOVING TO A CLOSE, IF US-EC PERMIT...

Geneva 13 Dec (Chakravarthi Raghavan) -- Trade Negotiators working well into Sunday night at the GATT, cleared a large number of the texts in the Uruguay Round Draft Final Act, and by Monday noon the only texts to be cleared were those relating to Services, Trips and Textiles and Clothing.

While as GATT Director-General Peter Sutherland put it at a Sunday press conference that it seemed inconceivable that the two major entities, US and EC, could jeopardise the overall accords over their differences on audio-visual services and aircraft subsidy questions, these differences were holding up actions in the multilateral process on Trips and Services.

The Textiles and Clothing agreement has been held up with reservations by the US and EC on the one side and India and Pakistan on the other.

Besides the US-EC dispute over audio-visuals (about EC right for cultural exception specific to this sector) and the US demand for a share in the revenues raised by EC members through levies on film showings in cinema houses and on blank videocassette tapes and videocassette recorders, the US position on two-tier approach to financial services was also holding up an accord.

The US Trade Representative Mickey Kantor and the EC Trade Commissioner Leon Brittan, who had been meeting in Geneva Saturday and Sunday, in several sessions, have been unable to clinch an accord on the audio-visual question.

There were reports though that this too is kind of theatre, with the two sides knowing the likely area of compromise and clinching and announcing a compromise at the very eleventh hour -- after the political leaders on both sides (Clinton, Balladur, Kohl etc) jumping in and announcing a compromise for the sake of the rest of the world.

The Quad ministerial meeting on Saturday night and the US-Japan talks on Sunday did not also create any breakthroughs -- with Japan remaining dissatisfied with the US-EC positions on zero tariffs on wood and wood products, but conditional on Malaysia and Indonesia removing their bans or high tariffs on exports of raw logs; on zero tariffs on industrial electronics but not consumer electronics and a few other areas; and differences over financial services and US demand Japan fully liberalise its financial services sector now, going beyond Japan's offer to throw up the subsector for pension funds.

While Japan will accept an overall accord, it remains to be seen whether it will put in a final market access package reducing its concessions in other areas to the US and EC.

In the effort to conclude the negotiations on texts and close the texts (the negotiators are now at least 24 hours behind schedule), the late night clearing of texts included the existing DFA text on Textiles and Clothing, but with the United States and the European Communities entering their reservation that acceptance of the text by them would depend on countries like India and Pakistan, who currently maintain import restrictions on grounds of their precarious balance-of-payments positions, opening up their own markets and providing effective access to textiles and clothing imports from the US and the EC.

This, in bilateral market access negotiations, has been reportedly explained would require the two countries to substantially reduce their existing tariffs and binding these tariffs at levels perhaps no more 5 or 10 percent above the levels of those of US and EC.

India and Pakistan in turn appear to have entered their own reservations that the existing DFA text on textiles and clothing (under which the quota restrictions they face in the two principal markets could remain in force till the seventh year of the entry into force of the agreement, and all the restrictions removed only at the end of the 10 years) was unacceptable to them -- unless the text was improved or at least their market access improved bilaterally.

On financial services, a number of participants have made clear that they would too would withdraw all their financial services offers, limiting their MFN commitment in this sector to assuring existing market access, and reserving all future liberalisations to non-MFN basis.

Some like Egypt have already withdrawn their financial services offers, and others like India, Brazil and some of the Asean have stipulated that their own offers were conditional on the US changing its position.

If the US does not change its stance, while the Round would still conclude and with a General Agreement on Trade in Services (GATS), it will virtually exclude a major sector on whose liberalisation much of the so-called benefits of the Round would seem to depend -- namely financial services.

The non-Most-Favoured-Nation provisions in this, as in several other areas would even make the Uruguay Round, for trade policy historians of the future, a multilateral negotiations to get for the industrial world right to derogate from the MFN principle which has been the standard basis for trade agreements and exchanges for over a century, though formally incorporated only in 1947 into the GATT multilateral system.

In the antidumping text of the rules, after most difficult negotiations over the last several days, and negotiations at level of heads of delegations over the weekend, and with the US at every stage threatening to walk out if it could not get changes, compromise text has been adopted -- subject to a Japanese reservation for clearing it with Tokyo and the Trade Minister.

The United States, which had put on the table (on Nov 26) 14 major proposals for changes in the Dunkel DFA text in this area dropped some of them, including its own version of an anti-circumvention provision, but got some amended changes on standard of review, sunset clause, standing of petitioners in a dumping complaint, cumulative injury assessment, termination of investigations on basis of de minimis finding of margin of dumping or volume of dumped imports, and way dumping is to be calculated by averaging prices, and for determination of sales below cost tests.

While the adoption of the antidumping text at level of heads of delegations, with the agreed changes in these areas, was being presented as a compromise by the United States, in fact the United States appeared to have gained most of its "real" demands: the ability to continue to use anti-dumping as a selective instrument of protection, to be invoked by parts of US industry or workers, without the US decisions being capable of being challenged and upset multilaterally, unless complaining country in the GATT proves bias and lack of objectivity on the part of the US national authorities -- a very difficult, almost impossible, requirement in any adjudication.

Japan and a group of key developing countries (who would be the real targets) had been resisting the US demand -- which had the full support of Australia and Canada -- particularly in the area of so-called "standard of review" or the powers of the GATT/MTO panels in such cases.

Several of them had also been insisting that any change relating to the powers of a GATT panel under 'standard of review' should not merely apply to antidumping determinations, but across the board for all agreements. But by Sunday, one by one, the developing countries caved in to US pressure, with India finally accepting it on the basis of a Ministerial decision to be adopted for review of this issue three years after entry into force of the agreement.

In other compromises, the text on subsidies was modified (the Canadian and US modifications, as negotiators have been sarcastically calling them over the last several days).

One modification, to suit Canadians, will place within the "green box" of non-actionable subsidies in the DFA text, those provided by subnational authorities.

The other would raise the limits, on non-actionable subsidies for research by firms, higher education or research establishments, from 50 percent of costs for basic industrial research to 75 percent.

Though this is generally worded, given the tight budget constraints of most of the developing countries (who face the fundamentalist theology against subsidies from the IMF and the World Bank), the beneficiaries of this amendment would be the major industrial countries like the US, EC and Japan.

As a Third World diplomat quipped in explaining this amendment, "We can all hope to benefit inshallah in mid-21st century!"

In the antidumping area, the changes agreed upon include:

* standard of review: A GATT/MTO dispute settlement panel, in adjudicating a dispute, must first determine whether the establishment of the facts (by the authorities making a dumping finding) is "proper" and evaluation of the facts is "unbiased and objective". In the event of both these findings, even if the panel might have reached a different conclusion, the evaluation by the authorities making the dumping finding "shall not be overturned";

While a loophole is thus still left for challenging the facts and evaluation by national authorities in anti-dumping proceedings, it would be a very difficult exercise for complainants to prove that the determination of facts was "not proper" and that the evaluation was "biased" or "lacked objectivity".

* in interpreting the provisions of the agreement, a GATT/MTO panel is to act in accordance with "customary rules of interpretation of public international law" (which would mean, for example, that national sovereignty remains unless expressly ceded), and where this results in more than one possible interpretation, accepting the anti-dumping measure imposed by national authorities if it is based on one of these possible interpretations;

* review: the authorities are to review the need for continued imposition of an anti-dumping measure after a "reasonable time" upon request by an interested party;

* sunset clause: Any definitive antidumping duty is to be terminated no later than five years from the imposition or the most recent review (if the review had covered both dumping and injury to domestic producers), unless the authorities determine that the expiry wold lead to recurrence of dumping and injury;

* standing for petitions: any investigation on a complaint about dumping can be initiated only after national authorities are satisfied that the complaint is by or on behalf of domestic producers of like products or by the domestic industry. The complaint would be deemed to be by domestic industry if it is supported by producers accounting collectively for more than 50 percent of total domestic production, either by supporting or opposing the inquiry, but with a minimum of at least 25 percent of producers supporting it. And where domestic law permits the employees to make or support such an application, this would be counted in the minimum requirement.

Taken together this would mean that if 25.1 percent of employees in a domestic industry complain of dumping of imports and 24.9 percent of the producers come out against the investigation, the US authorities could go ahead with the investigation and the entire gamut of findings and imposition of duties -- without its being challengeable in GATT!

* cumulation: imports of a product from more than one country could be cumulated, for determining effects of dumping and injury, in an antidumping investigation, if the margin of dumping in each case is two percent or more of normal value, and the volume of imports from each countries is above one percent;

* termination of investigation: an antidumping investigation is to be immediately terminated if the margin of dumping is determined to be less than two percent of the export price (and not the normal value as in the original text) or if the volume of dumped imports is less than three percent of imports into the importing country (rather than three percent of domestic consumption), unless cumulatively these less than three percent from each source together account for seven percent of imports.

In other developments during the weekend (but which could be overtaken by new compromises), Japans deputy prime Minister Tsutomu Hata who talked separately both with Brittan and Kantor (according to his officials) found some of the US-EC compromises unacceptable to Japan.

These include the compromise over Japan's rice imports (for a six-year moratorium under specified circumstances), a politically sensitive issue with the fate of the government in Tokyo in balance because of threat of the socialists to withdraw from the coalition on this ground, the "miserly" tariff cuts on electronics (about 60-80 percent from current rates and confined to industrial electronics and none on consumer electronics) and zero tariff over ten years on wood products (but on tropical wood products, unless Malaysia and Indonesia remove their bans on exports of raw logs or their export taxes)

The Kantor-Brittan talks on audiovisual sector and other differences continued on Monday morning, with Brittan who put off his originally scheduled departure Sunday night to Monday (in time to attend an EC Council of Ministers meeting).

The problem in this area has been further complicated by on one side the EC Summit over the weekend reiterated the hardline positions of France, Spain and others within the Community, thus effectively reducing Brittan's capacity for compromise, and on the other by the continued hardline demand of the US motion picture industry (to which Kantor and Clinton are politically sensitive) for a share in the EC members' levies on movie-theatre tickets and on blank videocassettes and videocassette recorders.