Jan 15, 1992

DUNKEL'S "FOURTH-TRACK" & QUALIFIED "YES" MAKES IT DICEY.

GENEVA, 13 JANUARY (CHAKRAVARTHI RAGHAVAN) Trade negotiators at the GATT agreed Monday, with some reservations and qualifications though, to a process for concluding the Uruguay Round by mid-April that has made the outlook was "very dicey", with more than even chance that EC's- demands for changes in agriculture could still -wreck the Round.

After a three hour-debate at a formal meeting of the Trade Negotiations Committee (TNC that oversees the Round, Chairman Arthur Dunkel got a unanimous go-ahead for three of his four-track process, but as he himself put it, only a qualified "yes" to his fourth-track.

As Dunkel put it to the TNC in his opening remarks, track four would be: "work at the TNC level to examine whether and if it is possible to adjust the package in certain specific places ... an exercise that must be very precise and concentrated on what we can all collectively agree to without unravelling the package".

The statements of delegates at the TNC showed that several of them have some serious reservations over this fourth-track approach and the process, both in relation to the "transparency" and to the prospect of the "package" being changed in parts (to suit the EC and the U.S.) but not in other areas of concern to them.

At issue is the EC insistence on some substantive chances in the Draft Final Act to enable continued subsidisation of its agriculture by putting all its planned direct payments to farmers, under its internal CAP reform programme, into a "green box" of permitted subsidies that would be beyond challenge in the GATT.

Over the next few weeks, Dunkel has to hold consultations to see whether there could be a consensus to changing his agriculture compromise proposals as demanded by the EC or whether the effort would unravel the whole package and wreck the Round.

The draft final act or the "global package" of accords covering all areas of the Uruguay Round negotiations was put to governments on 20 December by GATT Director-General Arthur Dunkel in his capacity as official-level Chairman of the TNC and has been under detailed consideration in all capitals.

Monday was the first occasion for governments to express their views and reactions which they did in very broad terms but not in any in detail - Dunkel had actively discouraged detailed comments at the TNC, both in his introductory remarks and even earlier in private consultations.

And delegates fell in line, though this would mean that the TNC would probably never have the opportunity to do it and influence the outcome in the future either - when the choice would again be to accept or reject a package with changes in it.

The discussions, and even more the private comments of delegations outside the TNC, suggested that there would be considerable opposition and resistance to any such move on agriculture (or for that matter on other substantive areas), but without one the European Community would not accept the package.

At the TNC, three countries (Australia, New Zealand and Brazil), all members of the Cairns group, announced their governments' acceptance of the package as a whole, despite the many deficiencies they found in it.

A number of others including the United States had problems with the text but were nevertheless ready to use the draft Final Act as a basis for concluding the Round through negotiations for market access and initial commitments in services. Some, including the U.S., left the door open for changes through the fourth track that would benefit them without opening up the entire package.

The Community got support to some extent on the a culture front, and the issue of domestic support to farmers, from the Nordics, Austria, Switzerland and Canada. All these too favoured changes in the agriculture through the fourth-track process.

Japan and Korea too had problems in agriculture - over rice imports and tariffication - and similarly favoured changes through the fourth-track, but it was not so certain that their particular concern would get any support even from the EC.

As trade negotiators left the GATT building on Monday night it was apparent that many of them were aware that even the United States no longer commands that kind of clout that the EC has and will acquire over the next few years and that unless there was a drastic change of position by the U.S. and the Cairns Group, the Uruguay Round may in fact be headed for failure.

But any event, the onus for the Round and the present GATT-based trading system seemed to rest on the European Community and its moves: it alone has (and will have even more in the future) the trading and economic strength to be able to decide whether to conclude the Round on the present basis or block the package and force a low-key continuance of the negotiations or reject the package and wreck the six-year old process.

The view on TV screens of President Bush going to Japan seeking help on the trade front (for continued "managed trade" that would be illegal in the GATT and Uruguay Round agreements) to win his domestic re-election has perhaps not been lost on the European policy-makers who too want "managed trade" in agriculture.

In December, before Dunkel tabled his package, at one stage the U.S. and EC were near to reach understanding on putting into the "green box" the domestic support measures of both sides.

Some EC sources believe that even now, under the "fourth-track" approach, the U.S. and EC could negotiate bilaterally, with Dunkel playing the "honest broker" role he has offered to play, to reach an accord on expanding the "green box".

The EC sources also believe that once such an agreement is reached, and the two persuade Dunkel to present it to the others in another formal or informal revision, the others including the Cairns group members would not be able to block it - for the same logic for which many of its developing country-members are going along, namely that prolonging the negotiations could only result in a worse deal and more bilateral pressures on them.

The U.S. and EC are also said to be set quickly to resume their bilateral contacts and talks, and this has in fact worried several of the other participants.

Some unofficial reports from Brussels suggest that the EC is also positioning itself for a failure of the Round where it could blame it on the rigidity of the U.S. and its trading partners.

In this view, the EC believes that the completion of its unified internal market and expanded European Economic Area and web of agreements and accords, would increase its leverage since ii would emerge as a powerful entity able to clinch deals bilaterally and impose its will on others including on the United States.