Feb 12, 1991

URUGUAY ROUND TO GET NEW TWO-YEAR LEASE OF LIFE?

GENEVA, 11 FEBRUARY (BY CHAKRAVARTHI RAGHAVAN) Ė GATT Director-General Arthur Dunkel's plans to re-start "very soon" Uruguay Round negotiations in agriculture and, in parallel, on other issues appear to be awaiting a green signal from the U.S., as also Argentina and Brazil in the Cairns Group.

The U.S. "green signal" appears to hinge on its bilateral discussions with the EEC and how far it is able to gain the perception in these talks that the EC is serious about negotiations in agriculture and would undertake separate commitments on domestic support, border protection and export subsidy and provide reassurances on the EC's "rebalancing" concept in border protection.

The extent to which the U.S., on the basis of this perception, is able to persuade Argentina and Brazil about EC's seriousness would have a bearing on negotiations in other areas and how far the U.S. could hope to get concessions from the Third World in new areas.

If Dunkel does get the "green light" this week, he would be convening an informal group of 30-40 delegations on agriculture and then other groups. Later, perhaps in another one or two weeks, he would also convene a meeting of the Trade Negotiations Committee (TNC) to show that the negotiations, which collapsed at Brussels, have been resumed.

Such a TNC meeting might also be needed to modify the Punta del Este Declaration of 20 September 1986 which said the MTNs "will be concluded in four years" and modify this by calling for conclusion of negotiations "as soon as possible".

The original four-year deadline in fact expired in September 1990, but was somehow stretched to the Brussels Ministerial session of December 1990. But further stretching it would no longer be credible if, as is now accepted by most participants, the round would have to be extended without any more artificial deadlines, and in practical terms by one or two years.

Only the European Community still seems to favour wrapping up the negotiations in February with a "mini-package".

Dunkelís plans involve resumption of negotiations on agriculture on the basis of a statement by him outlining his understanding that commitments would be undertaken in all three areas - reduction of domestic support, increased market access and reduction of export subsidies - as well as on sanitary and phytosanitary regulations and changes in GATT rules to reflect the agreements.

This would be a modified version of the Matt Hellstrom paper at Brussels but without any "figures".

There would also be no references in his statements to tariffication (conversion to tariffs of existing protection and domestic support) nor to "rebalancing" - the EC proposal for reduction of border protection in some products and their increase in others, but within the overall limits of reduction in aggregate measure of support (AMS).

Under Dunkelís plan these would be issues open for negotiations. However, the U.S. Trade Representative Mrs. Carla Hills is reportedly seeking private assurances on these from the EC and its external relations Commissioner, Franz Andriessen which the latter has been apparently reluctant to provide.

While both before and since Punta del Este, and much against advice from key Third World countries, Dunkel had been proceeding by setting deadlines and "event-planning" (formal and informal ministerial meetings), he now appears to be against both, noting that setting deadlines or meetings of the TNC and failure to reach accords could well damage the credibility of the GATT itself.

Third World sources provided this assessment Friday after a meeting of Dunkel with the informal Third World group. On Thursday he had met with a small group of Third World delegates.

Dunkelís efforts so far has been in pursuance of the mandate given to him at Brussels last December, after the negotiations collapsed on the agriculture issue. He was then mandated to hold intensive consultations with a view to promoting agreements in all the areas where there were outstanding differences and in the light of that reconvene the TNC at an appropriate level to conclude negotiations at the date he considered appropriate.

The EC so far has provided no signal of willingness to change its position on agriculture. But its moves for changes in the CAP, because of its budgetary constraints, have encouraged the U.S. and Cairns Group to believe that time is on their side and that the EC's plans for reforms, if adopted, would be of benefit to them.

Last week Dunkel had met with senior officials from the U.S., EC and Australia (which chairs the Cairns group). He has also held consultations with EFTA countries and Asian.

After these meetings GATT sources had said that the idea of a "platform" for agricultural negotiations had been given up but that consultations, including bilaterally between the U.S. and EC, were continuing with focus on ways to re-engage in the negotiations.

This was on the assessment that the EC at this point would not be able to move in agriculture beyond its position at Brussels but that the expected EC plans for reforming the CAP held out some promise of changes in the right direction, that the U.S. for its own reasons would be seeking and obtaining an extension of its fast-track authority and the best hope lay in re-starting negotiations without any deadlines.

Since then an EC delegations has been in Washington for talks with U.S. officials and has returned to Brussels, with U.S. pressing for some credible private assurances from the EC. But the EC however seems to be baulking at providing such assurances.

For the U.S., the Gulf war and need to maintain its alliance against Iraq and its dependence on Europe and Japan for financing the war, as well as opposition within the U.S. from sugar producers and other such sectors enjoying protection against far-reaching reforms, may have created a new dynamics.

At one stage in January, the U.S. had in fact suggested that to get the package past Congress, and to compensate for the lower benefits from agriculture, there should be compensation in other sectors like intellectual property, investments, etc.

This was interpreted by the Latin Americans to be a case of their being asked to pay a price for the inability of the U.S. to extract concessions from Europe, a price that would also benefit the EC and they refused.

Argentina and Brazil, the two Cairns Group members who blocked further negotiations at Brussels over the EC stand and have been insisting on progress in agriculture before starting negotiations on other issues, have also so far not given their okay to the Dunkel plans. But whether they would stand up and continue to block, if the U.S. and EC reach some bilateral accords is unclear.

Even if they don't, it would still have an effect in other areas. Without credible concessions on agriculture, textiles and other key areas of concern to the Third World, it is difficult to envisage concessions by them on new areas.

At his meeting with the Third World group on Friday, Dunkel would appear to have said that "very soon" he plans to start "consultations" on agriculture among about 30-40 delegations, on the basis of a statement commanding the consensus of the delegations which would be a modified version of the concepts in the Hellstrom paper put forward at Brussels, but without any of the numbers.

It would express his understanding that the negotiations would be for commitments by countries in all three areas - domestic support, border protection and export subsidies.

The Hellstrom paper had provided separate commitments in the three areas.

In internal support it called for reduction by commodity of 30 percent over a 5-year period from 1 January 1991, with 1990 taken as base period for calculations.

In market access, it called for maintenance of 1990 access conditions for all products, on basis of modalities including tariffication to be agreed upon, a minimum level of access from 1991-92 of at least five percent of domestic consumption for productions without currently a significant level of imports, and on basis of modalities to be agreed for reduction of border protection for all agricultural products by 30 percent from 1990 levels. The commitments were to be implemented over a five-year period.

On export competition, there would be commitments to progressive reduction of aggregate budgetary outlays on export assistance, per unit export assistance or total quantity of product in respect of which export assistance may be provided to commercial exports of primary products. Countries choosing the last approach would do so taking the volume of product exported in base 1988-90 as average and reducing it by 30 percent over five years.

At Brussels the EC would not accept this, and Argentina and Brazil found the market access commitments vague.

Parallel to the negotiations in agriculture, other issues would also be negotiated, Dunkel said.

Third World sources said that while technically the negotiations could resume in a week or ten days, as soon as the U.S. and EC, as also Argentina and Brazil, give their consent, in practice there would be no substantive negotiations until the situation about U.S. extension of fast-track authority was clear, namely, end of May the three month period that Congress has to disapprove a request for extension of the authority.

The administration appears to be fairly confident of getting the extension of authority and perhaps believes that taking on some of the domestic protectionist lobbies, like the powerful textile lobby, at this time when President Bush is domestically strong because of the Gulf War would be in its interest.

There would also probably not be substantive negotiations on agriculture until-the EC's internal reform process is under way and its direction is clear to others.

But while the resumed negotiations would have no deadlines of its own, Third World sources said that there would be the practical deadline of the time-span of the extended U.S. fast-track authority which would run till March 1993, with a further two-month time-span for the administration to forward to Capitol Hill the actual implementing legislation.

But given the US election calendar in 1992, a presidential election year, the administration might want the negotiations to be in fact completed by about mid-1992 to enable it to submit them to the Congress, for hearings to be held and voted upon before Congress adjourns for the elections.

At his Friday meeting with the Third World group, Dunkel indicated he would not be making any revisions of the Hellstrom text on the issue of special and differential treatment, noting that it had been spelt out in the Punta del Este mandate, in the mid-term accord and on a number of other occasions.

The Hellstrom text on this issue had said that Third World countries would not be called upon to undertake full depth of internal support reduction and where such support fell within the scope of reduction commitments, the countries concerned would have the flexibility to implement reductions within the range of 50-100 percent of reduction rate for ICs, and with an additional five-year time-period.

At Brussels India and a number of Third World countries had expressed their disagreement with this approach and had called for provisions fully reflecting the development dimension and the nature of agriculture in the Third World.

In other comments at Dunkelís meeting, Hong Kong reportedly pointed out that it was mainly concerned with the negotiations on Textiles and Clothing. The Multifibre Agreement (MFA-4) was due to expire at end of July and in that sense there was a deadline involved and wondered how the Dunkelís proposal for resumption of negotiations without deadlines would affect this issue.

Brazil wondered what was the change or development between the collapse of the negotiations at Brussels and now to suggest resumption of negotiations in all areas. Brazil also wondered whether it was wise to consider negotiations on new issues without having any agreement in agriculture?

At Brussels when the EC did not accept the Hellstrom paper as a basis for negotiations, Argentina and Brazil had called a halt to the negotiations and saw no purpose in continuing negotiations in other areas too.

Dunkel spoke of Brussels being in December and they were now in February and between the two periods a number of changes had taken place in the world. It was up to the delegations. While he did not clearly spell out the changes, GATT sources said what Dunkel had in mind was the U.S. decision to seek extension of fast-track authority, the EC's own internal reform process under way, and the Gulf War.