Friday 26 March 1993

OLD AND NEW DISPUTES AT GATT COUNCIL

Geneva 24 Mar (Chakravarthi Raghavan) -- The European Community's new banana regime and the much older preferential import regime for ACP countries, the US use of anti-dumping investigations and levy of countervailing duties on steel and other imports, new US levies on imported cars were some of the trade frictions that occupied the GATT Council's attention Wednesday.

None of the disputes were resolved and many would come up again at future meetings.

On the European Community's new single-market banana regime to come into effect on 1 July, Costa Rica and other Latin American banana exporting countries raised the issue again.

The issue had figured at the meeting of the Council in February when the current banana import regime, with restrictions in some of the EC states and duty-free preferences for imports from the ACP countries under the Lome agreements, was referred to a GATT panel for adjudication.

With no agreement on the terms of reference or the panel, the GATT Director-General has named a 3-member panel chaired by I.G.Patel, former finance secretary of India who later headed the London School of Economics. That panel will also have the standard terms of reference.

According to the GATT spokesman, David Woods, as a result of consultations, it had been agreed that the ACP countries who would be principally affected (if their preferential imports into the EC were challenged and eliminated) would be able to participate as third parties before the panel, attend all formal meetings and take the floor when invited.

The discussions on the old and new banana regimes at the Council Wednesday was mainly 'procedural' but having some bearing on the substantive questions. existing panel rather than substantive.

At the time of the February Council meeting, the Latin Americans had raised their complaint over the new regime and the EC's failure to hold 'consultations' on it with them under Art XXIII (a necessary formal step to raise a dispute and seek adjudication) but the EC had said any dispute could arise only when the regime is formally approved and promulgated.

This has now been done by the EC Council of Ministers (on Feb 19, soon after the last Council meeting) and consultations have been held with no success, but another round is scheduled.

In raising the question in the Council, Costa Rica noted that the new regime would be contrary to the GATT and hence they had sought consultations with the EC. The Costa Rican delegate complained that the consultations with the EC on 22 March had failed, since the EC wanted the discussions on the new regime in the context of the Uruguay Round. Costa Rica and other Latin Americans saw this as unsatisfactory, since even now in anticipation of the new regime, they were suffering damage and hence a panel should be set without delay so that solutions could be sought even within the existing GATT rules.

The EC took note of the Costa Rican statement, reiterated the EC's desire to seek a solution, and pointed out that a date had been set for further consultations. The EC also noted that a panel had been established on the old regime and hence it was inappropriate to discuss its GATT legality in the Council now.

Jamaica, reflecting the views of the Caribbean and African banana exporters to the EC, said though the dispute was being raised as a Latin American-EC one, the ACP countries were the real 'defendants' and they were having to fight the case as if they were industrialized countries. In this view, Jamaica sought technical assistance from the GATT secretariat to be able to represent the ACP country interests before the Panel and for sufficient time to enable them to do this.

While a number of other ACP countries also took the floor to support Jamaica, some of the interventions from Latin America suggested that the entire EC-Lome preferential regime would itself be challenged in the panel proceedings -- old and new.

Other GATT participants said that the very large tangled web of EC trade agreements and preferences -- within Europe, with Mediterranean countries, besides Lome and others like it, had not received GATT sanction in the form of approval (as free trade arrangements) nor waivers for departures from the GATT's MFN and other requirements and rules. The EC, whose Rome treaty itself never got formal endorsement of the GATT, has always proceeded on the basis that what is not disapproved in GATT is approved.

The banana regime challenge could thus set the stage for the GATT to look into the whole 'can of worms'.

Earlier, the Council discussed the report of the working party on the US Andean Trade Preference Act (ATPA), which provides special trade preferences to four Andean countries in the fight against the illicit drugs. The US had sought and obtained a waiver in March 1992. The working party itself was set up after the waiver, in effect thus reducing the normal scope of its work.*

The US has explained the preferences in terms of use of trade policy to fight production and trafficking of cocaine and enabling the citizens of Andean countries to engage in trade in legitimate products. While four countries (Bolivia, Colombia, Ecuador and Peru) were covered by the law, only two of them, Bolivia and Colombia were said now to be eligible for the benefits.

The law in giving GSP preferences has some non-trade criteria -- including the recipients having to agree to higher intellectual property protection or workers rights etc and the two not enjoying the benefits now presumably have not fulfilled the eligibility criteria. There were also several trade sectors, including textiles and clothing exports of these countries, that were excepted from the benefits. 

The report of the working party showed that several members had questioned exclusion from eligibility on criteria not related to the stated goals of the waiver, with Ecuador (a GATT observer, but potential beneficiary) telling the working party, as it did at the Council itself on Wednesday, that its exclusion was not at all directly related to any reasons pertaining to drug- trafficking problem.

Noting that the unilateral criteria set in the Act did not relate to the particular goals invoked in seeking a waiver, several members had also expressed concern over the systemic implications of incorporating non-trade conditions as a pre-requisite for granting trade benefits. Others also expressed concern that the 'benefits' were to be given on assurance by the eligible country that it would provide the United States "equitable and reasonable access to the markets". Also, even in area of intellectual property, the law only demanded copyright protection against broadcasts for US material and not generally.

The US response in the working party had been that the conditions were not unique to the ATPA but identical to those in the Caribbean Basin Initiative and that the US Congress in all these cases wanted to ensure that the countries would "enhance a cooperative relationship" with the US.

The Brazilian complaint against the US over restrictions on imports of woollen suits (covered by the MFA and on which the Brazilian complaint had been considered by the textile surveillance body but could reach no conclusion) which had figured in the February meeting was again raised, but with no conclusion. Brazil had sought the use of good offices of the GATT Director-General to resolve the dispute and the Council was informed that while some preliminary consultations had taken place, it had not so far borne fruit.

On the US anti-dumping actions on steel imports, Brazil brought up the issue again, pointing out that since the issue was raised at the February meeting, the US had taken further actions including instances where anti-dumping margins of 148 percent had been 'found' against producers of lead and bismuth -- all on the basis of the 'best information available' to the US authorities --an euphemism for reliance on US complainants unsubstantiated charges of dumping. Another case involved actions against steel pipes and tubes on the basis that these could be easily converted into steel 'like products' on which antidumping actions had been taken or in process.

The actions against Brazilian exports, Brazilian ambassador Celso Amorim warned, would affect the entire Brazilian privatization and liberalisation programmes, with $400 million or more than half of Brazilian exports affected. Sweden, Finland, Austria, South Korea, the EC and others similarly affected all voiced complaints over the US actions, noting at the same time that the only solution would be through a multilateral steel agreement.

The US for its part fell back to citing one of the US weeklies, Newsweek, for the 'fact' that there was 70 million of surplus steel production capacity in the world being targeted on a nine million ton US market. The ITC had only made preliminary findings and yet to decide on material injury etc.

The EC complaint against the US over new levies on automobile imports was a new dispute.

According to the EC, the US has three taxes or charges on sales of cars which have "more than proportional incidence on sale of imported cars". The three taxes, EC complained, were:

• the corporate average fuel efficiency (cafe) payment, a civil penalty to be paid by manufacturer or importer if the 'sales- weighted average' of all model type fuel economies of cars produced by that manufactured fell below a specified level. It was calculated on the full range of production of a manufacturer and favoured large, integrated, full-line car markers and worked to disadvantage of limited-line producers concentrating on the top of the market. The levy thus involved discrimination between imported and domestically produced products.
• so-called gas-guzzler excise tax on sale or use of automobiles of a model type with fuel economy standards set by the Environment Protection agency. Progressive levies were on models with a fuel economy of 21.5-22.5 mpg ($1000) and going up progressively to $7700 to models with a fuel economy of below 12.5 mpg. The minimum threshold fuel economy cut-off point 22.5 mpg was not founded on any reasonable or objective criteria but led to discrimination against imported cars.
• the luxury tax levy -- an excise tax on retail sales of some luxury items, boats, furs, jewellery and cars exceeding a certain price -- had a disproportionately higher tax on imported cars than on US produced ones. In 1990 over 80 percent of vehicles hit by the tax were imported almost 50 percent of all imports were hit. In 1991, an even higher percentage was hit. The $30,000 cut-off for the tax was "capricious" and the distinction between luxury and non-luxury cars was "irrelevant" for GATT.

The EC said that consultations had been held with the US in July and September last year, but had failed on the fundamental legal questions involved. The EC hence sought a panel reference.

With the US wanting time to develop information on the dispute and hence opposing reference at this meeting, the issue would come up at the next meeting when reference would be automatic.