Jun 27, 1991

SOMBRE PICTURE OF PROGRESS IN NEGOTIATIONS IN KEY AREAS SINCE DECEMBER.

GENEVA, JUNE 26 (CHAKRAVARTHI RAGHAVAN) GATT Director-General Arthur Dunkel in his capacity as Chairman of the negotiating group on agriculture has put forward a note outlining the various options for negotiating accords on agriculture trade reform and for specific commitments on domestic support, market access, export competition and on sanitary and phyto-sanitary issues.

The options paper is expected to be informally discussed at the negotiating group next week - before the meeting of the Cairns group in Brazil and the G7 summit in London in mid-July.

The options paper, along with two accompanying reports of the chairmen of the Negotiating Group on Market Access and of Group of Negotiations on Services (GNS), all issued as TNC documents, indicate the very considerable amount of negotiations of substance that remain ahead if, as being suggested, the Uruguay Round negotiations are to be wound up by end of 1991.

Both U.S. Trade Representative Carla Hills and some of the other negotiators have said that much would depend on actual progress made in July, and only then could some tentative targets for further intense negotiations conclusion of the round be envisaged.

While GATT sources suggested that the Dunkel option paper, and the status report of the two other key working groups would put new life into negotiations, agriculture option paper provides no clear guidance or suggestions for breaking the deadlock.

After the last round of consultations, it was suggested that the Dunkel option paper could enable the EC Commission to use it and get some revised mandate from its Council of Ministers, and that while the paper was not officially for the G7, it would also enable the G7 summit to be able to agree on some of the issues or give broad guidance and direction.

Some of the participants in the negotiations, on a preliminary reading, were sceptical of this and said if any pressure is to be brought to bear on the EC or on the G7, it would have to come from elsewhere.

In the report on the progress in services negotiations, seen as another key area, GNS Chairman Felipe Jaramillo of Colombia has said that in order to conclude the negotiations by end 1991, negotiations would need to be advanced, and if possible resolved by end of July, in six areas:

* Scheduling of specific commitments, where informal consultations are continuing on basis of a secretariat option paper.

* Resolve outstanding matters relating to the application of the Most-Favoured-Nation (MFN) provision in the agreement and agree on an approach that would meet concerns of individual participants without resorting to widespread derogations from this important principle. For this matters relating to horizontal arrangements (like bilateral investment treaties and friendship, commerce and navigation treaties) and techniques to deal with sectoral considerations would have to be addressed and resolved.

The U.S. has been opposed to the MFN approach and any provision that would compel extension to signatories of the services agreement of benefits if has or provides under the various bilateral treaties with countries.

* Resolving the issue of labour mobility, and agreeing on an annex on this issue, to enable negotiations on initial commitments.

* Need to address, before July 31, special arrangements for sectors, including telecommunication and financial services, where participants feel separate annexes are needed.

The picture of state of play in the Group of negotiations on Market Access, chaired by Germain Denis, said that since the Brussels Ministerial meeting in December 1990, "there has been no substantial progress in negotiations on market access".

The report said that participants had "difficulties in reaching consensus" on a common approach on reduction, harmonisation or elimination of tariffs and non-tariff measures (NTMs), and different priorities on results of negotiations, and considerable differences which continued on specific product areas and market barriers to be covered in liberalisation efforts.

There were indications, from both ICs and Third World countries of a desire for collective effort to intensify bilateral and plurilateral negotiations to arrive at a mutually acceptable balance of reductions of tariffs and non-tariff barriers, and indications that some major participants are engaging in "more serious good faith negotiations".

However, the Denis report said, a number of serious obstacles need to be overcome to achieve early progress and "strong efforts and genuine flexibility on part of all participants were necessary to ensure that agreed negotiating procedures and various approaches advanced lead to early substantive progress".

The paper listed difficulties in various areas as:

* Scope of market access negotiations - agricultural products, tropical products and natural resource-based products (NRBPs) have so far been left largely outside tariff offers of certain major participants while a number of industrial product areas have not been included in the offers.

* Tropical products - Third World countries insist on continued priority for this and full implementation of the Montreal mid-term accord to eliminate or substantially reduce duties and MTNs. Major markets have relatively high tariffs, selective and high internal taxes and production subsidies on non-tropical but substitutable products, quantitative restrictions, and a general absence of offers on NTMs.

* NRBPs - differences on product coverage prior to December Ministerial meeting remain unresolved. Fishery and forestry products and non-ferrous metals are accepted as part of NRBP negotiations but no agreement so far on paper and paper pulp, hides and skins and energy products. On fishery and forestry products offers are lacking (from a number of countries) that see them as part of agricultural negotiations. Other problems relate to export restrictions, export taxes, dual pricing practices, subsidies, voluntary export restraints and state trading.

* There are proposals (mainly the U.S. zero option proposal) for sectoral negotiations and for mutual elimination of all tariffs (e.g. in pharmaceuticals, pulp and paper, steel, construction and farm equipment, electronics and films) but different views on how these negotiations should be conducted or combined with other techniques to reduce barriers in products of interest to other participants who feel the sectoral proposals do not cover product groups of interest to them.

* High tariffs and tariff peaks - offers of some participants in some products have not been adequately addressed reduction and harmonisation proposals of others such as high tariffs in textiles and clothing, on footwear and leather products and on petrochemical.

* NTMs - no substantial progress on product-specific NTMs not dealt with in other negotiating groups. This adversely affects prospects of achieving a balanced market access package for many participants. Main problems concern QRs on footwear, textiles and clothing, QRs based on BOP criteria for Third World, restrictive standards and health regulations as on tropical products, restrictions related to state trading. Many participants concerned over lack of response in bilateral negotiations and not agreed techniques to evaluate and quantify NTM offers.

* Tariff Bindings - scope of tariff bindings on offer and scope of bindings do not yet provide sufficient basis for completing the negotiations. While there is acceptance of principle that credit should be given for bindings, no common understanding on how to evaluate bindings or as to how recognition is to be given for autonomous liberalisation measures.