8:13 AM Aug 29, 1993



Geneva 27 August (Chakravarthi Raghavan) -- The reports of the accord in Bonn Thursday between German Chancellor Helmut Kohl and French Prime Minister Edouard Balladur to seek changes in the US- EC Blair House accord on agriculture in the Uruguay Round appears to have created some new uncertainties on the drive to conclude the Round.

While everyone has been familiar with the French opposition to the accord, the media reports of the remarks of Kohl in providing some support to the French demand for revisions, has come as a rude shock to many of the GATT officials and negotiators.

Some GATT sources suggest that the Germans would explain or explain away the remarks and ultimately it would prove to be less than what it seems on the face of it.

A GATT official noted that the only benefit from the Uruguay Round for many of the developing countries lies in the discipline on export subsidies of agricultural products, and the ability of countries to compete in a fair way in third markets -- which is what the Blair House accord on volume restrictions would achieve.

If that is now called into question and the volume restrictions on subsidised exports is to reopened, the whole agreement will unravel, he feared.

However, there is some confusion as to what exactly Kohl has said, and whether his promise of working with France to obtain a reasonable result, relates to the revision of the Blair House accord or to the EC's Common Agricultural Policy to compensate the French and the French farmers.

Some sources here said that the Kohl remarks had not figured in some of the German media reports and do not contain the emphasis given to it in the French and English press.

But this could also be a case of the failure of the reporters.

In any event, even if it is a case of one news agency or another having given a wrong lead and willy nilly followed by others, what would matter is not what Kohl or intended, but how others have seen it and what effect any backtracking would have.

It was also being suggested that Kohl (and some of the reporters) had not understood the difference between the Blair House "file" (the US-EC accord) as Balladur has called it and the implementation of it within the EC through the Common Agricultural Policy and its modifications and reforms and that Kohl's remarks should be seen merely as an attempt at finding a face-waving way out for France and finding a solution to the problem faced by the French government from the French farmers.

The implication of this is that Germany would try to find a way to enable the French farmers to sell their cereal exports within the EC -- in Germany where the farm sector is high-cost and inefficient.

Though it is generally portrayed and assumed that the French need the Germans (inside the EC) more than the Germany need the

French, it is also clear that if the French decide to cut their interest rates too quickly to stimulate their economy, at a time when the Bundesbank is determined to keep up its rates, the appreciation of the Deutchmark would hurt German industrial exports.

To suggest that Germany can hence afford to ignore and break with the French could be a misreading of the situation.

GATT Director-General Peter Sutherland is due to visit Bonn and Paris next week, where he is due to meet Kohl and Balladur.

The visits themselves were set up earlier, before the Balladur- Kohl meeting and the German support, however limited it could ultimately prove to be, to the French on agriculture issue.

Sutherland is also due in September to visit North America and some Latin American countries, and is due to meet with the Ministers of the Rio group at Montevideo.

The entire strategy of the EC Commission and of the GATT Director-General Peter Sutherland in trying to bring the 7-year old negotiations to a conclusion is postulated on isolating France, within the EC on the subsidisied agricultural exports issue.

Kohl's remarks has upset this strategy.

While a clear picture would probably emerge only after the 20 September meeting of the EC Council of Ministers, it will further slow down even the bilaterals on market access intended to be resumed from early next week at the GATT here.

Some participants hope that the Kohl-Balladur remarks on agriculture is only a negotiating stance.

But as one official noted it is difficult to imagine that heads of governments could be engaged in such a tactic, since it would be difficult to climb down and compromise after statements at that level.

Technically, the Blair House accord, translated into legal language and presented to other participants by the US and EC towards end of November last year, is still to be discussed and accepted multilaterally and incorporated as agreed changes in the Dunkel text of the Draft Final Act. Hence the scope for changing the Blair House accord, if others are willing to go along, is still there.

Sutherland had indicated before the summer recess that parallel to the resumed market access negotiations, bilaterals and plurilaterals, from 30 August, there would be consultations on texts in agriculture.

So far, everyone of the agricultural exporting countries, have gone along reluctantly with the US-EC accords, but waiting to see how it would be translated in market access "offers".

The EC though had been telling some of its partners that it could do

precious little in improving market access in agriculture beyond what it has offered.

If, on top of it, the EC's cutting down in volume of subsidised cereal exports is also weakened, the Uruguay Round accord would have precious little for the exporting countries.