U.S.-EC SUBSIDY COMPETITION REACHES INTO JAPANESE MARKETS.

Oct 5, 1992

U.S.-EC SUBSIDY COMPETITION REACHES INTO JAPANESE MARKETS.

GENEVA, 2 OCTOBER (CHAKRAVARTHI RAGHAVAN) -- The U.S.-EC competition in subsidised exports, with each increasing its export subsidies to match that of the other, is not merely confined to some major products like wheat, oilseeds or sugar, nor to markets in the developing world, the GATT Council was rudely reminded this week.

Much of the media attention and focus was on the U.S. recent announcements increasing its subsidies, under the Export Enhancement Programme, to wheat, as well as the U.S.-EC disputes over the EC's oilseeds regime.

But Chile drew attention Wednesday in GATT Council to U.S. use of EEP to subsidise exports of canned peaches. Chile raised the issue under any other business, which precludes any Council actions.

By expanding its EEP programme to canned peaches, the Chilean delegate complained, the U.S. was now subsidising sales of U.S. canned peaches on Japanese, Mexican and Korean markets, which till now had been supplied by Chile. The effect of the U.S. subsidy would be to displace Chilean exports. The U.S. now accounted in the Japanese market for 15 percent share while that of Chile is nine percent, and the subsidised exports would displace the Chilean exports to that market.

Argentina, Brazil, Uruguay, Australia and Colombia supported Chile.

But U.S. delegate Rufus Yerxa trotted out the standard U.S. response on these complaints: the U.S. use of the EEP to subsidise its exports to these markets has been for the purpose of matching the EC subsidies.

Other matters that figured in the Council under any other business included Brazil's complaint against the United States over its failure (so far) to implement the panel ruling against the U.S. on non-MFN treatment to imports from Brazil of non-rubber footwear, Pakistan's complaint against Turkey over the levy of anti-dumping duties on Pakistani exports of cotton yarn, Japan's concerns over the NAFTA and need for the parties to notify GATT of the details, and a Philippines complaint (on behalf of Asean) of pending legislation in the U.S. Congress on so-called "anti-circumvention" measures over anti-dumping.

The Brazilian case goes back to the 1980’s, and relates to the difference in treatment accorded by the U.S. on imports of subsidised products among Contracting Parties signatory to the Tokyo Round subsidies code. The panel ruled in favour of Brazil and the U.S. accepted it, but is still to implement.

In the case of NAFTA, Japan said that it was important to safeguard three points: the agreement should not lead to "restrictive regionalism", it should be fully in conformity with the GATT and it should ensure full consideration for the trade and investment benefits of non-NAFTA Contracting Parties.

(One of the principal objectives of the rules of origin in NAFTA is to deny benefits to Japanese plants in Mexico or Canada exporting to the U.S. on basis of imports from Japan and their further processing)

Japan wanted an examination in depth of the conformity of NAFTA with GATT, and towards this end wanted all the information about the pact to be provided without delay.

Mexico (also speaking for the U.S. and Canada), in response, said that though the agreement had been concluded, no final text had yet been prepared, since the final phase of legal drafting was still going on, but was expected to be completed very shortly. The three signatories fully intended to follow the normal GATT procedures (as soon as the text was ready), the Mexican delegate Amb. Jesus Seade Kuri said.

U.S. delegate Rufus Yerxa added that while President Bush had notified Congress of his intention to sign the treaty, no date had yet been set.

A number of countries intervened to express their anxieties and concerns over NAFTA and the need for it to be properly examined by a GATT working party. Among those who spoke were Hong Kong, Korea, Asean, Australia, the European Community and Pakistan.

Philippines, speaking for the Asean, referred to a number of pending bills in the U.S. Congress on so-called anti-circumvention measures over anti-dumping and said these would violate GATT obligations and the proposals in the Uruguay Round Draft Final Act. Some of the provisions in the bills were contrary to U.S. GATT obligations.

While Yerxa said that the administration had not sponsored these legislations, and was opposed to them, several others (Korea, Brazil, Sweden, Pakistan, Japan and India) intervened to support the Asean complaint.

Japan noted that these bills sought to provide de facto for local content requirements and warned that they would discourage trade and capital flows.

Cuba referred to the recently enacted bills in the Congress for tightening the U.S. embargo against Cuba, by seeking to cover products exported to Cuba from other countries, thus applying extra-territoriality to the U.S. law, and violating the GATT rules.