Oct 19, 1988

U.S.-EEC DEAL IN OFFING FOR MONTREAL.

GENEVA, OCTOBER 17 (IFDA/CHAKRAVARTHI RAGHAVAN)óThough the United States and the European communities continue to confront each other in GATT over agriculture trade issues, the two are likely to strike a deal and present a compromise at Montreal, when trade ministers meet there in the week of December 5 for the ministerial meeting of the Uruguay round trade negotiations committee (TNC).

This is the impression of several third world participants after last week's meeting of the negotiating group on agriculture, where the U.S. and EEC stuck to their hitherto inflexible stands.

At the meeting, the U.S. orally presented its ideas for short-term measures, but on the basis of a firm commitment to a long-term framework involving elimination of all government support to agriculture.

For the short-term, the U.S. in effect suggested a freeze an further support, to be achieved by every country converting its existing level of protection, whether by way of quota restrictions or variable import levies, into tariffs and bind them.

'The EEC rejected such an approach, making clear that it could envisage restrictions and disciplines an agricultural support, and even gradual reductions, but not their complete elimination.

Third world participants said they had the feeling that the two sides were in contact, but that any compromise would emerge only after the U.S. presidential elections an November 8.

The agriculture negotiating group is due to meet next an november 14-15, and this would be the last meeting before the meetings of the group of negotiations on goods (GNG), and then of the Montreal meeting of the TNC.

All negotiating groups are due to report on their work to the GNG, which would in turn present a report for the consideration of ministers at Montreal.

At last week's meeting, the chairman of the agriculture negotiating group, Aart de Zeeuw of Netherlands, reportedly said that while he would try to present a report for the next meeting, he had indications that it might have to be delayed.

Several third world participants related this to their impression of on-going U.S.-EEC talks, and the EECís unwillingness to move in the matter until after the U.S. presidential elections.

The EEC commission, and meetings of agriculture ministers to be followed by foreign ministers, originally schedule for early November, have been put off till well after the U.S. elections.

Presumably to justify its "wait-and-see" attitude, EEC sources had carefully leaked to some delegates and newsmen last week copy Michael Dukakis, to U.S. if a letter by the Deinacratic candidate, farmer groups in the Midwest, indicating that he for one would not move to eliminate all government support measures in agriculture.

This demand of the Reagan administration has been seen within the U.S. by several farming communities as more in the interests of the big agribusiness TNCS rather than individual farmers.

At last week' s meeting, the EEC tabled a paper outlying what it called technical aspects of "concerted reduction" of domestic agricultural support with a view to establishing a sound basis for long-term-actions in this area.

In february, the EEC had proposed what it called "emergency measures" to provide for price discipline for cereals and cereal substitutes, supply management measures to reduce quantities of sugar put on the world market and maintaining present access to traditional import markets, and compliance by non-member countries who are significant exporters with the disciplines of the international dairy arrangement.

In June, the EEC also tabled what it called "short-term measures", involving commitments by countries to "freeze" their support expressed in so-called support measurement unit (SMU).

The short-term measures, the EEC suggested, should apply to cereals, rice, sugar, oilseeds, dairy products and beef/veal.

The EEC' s proposals, now tabled, for long-term reduction of support are to apply to the same set of products.

The EEC noted that other proposals on the table for reduction of support were linked to a total elimination of support.

In its paper of October 1987, the EEC had also said that at the second stage of negotiations, after agreement an emergency and short-term steps, there should be a significant, concerted reduction in support coupled with a readjustment of external. protection in order to achieve a reduction in the distortions which are the source of or contribute to the present market disequilibria.

The EEC has still not indicated its ideas an "readjustment of external protection", but has promised to do so in a future paper.

In its paper last week, the EEC envisaged "bindings" for a period of five years (rather than the GATT practice of tariff bindings for three years) of domestic levels of support at the 1984 levels, calculated with reference to an external reference price.

There would be provisions for dispute settlement and compensation if any GATT contracting party were to modify its bound level of support.

The EEC paper also envisaged that its proposals and procedures for binding of support should apply to all third world countries (except for the least developed), and especially those third world countries occupying a competitive position for certain products and having a high production volume.

At the same time, the EEC envisaged differential and more favourable treatment to third world countries through the aggregate measurement of support.

This, the EEC suggests, could be done through a restricted policy coverage that would allow third world countries flexibility in order to develop basic infrastructure and improve production and productivity in the agriculture sector, taking into account the demand an their internal market and on the world market.