Nov 6, 1991


GENEVA, NOVEMBER 4 (CHAKRAVARTHI RAGHAVAN) – While the U.S. and EC are pondering on whether and how they could do a deal on agriculture and sell it to others, negotiators from other countries were involved Monday in private consultations.

An official level meeting of the TNC has been convened for November 7 when GATT Director-General, Chairman of the official level TNC is to report on the status of the negotiations and put forward his procedural proposals on how to proceed further.

Dunkel is expected to propose further intense negotiations in all areas from November 11 week.

This is based on the hope that in the current series of U.S.-EC talks and contacts at various levels, including the U.S.-EC summit this Saturday at The Hague (between President Bush and the EC's Dutch Presidency and EC Commission President Jacques Delors) a deal could be struck between the two that could be forced down on the others at the Geneva talks.

The GATT and the Uruguay Round negotiators missed a deadline on October 31 when they failed to come up with clean or near-clean texts on the various issues on the Uruguay Round agenda so as to enable them to conclude the negotiations and wind up the Round by February end 1992.

The deadline of 31 October for clean draft texts had been set in September by Dunkel on the premise that the US and EC would resolve their differences and strike a deal over agriculture, the issue on which the Brussels Ministerial meeting broke up and one that has been seen as holding up substantive negotiations in all other areas of the Round even its effective resumption in June.

But this time-table was upset when the EC took time to get its own act together. It was only last week that the U.S. and EC began direct bilateral talks on agriculture, at level of their senior officials – U.S. Agriculture under-secretary Richard Crowder and EC Director-General for Agriculture Guy Legrasse.

The talks in Washington were followed up by another round in Brussels. Over the weekend the U.S. and EC officials met in London with Japan and Australia (the Chair of the Cairns Group).

Japan, in the talks in Geneva, has made clear last week that it was not ready to give up its objections to allow rice imports or to convert its quantitative restrictions and bans into tariffs - the so-called tariffication approach that the U.S., EC and Cairns group have agreed upon as the basis for freezing current restrictions and for reducing them in future.

U.S. and EC officials were back in their capitals to brief their bosses. Apart from the U.S.-EC summit, the U.S. Agriculture Secretary and the EC Agriculture Commissioner are due to meet to strike a deal if possible.

Australia was due to brief in Geneva Tuesday the other members of the Cairns Group.

While little is in fact known on the likely compromise that the U.S. and EC are discussing, it would appear to be one that would hold out the promise of reforms and changes over the long-term (perhaps in the next century) to discipline the use of subsidies to support and protect domestic producers through a framework providing for separate commitments covering domestic support, border protection and export competition.

But it seems unlikely to produce any immediate or short-term benefits to most of the agricultural exporting nations in terms of market access in Europe or even on competing but subsidised exports from the EC in third markets.

Reports from Washington show that some of the domestic US agricultural lobbies - producers of sugar, peanuts and cotton - are already positioning themselves to ensure the quotas and other restrictions on imports are not removed.

With the EC also anxious not to move too much immediately - because of domestic problems - and Japan insisting on exempting its rice imports from any reforms - the cynical view amongst observers is that the U.S. and EC would be doing a deal with some "sweeteners" in it for Australia and some of the key Latin American players to win them over.

This, it was suggested, could involve improved market access by EC for cereals and meat (to meet the demands of Australia, Argentina, and Uruguay) and some soyabean imports (for Brazil).

But whether on this basis, the majors (and Dunkel) could persuade others to go along, and also agree to concede to the demands of the U.S. and EC in areas like intellectual property, GATT rules and other such matters is not very clear.

But a cynical view of the "wheeler-dealer" approach was provided in the reaction of a trade official when it was suggested that even if the U.S. and EC could sell such a deal to Australia, and perhaps Argentina, Brazil and Uruguay, it might not satisfy other members of the group, at least sufficiently to persuade them to yield in other areas.

The source said that once the U.S. and EC persuade Australia (an OECD member) to go along, the rest won't matter. He cited in this regard the example of the pre-Punta del Este manoeuvre leading to the so-called "cafe au lait" paper that split up the Third World unity. At that time the U.S., EC and the GATT secretariat used the Cairns Group and then the Swiss-Colombia led group of smaller European trading nations and other Third World nations to break up the Third World unity against services and other new areas.

But whether such an approach can succeed now in forcing, not merely negotiations, but agreements that would have domestic repercussions in various countries remains to be seen.

Some of the U.S. trading partners including the EC and Japan are anxious that any package in the Round should include the U.S. giving up its "301" weapon of unilateral trade retaliation against trading partners, in all its variations – "Super 301" which has expired by is being threatened renewal by key Senators, "special 301" used against those the U.S. considers not providing adequate intellectual property privileges for U.S. enterprises, and the normal 301 procedures under which any U.S. enterprise or producer is able to set off investigations against any imports on a variety of grounds.

Japan as well as a number of smaller trading partners in Europe and the major Third World trading nations also want clear GATT rules on anti-dumping, for example, to prevent the U.S. and EC using the current provisions of the Tokyo Round codes and the GATT articles to start Anti-dumping investigations and take counter-vailing measures which in fact are not more than protective measures against imports.

Meanwhile, there is some evidence that Third World countries are being forced. under guise of procedural decisions, to give up some of their autonomy in trade policy decisions they are now allowed to take for balance-of-payments reasons under the GATT.

A procedural decision suggested by the chairman of the Rules group, Amb. Maciel of Brazil would change the current position of "desirability" of countries using price-based measures rather than quantitative restrictions on imports into a virtual obligation.

Under a compromise text put forward by Maciel, Contracting Parties are to confirm their commitment to impose "price-based" measures (tariffs, import surcharges, import deposit requirements or other equivalent measures that would increase price of imports). Contracting Parties, the paper provides, "shall seek to avoid" imposition of new quantitative restrictions for BOP purposes "unless, because of a critical BOP situation, price-based measures cannot arrest a sharp deterioration in external payments position".

The concession of "seek to avoid", which would imply a measure of autonomy in taking the decision, is however diluted or made meaningless by the further provision that in cases where a CP applies quantitative restrictions "justification shall be provided as to the reasons why price-based measures are not an adequate instrument". Also, in successive consultations on BOP with the GATT BOP committee, the CP concerned shall indicate the progress made in significantly reducing the incidence and restrictive nature of such measures.

By bringing, through procedures, the concept of "justification", any import restriction could be challenged by any affected Contracting Party by using GATT’s iniquitous "nullification impairment" provisions on disputes and dispute settlement.

Currently, under the relevant GATT article (XVIII: B.10) a CP has the right to determine the incidence of restrictions on imports of different products or classes of products in such a way as to give priority to importation of those produces which are more essential in the light of its policy of economic development.

The determination of what to allow and what not to allow, and the degree of restrictions on classes of imports would be an autonomous decision of the CP facing the BOP problem.

Under the new Maciel "procedural" text, the authorities of the importing CP "shall provide adequate justification" as to the criteria used to determine which products are subject to restriction. In effect the CP's "policy of economic development" and the criteria used in this connection to restrict imports for BOP reasons, would now be justiciable under GATT dispute settlement procedures.

If the CP applies "price-based" measures such as import surcharges, it could exclude or limit the application of such surcharges on imports of "certain essential products" - which is again defined to mean "basic consumption needs" or those that contribute to improving a CP’s BOP such as inputs for exports.

Another "procedural change" is to bring under the BOP procedures and surveillance, discretionary licensing - an issue that is covered by separate GATT provisions and Tokyo Round code agreement.