Dec 5, 1988

MONTREAL FACES OPTIONS FUDGED AT PUNTA.

GENEVA, DECEMBER 1 (IFDA/CHAKRAVARTHI RAGHAVAN) Ministers at the Uruguay round's Montreal mid-term review meeting are being asked, in the area of agriculture, to decide on some basic options which had been fudged over at Punta del Este, in the efforts to reach a compromise and as a price for launching the negotiations.

The clear options to Ministers in the area of long-term elements of a framework on agriculture, as well as in terms of short-term elements, are in "part B" (or points for decision) of the report of the chairman of the negotiating group an agriculture, Mr. Aart De Zeeuw of Netherlands.

The report of the Group of Negotiations on Goods (GNG), adopted on November 21, covered all the 14 issues on the agenda of the GATT MTNS in goods, but the door was left open for the chairmen of the groups on agriculture and tropical products to provide reports or recommendations for actions on the basis of negotiations that were continuing.

De Zeeuw's report was drawn up, in the light of the consultations and discussions in the Morges group on Monday, and made available to GATT participants Wednesday.

A copy of the report has been obtained by IFDA.

With most key diplomats already on their way to Montreal, no comments or reactions from key protagonists were available.

But some relatively junior diplomats engaged in these negotiations said the report on the whole appeared fair to all sides, including third world countries whose views were often ignored by chairmen in other groups.

While the report and formulations and options are a compromise, they reflected the positions of the Cairns Group, EEC, the U.S., Jamaica and other net food-importing countries and third world countries like India that had raised the issues of the development concept in agriculture, one diplomat said.

However, he said, the report might create big problems in Montreal: the Ministers are being asked to decide whether they envisage as the long-term goal total elimination or only substantial reduction of subsidies and other government assistance for agriculture.

The Punta del Este mandate, he said, was "dubious", and the compromise between the U.S. and EEC, on the basis of which only the round could be launched, had fudged this issue.

Now the chairman has put it squarely on the table, and has asked Ministers to decide.

With both U.S. and EEC now talking tough, "we may be talking at Montreal till the final hour without any solution and push the whole thing back to Geneva or the talks could be wrecked," he said.

The issues fudged in the U.S.-EEC compromise at Montreal, and which now Ministers are being asked to decide, include:

Whether the ultimate goal of the framework in agriculture should be "the elimination" (as U.S. and Cairns Group want) or the "substantial reduction" of trade-distortive support and protection (that the EEC might accept).

Also involved are the questions whether these objectives are to be achieved through negotiations on "specific policies", or through commitments on "an aggregate measure of support" - the formula favoured by the U.S. and Cairns Group and which several industrial countries and many third world countries find difficult to accept.

The De Zeeuw report asks Ministers to endorse a framework approach in agriculture comprising "inter-related long and short term elements and arrangements on sanitary and phytosanitary regulations."

The long-term objective of the negotiations, Ministers are asked to decide, should be to establish the basis of a "fair market oriented agricultural trading system", and a reform process initiated through negotiation of commitments on support and protection and establishment of a strengthened GATT regime.

Posing basic options for this, the report asks ministers to decide whether the goal should be "the elimination or the substantial reduction of trade-distortive support and protection", and whether this reduction or elimination should be through negotiations on "specific policies and measures," or through commitments on "an aggregate measurement of support" - the terms of which have to be negotiated - or through a combination.

Subject to decisions on these basic options, the ministers are being asked also to establish guidelines for a reform programme.

Such a programme, the report says, should result in progressive reduction in all direct and indirect subsidies and import barriers, which directly or indirectly affect trade in all agricultural products.

The programme should be subject to surveillance and other procedures to ensure full compliance, and should be completed by a date to be negotiated and agreed before the end of the round.

The strengthened GATT rules should also encompass all measures affecting directly or indirectly import access and export competition.

The import access measures should include those maintained under waivers (as the U.S.), protocols of. accession (as Switzerland and Austria) or other derogations and exceptions (including those of the EEC under its common agricultural policy and treaty of Rome).

Conditions would also have to be established in this area governing the maintenance, elimination or removal in favour of tariffs, of quantitative or other non-tariff accesses restrictions and measures "not explicitly provided for in the GATT"

The reinforced GATT rules and measures would also have to establish the conditions under which direct budgetary assistance to exports and deficiency payments an products exported and other forms of export assistance should be progressively reduced or eliminated.

In the area of internal support, conditions should be established under which "price and income support measures" should be subject to disciplines in order to make such policies "more responsive to international market signals."

"Non-economic factors" are also to be taken into account in the negotiations on GATT runs and disciplines and related commitments.

(This could possibly cover issues like food security, food aid, etc.).

The De Zeeuw report asks Ministers to recognise that:

--Special and differential treatment to third world countries is an integral element of the negotiations in accordance with the governing principles elaborated in the Punta del Este declaration, and

--Government measures to encourage agricultural and rural development are an integral part of the development programmes of developing countries, and such measures may involve direct or indirect government support.

While not spelt out, these two elements could mean that third world countries would be exempt from the long-term framework disciplines, under the special and differential treatment approach, in respect of their agricultural and rural development measures, which are an integral part of their development programmes.

The U.S. is opposed to S and D, and the Cairns Group envisages it only in terms of longer time-frame for compliance, and exemption for domestic programmes not involving exports.

In the area of short-term elements the ministers are asked to decide whether a freeze or reduction (on overall support and protection) should be expressed in terms of an aggregate measure of support or in terms of specific policies and measures or a combination.

The Ministers are also asked to decide whether third world countries should be exempt from the short-term measures.

The short-term measures, to be applied over the next two years, are to involve:

--Freeze an overall support and protection at levels prevailing in a base period to be agreed upon and to refrain from initiating new programmes that would undermine this commitment,

--Reduce, as a first step towards realising the long-term objectives, overall support and protection by "X" percent by 1990.

Special attention is to be given to the possible negative effects of short-term measures on net food-importing third world countries.

Also, the agreement an terms and conditions of the freeze and reduction must be reached not later than march 31, 1989, including an agreement on measures coverage, commodity coverage, and reference price.

In the area of sanitary and phytosanitary regulations, among other things Ministers are asked to endorse "harmonisation" of national regulations as a long-term goal and adopt a work programme.

The idea of "harmonisation" as a long-term goal is seen as a weak formulation by some protagonists, who note that often the industrial countries have been using these regulations as a trade-protection.

Among the objectives for a work programme are:

Strengthening GATT article XX so that measures to protect human, animal or plant life or health are based on "sound scientific evidence" and recognise "the principle of equivalence"

Review existing notification and counter-notification procedures for national regulations.

Develop a consultative process to allow opportunity for bilateral resolution of disputes.

Establish an effective multilateral dispute settlement process within GATT which provides the necessary input of scientific expertise and judgement, relying inter alia on the codex alimentarius commission, the international office of epizootics, and international plant protection conventions, and

Assess the possible effects on third world countries of GATT rules and disciplines for sanitary and phytosanitary measures, and evaluate the need for technical assistance.