U.S.-EEC FIGHT OVER AGRICULTURE HARDENS AND CLOUDS OUTLOOK.

Dec 9, 1988

U.S.-EEC FIGHT OVER AGRICULTURE HARDENS AND CLOUDS OUTLOOK.

MONTREAL, DECEMBER 5 (IFDA/CHAKRAVARTHI RAGHAVAN) –The United States and the European Economic Community appear to have hardened their stands on agriculture in the informal consultations here, thus jeopardising a successful outcome of the "Uruguay round" mid-term review.

The informal consultations under Ricardo Zerbino of Uruguay, the chairman of the Trade Negotiations Committee of the Uruguay round, have been "suspended" after two rounds of talks -- last night and this morning -- GATT spokesperson David Woods told reporters tuesday.

The U.S. negotiator in agriculture, Daniel Amstutz, told reporters at a press conference tuesday evening that using the "paper" of Aart De Zeeuw (chairman of the negotiating group on agriculture) as a basis, Zerbino would try to draft his own paper, and afterwards the negotiators would sit down again to negotiate. But so far no time had been fixed.

Positions on both sides had not so far narrowed down, and it was difficult to say whether there would be any narrowing down before the Montreal meeting would be over.

Amstutz made clear however that the united states was "hanging tough" and not yielding on its position that it was necessary to get an agreement from all trading nations that over time distortions to agricultural trade through subsidies and government support would be ended.

Asked about the frustrations of the "Cairns group", and the view of the Australian Minister that the EEC had made some movement but that the Americans were inflexible, Amstutz said: "sometimes you have to hang in there, and not sacrifice-long term interests for some short term benefits. Perhaps there will be no agreement here, but it is a four-year negotiations ... sometimes a stalemate is a stimulant."

Other participants said that in the informal consultations, presumably in response to the U.S. position, argentine made clear that if there was no agreement or lack of consensus at Montreal on agriculture, the Argentinian delegation would block consensus in all other negotiating groups.

Amstutz and other members of the U.S. delegation at a press conference welcomed the "package of agreements" worked out Sunday night on tropical products, but made clear that the U.S. contribution and agreement was linked to a satisfactory outcome at Montreal on agriculture.

The U.S. delegation also suggested that the EEC "contribution" an tropical products was much less than made out, that the united states already had virtually zero tariffs on most tropical product imports (in raw material stage), and unlike the EEC had no "domestic consumption taxes" on tropical beverages, for example.

Other participants said that there had been some intense discussions in an informal small group, well into the morning of Tuesday, on services, and that, Swedish Minister Anita Gradin was planning to present her own text.

United States and its supporters had been encouraging this, others however apparently had cautioned her that put in, in an effort to simplify the report of the result in others putting in their own earlier and changes, and this would merely complicate things reaching any solutions.

The European Economic Community also reportedly underscored its view that any agreement on services should "take on board the developing countries and their viewpoints."

Some industrialised country sources said that behind this EEC position was the desire not to engage in a binding multilateral framework on services, ahead of its own internal decisions and regulations on services in the context of the 1992 single market.

In the area of Trade-Related Intellectual Property Rights (TRIPS), after a debate in the informal consultations, where a number of third world countries and ministers made clear their objections to deal with substantive norms and other issues about patents, trade-marks or copyright in GATT -- departing beyond the mandate of Punta del Este -- a small group of participants representing various viewpoints was reportedly at work trying to evolve a single text (rather than three or four texts and formulations in the report of the group) to enable ministers to work on them.

Remarks of the U.S. delegation at its press conference, and a subsequent press conference by Indian Commerce Minister Dinesh Singh, brought out that the gap on this issue between the U.S.-EEC and some other industrialised countries on one side and a number of third world countries on the other, had not changed and is unlikely to change here.

Dinesh Singh said that the Indian viewpoint on intellectual property was different from that of the United States, but was shared by a large number of third world countries.

India agreed that inventors should be rewarded, but that the regime should not create monopolies, and should not be trade-restrictive, but promote freer trade. Also that inventions on pharmaceuticals, food products, and chemicals like fertilisers and pesticides be provided a patent-life of seven rather than 14 years.

While India was willing to discuss in GATT the "trade-restrictive or distortive" aspects of intellectual property, and preventing counterfeit trade, issues of standards and norms should be discussed in WIPO and UNCTAD which had been dealing with these issues. Third world countries saw no reason to shift there issues to GATT, Singh added.

Other participants said that in the discussions in the Ozal-led group, reflecting the change of government in Islamabad, the Pakistan deputy chairman of the planning commission, A. G. N. Kazi, forcefully argued the case for a "hands-off" policy by GATT in an area falling within the jurisdiction of WIPO.

In a variation of the U.S. -- theme -- used as a threat to other delegations that if they did not agree to U.S. demands and reach agreements on its priorities according to U.S. views in agriculture and other areas, the United States would be willing to "walk away" from Montreal without an agreement, the Indian Minister underlined that decisions and agreements had to be reached at the end of the Uruguay round and the Montreal meeting was only for a "mid-term review" and general guidance to negotiators an their further work over the next two years.

The only area identified for early agreements at Punta del Este, he noted, was tropical products, and the early agreement on this could have been concluded much earlier and need not have waited for the mid-term review.

In the informal consultations an the "other issues" market access issues, institutional and systemic issues an the "Uruguay round" agenda -- participants said that a number of small groups had been set up to try and draft texts, and that while perhaps some progress was possible in some of these areas, the united states and other majors were blocking progress pending agreements an their priorities of agriculture, TRIPS and services.

In the area of dispute settlement, where there had been general expectations about agreements formalising recent informal improvements in GATT procedures -- such as panel adjudications as of right, and other procedures -- a major difference holding up agreement has been the unwillingness of the united states to agree that contracting parties should "adjust their domestic trade legislation and enforcement procedures in a manner ensuring the conformity of all measures with GATT dispute settlement procedures."

On this issue the rest of the negotiators were united in their demand that the United States must take steps to comply with GATT commitments. They have in mind particularly, the U.S. trade and tariff act and its S. 301, under which the U.S. administration decides when and whether foreign trading partners are resorting to "unfair" trade practices, and imposes penalties by raising tariffs to 100 percent.

The "unfair" practices determined by the united states and the basis on which it retaliates are not related to what GATT rules consider to be "unfair", but other concepts and ideas that do have any relationship to GATT and its trade in goods -- such as whether the trading nation agrees to provide openings to U.S. capital for service industries, or intellectual property protection, etc., and even whether the trading partner is taking an antagonistic position to the United States in multilateral negotiations.

At the U.S. briefing, the U.S. representatives make clear that "the U.S. will not give up its sovereign right to be able to take action under S.301 whenever it considers it appropriate."

In the area of Functioning Of the GATT System (FOGS), third world participants privately charged that the GATT secretariat and its top officials were lobbying with industrialised countries to stand firm and create a mechanism for trade surveillance with some provisions.

Sought by the GATT officials, but already rejected by third world countries.

These provisions apparently include the idea that GATT teams should be able to visit capitals of GATT contracting parties, a la IMF/World Bank missions now, and seek information and examine government officials, and prepare an assessment to be considered or discussed at GATT council sessions.

The GATT secretariat would also appear to be pushing for the idea that the surveillance and examination of trade policies of Contracting Parties, not in relation to their GATT commitments but in terms of wider "economic philosophies", should be conducted by "discussants" chosen in their personal capacities, like members of adjudicatory panels in disputes, and that these "discussants" (who would be assisted by GATT officials) should be able to examine and ask questions of officials and governments in their capitals on a wide range of trade policy issues.

Participants said that a small drafting group was at work dealing with about six or seven points identified as needing clearer formulations than in the texts present to the Montreal meeting, with several of them in square brackets or in alternatives.

Another issue is whether or not negotiations in this area should pursue the idea of a small ministerial steering group (as the Americans want) or whether this idea, which is widely opposed by third world and smaller industrialised nations, should be buried at Montreal and not pursued.

In the area of textiles, a basic issue relates to the type of guidance negotiators should be given, and whether or not negotiators should be directed, in seeking modalities for return of this trade to the GATT rules and disciplines, to negotiate the phasing out of restraints inconsistent with GATT rules and disciplines -- an oblique way of saying that the phasing out of the "MFA" should be negotiated.

In the area of safeguards, a very large number of third world countries have supported the view that the negotiating should be on the basis of some key principles including limited duration for such safeguard measures, non-discrimination and proscription of "grey area measures".

In the consultations, some third world participants reported, there was an attempt by the United States and EEC to suggest that this point, put in square brackets in the text before the ministers, had been the result of a last-minute injection of ideas and that the Montreal meeting and ministers could not be expected to answer this difficult question.

However, the participants said, India and a number of other third world countries (including Argentina, Brazil, Pakistan, Mexico) pointed out that these were issues that had been before GATT since 1973 when the "Tokyo round" was launched, and the technical people had gone as far as they could, and it was now for ministers to give political direction.

The fact that this was a long pending issue where the industrialised nations have been holding up agreements reportedly came as a surprise to several of the ministers of industrialised countries including the Canadian chairman, John Crosbie, Minister for Foreign Trade.

India reportedly pointed out that with so much talk about increasing GATT credibility and sending the right signals, it was for ministers to pause and think what kind of message they would be sending out of Montreal if they did not deal with this fundamental issue of non-discrimination.

At a press conference tuesday evening, India’s Dinesh Singh repudiated the view of western media that it was Brazil and India alone that were "recalcitrant," on the services issue.

Speaking in a wry tone, Singh said that India and perhaps Brazil should be grateful to the western media for mentioning them and thus bringing their countries to public notice, but their viewpoint was widely shared by a large number of third world countries, and the western media should not try to "isolate" India and Brazil from the rest of the third world.

On services, as on GATT issues, Singh said it was imperative that the "development concept" and trade as a vehicle of development rather than an end in itself should be fully reflected in any rules or new regimes emerging out of the Uruguay round.

On services, Singh said, whatever rules and principles were sought to be put in, they should be "universal" and apply as much to sectors of interest to industrialised countries as to third world countries. There should not be liberalisation only in services where industrialised countries had advantage -- or capital intensive and high technology services only -- but also labour and labour intensive services.

If industrialised countries feel they should have "right of establishment" for services of interest to them, such as banking or insurance, there should be similar rights for labour-intensive service exports of third world countries -- like construction or hotel services, etc.

If industrialised countries wanted their personnel to be able to move to third world countries to set up and run banks, third world countries, if they felt it to be in their advantage, should similarly be able not merely to bid for construction projects but bring in their own-labour for construction, and not merely own hotels but be able to bring their labour and run them.

When a questioner said that the demand about a services agreement to include "labour services" was a tactical position in order to prevent an agreement, since India knew that "this involved immigration and industrial countries cannot agree to this", Dinesh Singh sharply remarked that "it is not the prerogative of only industrial countries not to agree. If you do not want to apply the services framework to some sectors and make reservations, others can also make their own reservations. If it is a negotiated agreement, it has to be balanced. If it is to be an agreement based an ‘diktat’ that is another matter. an agreement must have- benefits for

developing countries also, and not merely for industrial countries."

The Indian Minister made clear that India continued to object to the services issue or a framework being a part of the GATT system. This was India’s position at Punta del Este, and it was why the negotiations were on a separate track. India had not chanced its stand on this.