Oct 13, 1988

SLIMMER PROSPECTS OF EARLY ACTION ON TROPICAL PRODUCTS.

GENEVA, OCTOBER 11 (IFDA/CHAKRAVARTHI RAGHAVAN)—With the Montreal ministerial mid-term review of the Uruguay round just about seven weeks away, prospects of early agreement and implementation in respect of liberalisation of trade in tropical products appear to be getting increasingly slimmer.

This is the assessment of several third world participants after last week's meetings of the negotiating group on tropical products.

The group is to hold a formal meeting, the last before Montreal, on November 4-5. Informal consultations are also scheduled by the group an October 24-25.

The chairman of the negotiating group, Paul Leang Khee Seang of Malaysia, is holding informal talks this week to draw up a paper for Montreal, and envisaging some actions by industrialised countries in improving market access.

However, some participants say that the basic problem of unwillingness of industrialised states to take meaningful actions to improve access to their markets remains, and in this situation there would only be "cosmetic" efforts to show progress for Montreal.

Of the 14 areas an the agenda of the Uruguay round GATT MTNS in goods, tropical products is the one area specifically mentioned by ministers in their Punta del Este declaration for early agreements and their implementation.

Third world participants note "that this subject, an the GATT agenda for now 25 years, is also a "political test case" of the professions and claims of the industrialised countries about the Uruguay round and liberalisation of world trade.

However, it is in this very area that the three major trading blocs, the U.S., the EEC and Japan, have adopted positions, sometimes mutually contradictory, that make it less and less likely to foresee early agreements and results.

The negotiating group is yet to agree on a common negotiating basis and modalities.

Cosponsored by Colombia, Cuba, Mexico, Nicaragua and Peru, Brazil at last week's meeting reportedly put forward a paper outlining modalities for negotiations on trade in tropical products.

However the industrialised countries would not agree to consider this as a basis, describing the proposals as "unacceptable".

The six-nation proposal put forward a number of steps that the industrial countries should take in terms of improving access to their markets for the tropical products exported by the third world.

In the area of tariffs, it suggested that tariffs should be bound at zero level an all unprocessed tropical products, and the concessions should be implemented in January 1989.

Duties on processed and semi-processed products, the proposal said, should be reduced by at least 50 percent for implementation starting in January 1989, within an agreed time frame.

As regards non-tariff measures, the proposal suggested elimination of para-tariff and non-tariff measures, including internal taxes, to be implemented as from January 1989.

The liberalisation process, it was suggested, should cover all the products of seven product groups identified in the negotiating group (and for a long time within GATT) as falling within the category of tropical products.

While these measures are to be taken by industrialised countries, if the negotiating group agreed on these modalities, third world countries in a position to do so would study the modalities fur their individual. Participation in this area, in accordance with part IV of the general agreement, the enabling clause and the Punta del Este declaration, the Brazilian paper added.

Part IV of GATT and the enabling clause specify the right of third world countries for special, differential and preferential treatment.

The Punta del Este declaration reiterates this concept.

Third world participants said a major problem in the negotiations has been the unwillingness of the industrial countries to move forward.

The U.S. has linked the negotiations to negotiations on agriculture.

Though at the September meetings of the group, the U.S. appeared to have seemingly delinked the two, at Islamabad, where a group of trade ministers met informally on october 1-2, the U.S. Trade Tepresentative Clayton Yeutter reportedly said that any agreement on tropical products and its implementation would have to depend upon agreements and implementation of measures in the area of agriculture.

The EEC, the target of U.S. drive an agriculture, has talked vaguely of willingness to liberalise trade in tropical products but tied it to "burden-sharing" and "contributions" from the more advanced third world countries.

Third world countries have generally taken the position that while they are willing to contribute to the liberalisation processes of the Uruguay round and enable a balanced package to emerge, their contributions would have to be in overall terms and not sectoral.

Some of the third world countries say that they might even be willing to take some liberalisation measures in the area of tropical products, but this would be on the basis of satisfactory offers from the industrialised countries as a whole.

Asian countries, for whom tropical products are a particular area of concern and priority, are reportedly considering among themselves how to respond to the EEC and others. They are also reportedly having bilateral discussions with the EEC as to how to solve this problem of "contribution" by third world countries.

While Asian countries might be willing to make a contribution themselves, "we want to see what are the specific offers" of the EEC, U.S., and Japan, one Asian source said, adding that so far there has been no concrete and specific offers.

At last week's meeting the EEC and other industrialised nations reportedly characterised the proposal of Brazil and five others as "unacceptable".

Brazil, for its part, reportedly charged that the EEC and others were raising the talk of "burden-sharing" and "contributions" by third world countries, merely to hide their own unwillingness "to contribute for a real liberalisation of their markets for tropical products".

The proposals of the six, and the discussions on them, the Brazilian delegate is reported to have added, had brought out "a very important gap" between requests of third world countries and the offers of industrialised countries, and even more relevant "a very important gap among offers presented by developed countries themselves".

It was easier for the industrialised nations to try to transform the issue into a "north-south" issue, and paint the third world as unwilling to contribute to the liberalisation process "than to admit that many developed countries don't want to contribute for a real liberalisation of their markets for tropical products".

If third world countries had to elaborate on their own offers, in response to the offers and proposals of the industrial countries, Brazil for one would find itself having to make greater contribution than the industrialised countries themselves - a prospect quite the opposite of that envisaged by part IV of GATT.

The U.S. for example had suggested negotiations on the basis of its offer to eliminate all tariff and non-tariff measures, and wanted all other countries also to do the same.

However, no other industrial country had accepted this idea.

If Brazil were to negotiate on the basis proposed by the U.S., it would be eliminating its own tariff and non-tariff barriers, while other industrial countries would not do so.

Japan had offered some limited concessions without reciprocity. If Brazil were to accept it, other industrialised countries would not implement their own offers.

Brazil thus would have to "contribute" on terms proposed by the U.S., but the latter would not make any concessions except on its terms.

It was for this reason that Brazil and others had proposed, as a first step for Montreal, a uniform contribution or offer.

Industrial countries were refusing to discuss the proposal since this was the best way to avoid a recognition by the group that there were no agreements among industrialised countries about their participation in the process for liberalisation of trade in tropical products.

It was hence easier for them to say that third world countries had to bridge the gap by presenting increased concessions an their part.

But there was no guarantee, if Brazil and other third world countries were to do this, that the U.S., Canada or Japan would increase their own offers.

Discussions about contributions from the third world, as suggested by the EEC, would not enable the group to reach an agreement, since this was not the element blocking negotiations, Brazil reportedly added.