Nov 19, 1987

IS THIRD WORLD CHASING MIRAGE OVER TROPICAL PRODUCTS?

GENEVA NOVEMBER 17 (IFDA/CHAKRAVARTHI RAGHAVAN) – Are Third World countries chasing a mirage in seeking liberalisation of trade in tropical products by their partners in industrial countries, and hoping for priority negotiations in 1988 and implementation of results?

This is the question Third World countries are asking themselves as the Uruguay Round negotiating group on tropical products ended last week the first phase of its work.

Some of them said the very premise on which they had agreed to the Uruguay Round was now being belied.

The chairman’s agreed conclusions apparently slurred over the group’s failure to agree on techniques and modalities as a common basis for negotiations, and spoke of the agreement to establish such procedures in the new year "in order to start concrete negotiations as early as possible in 1988".

The negotiating group is expected to meet for this purpose informally in mid-January.

Participants said that the stance of industrial countries showed that they were challenging the very basis of separate negotiations on tropical products, by trying to tie these negotiations to the separate and more complicated negotiations in agriculture, and insisting that third world countries would have to make some concessions in this sector in their own markets to gain improved access in industrial country markets.

In the run-up to the Punta del Este meeting, third world countries had split.

One group led by Brazil and India took a hard position against inclusion of new issues like services and insisted on commitment from industrial countries on long-standing third world concerns before they would agree to launch the new round.

Another larger group led by Colombia and including the Asian countries, Pakistan, and some of the Africans, thought the third world would gain more by seeking accommodation with the industrial world in return for promises of speedy action on issues like tropical products.

The outcome in the tropical products group, and the stance of the industrial countries, is placing these countries and their diplomats here in a difficult position.

The Punta del Este negotiating mandate in this area calls for "fullest liberalisation of trade in tropical products, including in their processed and semi-processed forms" and covering "tariff and all non-tariff measures affecting trade in these products".

The negotiating plan for the initial phase calls for "agreement on techniques and modalities as a common basis for negotiations, including the tabling of initial requests/offers".

The Contracting Parties of GATT, in launching the Uruguay Round MTNS in goods at Punta del Este in September 1986, recognised the importance of this trade to a large number of third world countries and agreed that negotiations in this area "shall receive special attention", including the timing of the negotiations and early implementation of results in this prior to the formal completion of the negotiations.

Otherwise, the entire negotiations were acknowledged to be a single undertaking in terms of launching, conduct and implementation.

The issue of tropical products and liberalisation of trade in them have been on the GATT agenda since 1963 when this "hybrid group" of products was identified and put together in one group as products primarily of export interest to the third world, and where liberalisation action by industrial countries would secure increased export earnings for the third world.

As early as 1963 the liberalisation was seen as involving reduction or elimination of market barriers to the third world exports of these products in their raw and processed forms, and the barriers were identified as tariffs and non-tariff barriers, and domestic consumption taxes inhibiting consumption.

Since 1963, this issue has been on successive GATT MTNS, and on every GATT work programme – with industrial countries promising action but never fulfilling them.

As the negotiating group ended on November 13 the initial phase of its work, it was becoming apparent that not only were assurances of priority proving once again a mirage, but that industrial countries were expecting an element of reciprocity from third world countries in this area too.

The EEC reportedly went so far as to say that the past approaches had failed to yield results, and third world countries should now agree to try the new approach.

At last week’s meeting, the United States is reported to have put forward its own proposals which appeared to negate the very basis on which the tropical products issue has figured on GATT agenda for 24 years now.

Till now tropical products were seen as a sector where the issue was one of access and where the liberalisation actions in favour of the third world has to be taken by industrialised countries by lowering tariffs, including tariff escalation on processed products, by removal of non-tariff measures and by reduction or elimination of domestic consumption taxes.

Six tropical products groups identified and agreed as falling within the mandate of the group – tropical beverages: jute and hard fibres; spices, flowers, plaiting products, etc.; certain oilseeds, vegetable oils and oil-cakes; tropical roots, rice and tobacco; and natural rubber and tropical wood.

In its proposals, the EEC eliminated some of these (like bananas and cut-flowers) from this area, and tied up action on some others with actions in the agriculture negotiations.

In its proposals, the U.S. appeared to have gone a step further. It has equated the approach in tropical products and agriculture negotiations and has suggested that all participants in tropical products negotiations should agree to eliminate all support and protective measures affecting trade in agricultural tropical products.

The U.S. has also sought to create a new sub-group of "non-agricultural tropical products", but without defining them, where it has sought a "request/offer" procedure involving bilateral negotiations and bargaining.

Third world countries on the other hand have underlined a multilateral approach to elimination of barriers ... of domestic consumption taxes.

The U.S. not only sought to apply to tropical products negotiations the same principles it has sought in agriculture (namely elimination of all domestic support measures and freeing trade), but also sought to link it to the same time-frame, by suggesting that it expects to get actions on agriculture too by end of 1988 (in order to agree to actions on tropical products).

A number of third world countries reportedly rejected the U.S. position, and said that the linking of negotiations in tropical products and agriculture was unacceptable to them.

The EEC reportedly agreed that the U.S. view on this was inconsistent with the Punta del Este mandates. But this view of the EEC was more because of its stance on agriculture rather than in support of the third world.

Several third world countries reportedly complained that far from the "special attention", and early implementation of agreements envisaged for tropical productors, the U.S. was now linking the issue to the "most intractable" issue of agriculture in GATT, and thus ensuring no action on tropical products.

India, Sri Lanka, Pakistan and a number of other third world countries accused the U.S. and others of ignoring the past history of this issue in GATT, which had seen the issue only in terms of market access in industrial countries, en formulating their proposals.

In agriculture, on the other hand, they noted the issue was of the total absence of rules and disciplines and rampant policies of cross-subsidisation. Linking the two areas hence made no sense.

New Zealand, in separate proposal, envisaged an approach based on all CPS reducing their tariffs on processed and unprocessed tropical products to an agreed maximum X percent, binding the tariffs at that level or existing level if it was below X, and negotiating on request/offer basis for further reductions below the X percent.

Aside from this issue of approach where there were differences, all the industrial countries continued to insist on the so-called "extended coverage", namely that the negotiations, and collection of data for that purpose, must cover "all markets", and not merely the important eleven or twelve industrial country markets.

The EEC contended that the "extended coverage" approach was what the Punta del Este mandate called for, while third world countries argued that the mandate called for "fullest liberalisation" and not "extended coverage" which were two different things.

In its paper at the last session of the group, the EEC had said that its own offers for liberalisation would be contingent on burden-sharing by other industrial countries, and also by the "more advanced" third world countries taking liberalisation actions themselves.

Several of these countries, including South Korea, have suggested that any liberalisation they could do would be in the context of the separate south-south negotiations for the global system of trade preferences.

The EEC in informal conversations has reportedly told some of them that it had no problem with this view, and did not mind whether this liberalisation was done in the GATT Uruguay Round context or in the GSTP context. All that it wanted was to have such liberalisation so that its own hands vis-à-vis domestic processing industries would be strengthened.

However, this has not been put forward by the EEC in the formal meetings of the group, where it has not only been pressing for the so-called "extended coverage" approach, but has been using its Franco-phone African countries to suggest and support the same.

Cote D’Ivoire at last week’s meeting reportedly advanced this view, though it mentioned east European Socialist countries as among the markets where it sought liberalisation.

The EEC and a number of third world countries are also reported to have asked the U.S. and New Zealand as to how they envisaged the application of the principle of special and differential treatment for third world countries in their proposals.

New Zealand reportedly took the position that the Contracting Parties would have to evolve this, while the U.S. felt that improved access to its markets for the exports of the third world would take care of this – a view with which third world countries did not agree.

Brazil, Mexico, India, Sri Lanka, Pakistan and others reportedly were critical of the U.S. and other industrial countries over their insistence on "extended coverage", forgetting the entire history of tropical products in GATT.

But the Asian countries for which tropical products are the main focus in the Uruguay Round apparently remained silent.

One third world participant said after the meeting that as before Punta del Este, while the industrial countries appeared to be united in their strategy and tactics vis-à-vis the south, the countries of the south were divided.

On the issue of techniques and modalities, while the third world countries sought a multilateral approach, several of the industrial countries also called for a request/offer approach.

Japan, the industrial country with perhaps the largest and hidden barriers to processed products, reportedly insisted that it could not proceed except on the basis of request/offer lists.

Instead of agreeing on one approach, as called for in the negotiating plan, the industrial countries suggested that all approaches or a combination of them could be used.

Sri Lanka, India and others did not agree with this and felt this would be a prescription for disaster for the third world, and that if in the one area, where they expected concessions from the industrial countries in improved access to markets, reciprocity was demanded there would be little in the Uruguay Round for the third world.

While agreeing with the need for some "flexibility", these countries underscored the need for multilateral approach.

In the summing-up, the chairman of the negotiating group, slurred over this issue in an effort to show that the initial phase has been concluded and there was progress to justify moving into the next phase of negotiations.

The chairman said that "a large number" of delegations felt it was necessary to maintain flexibility, and that a combination of techniques could be adopted as a more effective approach for negotiations.

The negotiating group, he added, had "agreed to establish procedures as appropriate, including the tabling of initial requests/offers, in order to start concrete negotiations as early as possible in 1988".