U.S. STAND ON SURVEILLANCE BLOCS PROGRESS.

Dec 20, 1986

U.S. STAND ON SURVEILLANCE BLOCS PROGRESS.

GENEVA DECEMBER 19 (IFDA-CHAKRAVARTHI RAGHAVAN) – An intransigent U.S. stand on the nature and functions of a surveillance mechanism on standstill and rollback is threatening the start of Multilateral Trade Negotiations (MTNS) in goods under the Uruguay Round, GATT sources said Friday.

The Group of Negotiations on Goods (GNG), which is to supervise and co-ordinate the MTNS in goods, has been given a deadline of December 19 to adopt negotiating plans so that negotiations could begin in the new year.

Approval of negotiating plans for each of the subjects identified for negotiations, as well as the structures for such negotiations, have been held up because of disputes over the nature and powers of a surveillance mechanism to oversee the implementation of the standstill and rollback commitments undertaken at Punta del Este, GATT sources said.

Third World Countries as well as most of the other Industrial Countries have agreed that the establishment of a standstill mechanism is fundamental and without this there could be no progress in discussing and ironing out differences on negotiating plans or structures.

The U.S. for its part has reportedly said that along with approval of negotiating plans for MTNS in goods, it must also obtain a negotiating plan for negotiations in services, and the two were "a package".

The discussions in the separate Group of Negotiations on Services (GNS), have also run into problems, though they are not insoluble, participants in the GNS said.

GATT Officials said Friday morning that if the U.S. changes its mind on surveillance, other issues could be taken up, and the plans and structures could be approved by Friday midnight, even if necessary "by stopping the clock".

But if the U.S. does not change its stand on surveillance, GATT sources said, the December 19 deadline cannot be kept, and further consultations and negotiations can only resume in the new year, since most of the senior delegates were due to leave Geneva this weekend for Christmas Holidays.

At informal consultations Thursday night involving some 30 delegates of key countries involved, the U.S. apparently stuck to its position on surveillance and would not agree to a weakened draft that has emerged after weeks of discussions, Third World sources said Friday morning.

Without U.S. agreement to a meaningful surveillance mechanism, the other participants saw little use in tackling the considerable differences still remaining on negotiating plans or the structures, and the meeting broke up at 0130 GMT on Friday, sources said.

The informal consultations were chaired by the GATT Director-General, Arthur Dunkel, who is the chairman of the GNG.

Suggestions by Dunkel that the differences over surveillance should be put aside, and that the other issues relating to negotiating plans and structures should be tackled, did not find favour with the rest of the delegates, sources said.

The informal consultations under Dunkel over the surveillance issue is due to resume Friday to await a final U.S. response, sources said.

Depending on this, the issue will be discussed openly in the presence of all delegations at a meeting of the GNG set for later Friday, so that everyone would be aware of the U.S. stand and its isolation, one Third World source reported.

Third World sources said that the U.S. is opposed to the surveillance body undertaking any "examination" of complaints of violation of standstill, but merely wants a "discussion", thus reducing the entire surveillance exercise to a debate without any conclusion.

The U.S. is also not willing to accept any time-frame for the conclusion of the work of the surveillance body on any complaint, Third World sources said.

Draft proposals envisage a 30-day limit within which the surveillance body must examine a complaint, and transmit its records to the TNC.

Third World sources said the U.S. is not prepared to admit any role for the GNG in the surveillance of standstill and rollback, despite the specific mandate for the GNG to "supervise the progress of negotiations", and despite the fact that the standstill and rollback commitments are a part of, and fundamental condition, for the MTNS in goods.

At best the U.S. is reported to be agreeable only to the GNG receiving "for information" a record of the discussions in the surveillance body.

However the U.S. is reported to be opposed to any such "information" being provided to the GNG of the outcome of the "periodic evaluation" by the TNC, every six months, of the implementation of the standstill and rollback commitments, and its impact on the process of MTNS.

The U.S. opposition to this is apparently on the view that any such "information" officially brought before the GNG could lead to blocking of further negotiations on goods in the MTNS.

The U.S. is also reported to be against the rollback commitment being examined by the surveillance body, or for the issue to be subject to any plurilateral or multilateral consultations.

It views the rollback as essentially a "bilateral issue" between the country imposing such illegal restrictions and the country whose product is being restrained.

In effect, the U.S. wants to deal with the rollback in "a non-transparent" way and for the rollback to be implemented on a "non-MFN" principle, sources said.

In GATT under the most-favoured-nation treatment enshrined in article one, any favourable treatment in tariffs and trade meted out by one Contracting Party to another shall be extended to all other Contracting Parties.

The U.S. stand in this regard, other delegations say, is perhaps intended to extract concessions in areas other than "goods" from a country as a price for rollback, and to prevent any possibility of this having to be extended to other GATT Contracting Parties as of right.

In the preparatory process leading to Punta del Este, U.S. delegates have reportedly made clear that they would expect concessions in return for any rollback.

The U.S. stand now on standstill and rollback is related to the "protectionism minded" democratically controlled Congress, and a beleaguered Reagan Administration unwilling to the international focus of charges of violations of its commitments.

Under the compromise evolved in weeks of consultations, but to key parts of which the U.S. is still objecting, the surveillance body would be open to all participants in the new round.

Any participant in the negotiations could bring to the attention of the Surveillance Body, through the GATT Secretariat, any action or measure by itself of by another participant, that is believed to be relevant to the standstill commitment under the Uruguay Round.

Under the commitment which became effective September 20, each participant has undertaken:

--Not to take any trade restrictive or distorting measures inconsistent with GATT or any instruments negotiated within its framework or under its auspices (like the MFA),

--Not to take such measures in the legitimate exercise of its GATT rights, beyond those necessary to remedy a specific situation, and

--Not to take any trade measures in such a manner as to improve its negotiating position.

The draft proposal for the surveillance, calls for circulation by the GATT Secretariat of all notifications (or cross-notifications from other countries) to all participants within ten days, and for comments from the country concerned.

The Surveillance Body is to take up and complete, within 30 days of taking up a notification, its examination of the measures or actions notified and its relationship to the three standstill commitments.

The Surveillance Body is to transmit the record of its examination to the Trade Negotiations Committee (TNC), the overall body named to conduct the negotiations in goods and the parallel but separate negotiations on services.

The record of the examination of the complaint of violation of standstill is also to be transmitted to the GNG.

As regards rollback, the draft proposals for surveillance, enables any participant to bring to the notice of other participants, through the GATT Secretariat, any measures applied by it or another participant, which is believed to subject to the rollback commitment.

The commitment, also undertaken at Punta del Este, requires that all trade restrictive or distorting measures inconsistent with GATT or instruments negotiated within GATT framework or under its auspices, shall be phased out or brought into conformity within an agreed time frame, not later than the formal completion of the negotiations.

It also requires that there shall be progressive implementation of the commitment on an equitable basis in consuls among the participants concerned, including all affected participants.

The commitment also provides that "there shall be no GATT concessions requested for elimination of these measures" (more).

The proposals for surveillance of rollback provide that any participant may bring to the attention of others, through the GATT Secretariat, any measures applied by it or by another participant which is believed to be subject to the rollback.

Participants maintaining such measures are then required to consult "bilaterally or plurilaterally" in order to arrive at rollback undertakings, including time-frame, modalities for progressive implementation, etc..

Notice of such consultations are to be given to the Secretariat for the information of all participants. Other affected participants have a right to take part in any consultations on these measures.

Participants are required to notify any undertakings resulting from the consultations to the Surveillance Body, which "shall review" the implementation of the rollback undertakings and report to the TNC, and also transmit the report to the GNG.

It would be open to any participant to notify the Surveillance Body any omission by another participant believed to be relevant to the fulfilment of the rollback commitment.

The Surveillance Body, the draft proposals provide, will meet three times a year, or at the request of any participant to carry out its surveillance’s tasks.

The TNC will meet every six months to carry out "a periodic evaluation of the implementation of the standstill and rollback commitments, and its impact on the process of multilateral trade negotiations", on the basis of records transmitted by the Surveillance Body.

GATT sources said that while the dispute over the Surveillance Body is the major stumbling block to further progress, there are also a number of differences still to be sorted out over negotiating plans in individual areas including agriculture, textiles and clothing, trade-related investment, and trade-related intellectual property issues, as well as over the examination of the functioning of the GATT system.

There are also reported to be differences over the structures – with the U.S. trying to block a separate negotiating body on textiles and clothing, others like India trying to block separate bodies on investment and intellectual property issues.

The U.S. is also reported to be against separate bodies dealing with tariff and non-tariff issues in the MTNS.

Some Third World sources speculated that the U.S. is "upping the ante" on surveillance, so that at the last minute it could make some minor concessions and get its way on all other things.

However, other Third World sources said that it would be difficult to find any trade-offs.

While there is also some talk Friday morning of adopting the proposals for surveillance on the basis of "consensus minus one (U.S.A.)", others, including several industrial countries are opposed to it.

They note that they had made several concessions on surveillance in order to secure U.S. agreement, and they were not agreeable to the present weakened proposals on surveillance unless the U.S. is prepared to be committed to it.