Mar 10, 1989

STRONG COMMITMENT TO RULES BY MAJORS INDISPENSABLE.

GENEVA, MARCH 8 (IFDA/CHAKRAVARTHI RAGHAVAN)— A "sufficiently strong commitment" on the part of the main participants in world trade was "indispensable" to easing major problems in international trade, a senior UNCTAD official has underlined.

The Director of UNCTAD’s International Trade Programmes Division, Bhagirath L. Das, was addressing the sessional Committee of UNCTAD’s Trade and Development Board.

The UNCTAD official's remarks came even as details of recent congressional testimony by the new U.S. Trade Representative, Carla Hills, about U.S. determination to defy GATT rulings has become available here and have been subject of some sharp criticism from third world and industrial trading partners.

In her testimony, and written report, Mrs Hills has reiterated the U.S. intention to use "the leverage" of section 301 of its, domestic trade law "to bring down foreign unfair trade practices".

The use of this provision has now become a major source of controversy between the U.S. and its trading partners, and has been directly or indirectly criticised by UNCTAD and GATT officials.

The U.S. actions in using section 301 in imposing 100 percent, discriminatory tariffs against imports from brazil have been referred to a GATT panel for adjudication, and the main issue there would be the legality in terms of GATT obligations of section 301.

The members of the panel and its terms of reference in the Brazil-U.S. dispute are still to be named and it is still to begin work. But Mrs Hills has already declared that the U.S. would not pay any heed to an adverse ruling against it, and that "regardless of how a GATT dispute panel decides on the Brazilian complaint ... it won't affect U.S. trade retaliation against Brazil's refusal to provide patent protection for U.S. pharmaceuticals and fine chemicals".

Earlier she had said: "we cannot fall into the trap of suspending all actions against unfair trade practices on the ground that such actions ‘spoil the atmosphere' for the Uruguay round".

Introducing several studies and documents before the sessional Committee, Das pointed out that despite positive growth in the industrialised countries, introduction of trade distorting measures continued to pose grave problems to the world economy.

All Non-Tariff Measures (NTMS) due to expire in period after Punta del Este declaration for the Uruguay round had been renewed and new ones imposed.

Resort to export subsidies, voluntary export restraint and surveillance measures had increased, and so had resort to antidumping laws for protectionism purposes.

To all these, the UNCTAD official declared, must be added the growing tensions and uncertainties in trade relations between certain industrialised and third world countries due to imposition of obstacles to market access for what was "unilaterally perceived as unfair trade actions".

There had also been linking of concessions in goods sector with obligations in other sectors.

It was hence more than ever important that member-states should strictly adhere to their standstill commitments, and further reduce tariff and non-tariff obstacles, particularly those affecting exports of third world countries, Das declared.

The UNCTAD official also underlined the need to establish national mechanisms to evaluate protectionist measures and likely effects on the economy as a whole as called for in UNCTAD-VII final act.

On issues of structural adjustment, Das said that in agriculture the OECD countries were caught in a "vicious circle" of closing their markets against foreign competition and compensating farmers for domestic cost increases, which resulted in uncompetitive protection, further production, and greater government support.

While there had been some policy changes, these had not yet resulted in any significant improvement of the international trading environment for agricultural products.

In the industrial sector, support measures of ailing industries continued to be a familiar response of governments to structural adjustment problems.

The completion of the unified internal market in the EEC by 1991, Das said, would have major implications for all competitors including third world countries, and developments would need to be closely watched.

The structural adjustment in third world countries, the UNCTAD official added, was fully intertwined with development.

The Uruguay round negotiations, Das pointed out. were not held in vacuum. Major imbalances in world economy, ever changing patterns of international division of labour, technological progress and the inadequate pace of structural adjustment had increased temptations for protectionist and discriminatory trade measures.

These could not but have major negative repercussions on the negotiating environment and credibility of whole exercise.

"The momentum towards trade liberalisation, brought about by the launching of the Uruguay round, can only be maintained through strict implementation of the standstill and rollback commitments".

Referring to the various tariff and non-tariff measures against third world exports, and the discriminatory restrictions outside the general agreement, the UNCTAD trade official blamed the "inadequacy of the escape clause" in GATT which had given rise to selective interpretations.

Legalising departures from the principle of non-discrimination would not only make recourse to safeguard actions more frequent, but would make the weaker nations, generally third world countries, more vulnerable.

The major shifts accruing in the world economy, Das pointed out, was the origin of the increased interest in cross-sectoral issues like TRIPS and TRIMS.

Knowledge-intensive industries and foreign investment were laying the grounds for third world country capacities to compete effectively in world trade.

The challenge before negotiators in both groups was "to strike a rational balance between interests of patent holders and foreign investors, on the one hand, and the development needs and objectives on the other".

"Linkages sought to be established between trade rules, on the one hand, and better access of developing countries to technology and development of their own technology, on the other, may complicate ongoing efforts and lead the Uruguay round into difficulties".

"Similarly attempts to put constraints on the developing countries’ right to channel foreign investments, in accordance with their development strategies, may well hinder the progress of the negotiations".

The progress achieved at Montreal on services, Das said, had provided a workable basis for future negotiations of the multilateral framework of principles and rules for trade in services.

In a number of provisions, the Montreal text appeared to recognise the special economic situation and development, trade and financial needs of developing countries by providing them with flexibility relating to sectors and transactions, and recognising the particular needs of developing countries to introduce regulations in pursuit of their development.

It was important to ensure that in the second phase of the negotiations, when specific provisions were drafted and specific sectors were taken up, the developmental role of trade in services found adequate reflection in the framework.

Speaking on behalf of the Group of 77, Amb. Kamlesh Sharma of India complained that despite repeated declarations of faith in a multilateral trading system and pledges to preserve and strengthen, there were increasing trends towards bilateralism and unilateral and arbitrary departures from the agreed principles of non-discrimination and non-reciprocity in trade relations between third world and industrial countries. The 1988 U.S. omnibus trade and competitiveness act went beyond U.S. international obligations in GATT contained many protectionist elements and would lead to unilateral and arbitrary measures.

Trade developments in industrial and third world countries presented the paradoxical picture of unilateral trade liberalisation by the third world and resort to subtle and intensified protection by industrial countries.

The persisting and growing tendency in some industrial countries to seek linkages between trade in goods and other areas such as intellectual property protection, foreign investment and services, Sharma pointed out contravened the agreements in the final act of UNCTAD-VII and were clear violations of the standstill commitment.

In services, there was need for "unambiguous definition" of what constituted "trade" in services. The conceptual problems relating to trade as well as development dimension of services were therefore still a subject for definition and on issue for negotiations in the Uruguay round.

The asymmetrical position of the third world countries was much more accentuated in service trade than in goods. Many third world countries had no effective control over essential services like shipping, transportation, insurance, communication etc. they ran overall deficits on this trade and faced acute bop problems.

In view of these "unhappy realities", their infant services sector needed special protection. The unhindered growth of indigenous services, especially knowledge-intensive services in the third world was also quite essential.

The negotiating agenda must hence have "a balanced coverage", and could only include sectors of interest to the industrial countries and involving movement of corporate entities and capital across national boundaries.

Underscoring the dominant role of TNCS in several essential services and their pressures for dismantling national regulations the G77 spokesman said the policy objectives of such regulations would not coincide with the commercial motives of the large TNCS.

It was hence essential to ensure compatibility of practices and activities of the large market operators in services with the national policy objectives.

Also, discussions in services could not merely focus on government policies and regulations. They must also deal with far more important non-governmental factors like Restrictive Business Practices (RBPS) of the TNCS.

Due to the peculiar characteristics of services and the greater degree of intra-firm transactions in this trade, "there is a higher possibility of incidence of RBPS in this sector".

"To take care of these serious and justifiable concerns, the Group of 77 attaches utmost importance to the establishment of a regime for identification, notification and consultations to control and eliminate RBPS which hamper economic growth in general and "he transfer of technology in particular," Sharma added.