Mar 2, 1984

"IMPROVED AND MORE EFFICIENT SAFEGUARD SYSTEM" UNLIKELY.

GENEVA, FEBRUARY 28 (IFDA/CHAKRAVARTHI RAGHAVAN) -- Unless there is a radical change in the position of the major trading countries, there appears to be no basis for negotiations in GATT of "a comprehensive understanding" leading to an "improved and more efficient" safeguard system, according to UNCTAD.-

In a report to the trade and development board, the secretariat of the UN Conference on Trade and Development suggests that the interests of the developing countries will not be advanced by "repetitive discussions" around article XIX of the general agreement on tariffs and trade.-

Also, any agreement to some of the proposals being advanced by the major trading partners, would be prejudicial to the interest of the smaller trading partners, and specially the developing countries, UNCTAD adds.-

The reference is to proposals for introducing "selectivity" in safeguard actions, and for doing away with the requirement that the importing country introducing restrictive measures under article XIX should pay equivalent compensation to the exporting country or face "retaliation".-

Such proposals, UNCTAD warns, would only lead to the weakening of such discipline as now exists through the application of article XIX.-

It could also distract attention from the central issue as to how countries which are traditional suppliers should react to the profound changes in the conditions of international competition that have coincided with significant shifts in demand and with significant changes in their own production structures.-

The term "safeguards" is used in respect of actions that a GATT Contracting Party can take, in circumstances and conditions, specified in article XIX, to temporarily restrain imports of a particular product into a country.-

Though article XIX was introduced in GATT from inception, there was little recourse to it in the early stages, UNCTAD points out.-

Until 1955, countries protecting their "sensitive" industries did so, not by recourse to article XIX, but through restrictions justified on balance-of-payments (BOP) grounds.-

By 1955, procedures had been set up in GATT whereby such restrictions on BOP considerations could be maintained only for limited periods and subject to conditions.-

Article XIX became relevant to the Industrial countries only at this stage.-

But soon a new situation arose, with the emergence of Japan, Hong Kong and others as important new suppliers, such as in textiles.-

In this situation, the U.S.A. and others entered into agreements that avoided the disciplines of article XIX. This was what led to the cotton textiles agreement of the 1960's, and the subsequent Multifibre Arrangements (MFA).-

Also, throughout this period, in regard to agricultural products, restrictions were imposed under article XI of GATT, or through special "waivers" as was obtained by the U.S.A.-

Thus protective actions were taken outside article XIX, and recourse to it was infrequent.-

Following an OECD report on structural adjustment and safeguard actions, Tokyo Round negotiators were asked to address the issue of the adequacy of the multilateral safeguard system, and the modalities for application of article XIX in order to further liberalise trade.-

Various detailed proposals were put forward during the Tokyo Round. But as the negotiations progressed, "discrimination" or the so-called "selectivity" principle became the predominant issue.-

Some of the OECD countries wanted powers to apply safeguard measures only against imports from countries causing "injury" and not against all imports.-

However this was opposed by the smaller trading partners the developing countries, some of the Industrial countries, and the Socialists.-

All of them opposed any breach of the most-favoured-nation (MFN) principle in article one of GATT in the application of safeguards.-

The smaller trading countries, lacking fundamental retaliatory power, saw that their rights could be protected only by maintaining the MFN principle.-

This position, which has so far remained unchanged, led to the inconclusive results on the safeguards issue the Tokyo Round.-

After the conclusion of the Tokyo Round, the issue was pursued in the Safeguards Committee, and later in the preparations to the l982 GATT Ministerial, but without any agreement.-

The Ministerial declaration asked the GATT Council to prepare a "comprehensive understanding" by the 1983 November meeting of the Contracting Parties (CPs). But this too has not been possible. Discussions are still continuing with the November 1984 meeting of the CPs as the new target date.-

At Belgrade UNCTAD VI, the Conference unanimously decided that in view of the need for "an improved and more efficient safeguard system", work under way in GATT on a "comprehensive understanding to be based on the principles of GATT" should be continued actively, with the participation of all interested countries and with a view to reaching concrete results within the agreed time-frame.-

The UNCTAD secretariat adds: "as things now stand, the discussions in GATT on this very important issue may be moving further from an agreement on the multilateral safeguards clause and thus leading to a dead end on an issue which in the present conditions of tense international trade relations could weigh very negatively on the much needed sustained recovery and development drive sought by all trading partners".-