EEC CONCERNED OVER FUND/BANK STAFF REPORTS ON URUGUAY ROUND.

Mar 29, 1988

EEC CONCERNED OVER FUND/BANK STAFF REPORTS ON URUGUAY ROUND.

GENEVA MARCH 25 (IFDA/CHAKRAVARTHI RAGHAVAN)— The EEC is reported to have expressed here its serious concern over the reporting by the staff of the IMF and the World Bank to their respective Executive Boards on the progress in the Uruguay round negotiations.

According to GATT sources, the EEC representative, Amb. Tran Van-Thinh, raised the issue at this week's meeting of the Uruguay round negotiating group on the Functioning Of the GATT System (FOGS).

Tran reportedly criticised the organisations for not abiding by the "understandings" on the basis of which they were permitted to attend meetings of the Uruguay round bodies, and some of the negotiating groups, as "observers".

The international organisations had been permitted to attend as "observers" on the explicit understanding there would be "no parallel reporting". But the fund and bank had not only been doing this, but "giving a wrong picture ... and even attempting to influence the outcome in an issue of concern to U.S. like agriculture, and on textiles of concern to the developing countries", Tran reportedly declared.

The representatives of the fund and the bank reportedly responded that they were aware of these understandings, and had attempted to abide by them, but that the two institutions, by virtue of their charters, had an interest in the developments in the Uruguay round and general trade issues.

GATT sources said that the EEC concern was over the report of fund staff to the IMF Executive Board, and the bank staff's report to their executive board.

Third world sources said that though the EEC had raised the issue at the FOGS meeting, third world countries too were concerned about the reports, and particularly the IMF staff report.

While some third world sources saw the reports as mainly "sloppy" rather than "motivated", others said the reports were misleading and biased, advocating viewpoints closer to those of the U.S.

The issue, the sources said, has already figured at the informal meeting of third world countries in GATT, and is likely to come up at the next meeting of the Trade Negotiations Committee, and elsewhere, including in UNCTAD, where the U.S. was trying to block that secretariat from commenting on Uruguay round issues.

The fund staff report, the sources said, had been criticised by a number of executive directors from the third world at the meeting of the board, and could also figure at the April meetings of the interim and development committees, particularly if there were attempts to push through as conclusions or recommendations the viewpoints favoured by the staff.

The issue of allowing international organisations as "observers" at the meetings of the Uruguay round bodies (the TNC, GNG and GNS) and some of the negotiating groups, had been the subject of some intense consultations and negotiations.

While the U.S. had pressed for the participation as observers of the IMF and IBRD, it had been opposed not only by third world countries but also by the EEC, which said that negotiations were confidential processes and only among participants, and there should be no "voyeurs" sitting on at such meetings.

It was only in July 1987, that the TNC agreed to selective participation and that too on the basis of "understandings" about what the observers could or could not do.

In inviting some of the executive heads (or their representatives) of some international organisations to participate as "observers", the TNC had said such observers could attend formal meetings to the bodies they were invited to, but under certain conditions.

Chief among these was one stipulating that rules of confidentiality of proceedings of negotiating bodies would also apply to invited observers, and that the content of discussions and documents "would not be available for use outside international secretariats attending the meetings".

Since negotiations were among participants, "the sole purpose of such attendance is to enable negotiating bodies to seek appropriate technical support in the field of expertise of these organisations, to complement expertise primarily available from participants", the TNC had said.

The technical support, it further stipulated, could be in the form of oral responses during meetings "to requests through the chairman for factual information and clarification of matters concerning the relevant instruments and activities of any such organisations, and the factual papers to be prepared at the request of the body".

Support by invited international organisations, the TNC had further stipulated, would be given "in a manner which does not affect the negotiating positions of participants", and information obtained would be used solely for purpose of providing the technical support.

The IMF and bank staff reports were seen as violating this understanding, and trying to use the fund and bank machinery to influence negotiators, and particularly third world governments, to adopt stances in the negotiations to achieve objectives favoured by the fund and bank staff.

These ideological positions, it was noted, often coincided with those of the United States, particularly on some of the new issues like services, intellectual property rights and investment questions, as also on changes to GATT articles like the balance-of-payments (BOP) provisions, where there are sharp divisions as between U.S. and third world delegations.

The fund staff report, according to third world sources, in some areas presents as negotiating objectives ideas, which were pushed by U.S. and others but which ultimately did not find a place in the Punta del Este mandate.

For example, in more than one place, the fund staff report speaks of "liberalisation" of the trade in services as the objective of the negotiations. In the meetings of the GNS itself it has been repeatedly brought out that the mandate views "progressive liberalisation" as only one of the conditions for expansion of trade whose objective is to be growth of all trading partners and development of the third world countries, and even the U.S. has not challenged this. The staff paper sees third world countries' cautiousness over a general framework and establishing multilateral disciplines on services as due to lack of understanding on the benefits of trade liberalisation and transparency.

The general demand of several third world countries (South Korea, Pakistan, Mexico, India, Tanzania, etc.) that labour and labour-intensive services should be covered has been presented as that of "a few", including India.

In the area of intellectual property rights, where there are sharp differences over interpretation of the mandate, the fund staff concludes that negotiators are to agree on new rules and disciplines with respect to intellectual property rights.

The inclusion of TRIPS and TRIMS issues, the staff adds, "marks the intent of the negotiators to widen the coverage of multilateral disciplines for the conduct of international trade".

In fact within the two groups there are some sharp differences and controversies over the efforts of the U.S. and Japan to widen the mandate, on the basis of what they had sought before Punta del Este, rather than what was actually agreed to there.

On the issue of the special and differential treatment for third world countries in GATT, the paper argues the case of some industrial countries for ending these, and talks of the fund emphasising these points in its discussions with third world countries.

On the revision of GATT articles, where the U.S. and other industrial country efforts to put changes in GATT provisions on BOP on the negotiating table has been opposed by the third world, the staff paper appears to advocate making changes in the provisions.

The existing provisions permit a third world country, applying restrictions on BOP considerations; to decide what imports it would allow and what it would restrict or prohibit, in the pursuit of its policies of economic development. The article also stipulates that no CP should be required to withdraw or modify its restrictions on the ground that a change in its development would obviate the need for restrictions.

The U.S. and some others have been arguing for end to these provisions, and for empowering only an across-the-board restriction on imports and not selective.

The fund staff in effect supports this by arguing for "market-based, system-wide" restrictions such as through general import surcharges.

Third world participants complain that the fund and bank staff, beyond statements in their annual reviews, have never been known to take up such positions in their surveillance of industrial country policies about such QRS like MFA and other grey area measures, but want to use their leverage with third world countries (because of their borrowings) to bring about such ideologically motivated changes.

Though the GATT is agreed to be "a contract" among governments, with the secretariat having a very limited and assigned role agreed to by all by consensus, the fund paper speaks of improving liaison between fund and GATT staff, and enhancing the role of the GATT secretariat.