TEXTILES: EXPORTERS COOL TO DUNKEL'S COMPROMISE IDEAS.

Feb 21, 1989

TEXTILES: EXPORTERS COOL TO DUNKEL'S COMPROMISE IDEAS.

GENEVA, JULY 17 (IFDA/CHAKRAVARTHI RAGHAVAN)— Third world countries, exporters of textiles and clothing, are reported to have reacted with some coolness Friday to compromise ideas put forward by GATT Director-General Arthur Dunkel to solve the deadlock in negotiations in this sector.

Participants said that Dunkel did not present his ideas on paper, but formulated and elaborated what he felt should be the elements of a compromise, and avoided further discussions or comments.

As a result, they said, consultations on textiles ended after one session Friday.

Textiles and clothing is one of the four sectors in the Uruguay round where deadlocks developed at Montreal in December 1988 at the Ministerial mid-term review meeting.

Dunkel in his capacity as chairman of the official level meetings of the TNC was asked to hold consultations on the deadlocked issues

The third world countries have said that in order to get the negotiations in this sector moving forward, and thus unblocked the Uruguay round negotiating processes put on hold at Montreal, the agreement on further negotiations should have some basic elements.

There should be a freeze on further MFA restrictions on their exports.

There should be agreement that the process of phasing-out of the Multifibre Arrangement and integration of the trade in this sector into GATT should commence at the expiry (in July 1991) of the current MFA-4.

The modalities and a time frame for achieving the full integration of the trade into GATT and the phasing out of the special arrangements should be negotiated and agreed upon in the Uruguay round.

The U.S. and EEC are opposed to any commitment to phase-out the Multifibre Arrangements.

In the second round of consultations Friday on this issue, Dunkel reportedly formulated some ideas:

Firstly, there would be recognition of the importance of this sector to the economies of many countries and particularly third world countries for their economic and social development and for increasing their export revenues.

Secondly, there would be recognition that this issue is one of the key elements for negotiations in the Uruguay round.

Thirdly, in order to achieve by the end of the Uruguay round the negotiating objectives in this area, substantive negotiations would start in may 1989.

Fourthly, in order to provide the right climate to achieve the objectives, and without prejudice to the existing rights and obligations, countries commit themselves not to take any measures that would worsen the international trading system in this area.

Fifthly, the modalities for integration of the trade in this sector would have to take account of a number of concerns expressed by participants: phasing but of restrictions inconsistent with GATT rules and disciplines, timeframe for integration of this sector into the GATT, and progressive character of the liberalisation to be achieved.

Sixthly, contributions by all participants that would lead to liberalisation of this trade.

Seventhly, negotiations in the group would take account of the negotiations in the Uruguay round framework for strengthening of the GATT rules and disciplines.

Third world participants in the consultations said that there were some strong reactions against the so-called compromise from several of the third world countries, while the U.S., EEC and other industrialised countries "encouraged" Dunkel to continue his efforts along the lines outlined.

After the negative reaction of some of the participants, Dunkel reportedly reformulated the ideas and asked the delegations "to reflect" on these ideas.

As a result, further reactions were mooted, according to some participants.

Pakistan, India, brazil, Mexico, Indonesia, and Hong Kong were among those who reportedly spoke reiterating the position of the third world exporters on three basic elements of any compromise - freeze, starting the phase-out at end of MFA-4, and negotiating the time-frame for full integration in the Uruguay round negotiations.

Pakistan reportedly underscored the importance of this trade for its economy, and the sector as perhaps the only area of interest to it in the entire Uruguay rounds negotiations. The Pakistani comments were viewed by some as a hint that if there was no acceptable decision or movement in this area, Pakistan would be unable to agree to lift the "on hold" decision on the Montreal package in other areas.

India is reported to have pointed out-that if 2-1/2 years after launching the negotiations and just 18 months to complete it, they would merely agree to start substantive negotiations in May, the question would arise as to what the negotiators had been doing all this time.

While the Montreal decision put "on hold" results achieved in other areas, there had been no "freeze" on negotiations in the four deadlocked areas, and negotiations on textiles could start even now, provided there was a political will to negotiate.

There had been no progress or any substantive negotiations because some participants had been raising extraneous issues to create bottlenecks. It was hence necessary now to demonstrate clearly through actions the political commitment to achieve the objectives and bring progress in this sector of negotiating on part with negotiations in other sectors.

A freeze on further restrictions was thus the first step towards integration of this trade, and would send a clear and unambiguous signal that negotiators meant business.

India reportedly contrasted the approach being followed in the consultations on agriculture and that on textiles.

In agriculture, there was agreement that the concept of "freeze" and "cutbacks" would be used to create the right environment for negotiations on long-term.

But when third world countries sought a freeze on further MFA restrictions in textiles, they were told it should be considered as part of the modalities to be negotiated.

Again in agriculture, there was agreement that implementation of the modalities on long-term should begin at end of the Uruguay round. But in textiles there were objections to start the implementation of integration from the end of MFA-4.

The language used for "freeze", India and several others reportedly noted, would be even less than a political commitment, and would amount to a "best endeavour" effort.

Several of the third world participants also reportedly voiced objections to the concept of "contributions" by third world countries to the "liberalisation" process, noting that while industrial countries maintained restrictions under MFA, which was a derogation from GATT, third world restrictions were GATT sanctioned for balance of payments reasons.