Jul 29, 1992

LOW-KEY TALKS ON MFA FUTURE EXPECTED AT GATT IN SEPTEMBER.

GENEVA, JULY 27 (CHAKRAVARTHI RAGHAVAN) -- With the Uruguay Round negotiations at an impasse, and unlikely to be renewed before end of the November U.S. presidential elections, GATT diplomats have begun to apply their minds to the future of the Multifibre Agreement which governs the international trade in textiles and clothing.

"At the moment it is all in very low key, given the uncertainties about the Uruguay Round and unwillingness of everyone ‘not to rock the boat’, and many of our governments have not applied their minds at all to the various options", on Third World delegates said.

Integrating the international trade in textiles and clothing, now carried on as a "derogation" from GATT rules and principles, into the disciplines of the General Agreement is one of issues on the Uruguay Round agenda.

A ten-year phased procedure for bringing this trade fully into the GATT and its disciplines is one of the draft agreements in the Draft Final Act (DFA) Uruguay Round package put forward by GATT Director-General Arthur Dunkel,

While the process envisaged is still a matter of difference among textile exporting and importing countries, with some points that have to be cleared up before the DFA can be adopted by the negotiating countries, the entire issue (like others) has been held up because of the impasse over agriculture.

The MFA was to have expired at end of July 1991, but was extended till end of the year by rolling over the existing arrangements. This was on the premise that the Uruguay Round negotiations would be successfully concluded, and the entire package of agreements brought into force on 1 January 1993.

Now no one in Geneva, or in trade policy divisions of governments in various capitals, believes that such a scenario is possible.

While there is still talk, publicly, by GATT officials that the negotiations could resume after the summer holidays in September, immediately after the French referendum on Maastricht (hoping it would result in a "yes" vote, but an outcome not so certain now), no one seriously believes that negotiations can get under way until after the U.S. Presidential elections, and a George Bush victory.

Even if that happens, and very quickly the Americans and Europeans reach an understanding on agriculture, it would take at least three to four months for the details on this and other questions to be resolved. The earliest date for concluding the Round would be end February (to enable the U.S. administration to notify the Congress under the fast track authority provisions) and even for details to be completed by end May.

Also, even if President Bush were re-elected, it would be a new Congress in January. Under the U.S. procedures, each House would then by free to settle its rules of procedure (and this will not be subject to any Presidential veto).

And there is talk that legislators may come back to take away through rules the fast track authority.

All this would imply that under the most favourable scenario, the Uruguay Round accords would not enter into force before end 1993, and there is some talk that it might even go into 1994.

The future of the MFA has come up in this behalf.

Developing countries, particularly those pressing for a faster rate of integration were dissatisfied with the Dunkel text and had been insisting that even if the integration were to last for ten-years, the process of integration must be brought up front - and not as now, namely for 49 percent of the restricted trade (in so-called sensitive and very sensitive products) envisaged to be liberalised only at the end of the tenth year.

However others, whether newcomers hoping to get a foothold through an MFA quota regime or the established exporters enjoying an advantageous market niche and don't want to face competition, have been unwilling for a faster integration.

In May, when the developing countries, members of the International Textiles and Clothing Board, met in Shanghai to consider the draft proposals in Dunkel DFA, though there had been some awareness that the Round would get stalled, no one was ready to acknowledge it openly and consider the consequences for the MFA.

But now the issue has come up and various options have begun to figure in informal conversations. These range from another rollover for A short period, a limited one or two-year extension with improves for the exporting countries written in and advance implementation of the Uruguay Round textile accord itself.

Among the importing countries, the EC recently even flagged the idea of an "indefinite" rollover of the MFA, on the ground that it was not certain how long the Uruguay Round process might take.

The exporting countries, particularly those pressing for a faster integration (than envisaged in the Dunkel draft) flatly rejected it.

Any improvement in the terms of the current MFA might need some detailed negotiations, while a simple rollover would not.

But while a simple rollover for another six months or so might be more easily, though very reluctantly, accepted by some of the exporting countries, any extension of the MFA with all its current restrictions and virtual freeze or marginal growth would not.

Even when negotiators and GATT officials get back to work towards end of September, it is unlikely anyone would begin to talk about it, one GATT source said.

It will be too near to the U.S. election process, and the Americans would be even more unwilling to create unnecessary waves, particularly given the Clinton-Gore "Southern ticket" facing Bush, the source explained.

And the exporting countries too would be unwilling to consider or discuss any of the options until the future of the Round was clear - which it would not be before the U.S. poll.