8:13 AM Dec 9, 1993

MFA TO BE ROLLED OVER

Geneva 8 Dec (Chakravarthi Raghavan) -- The Multifibre Agreement (MFA-4) is to be rolled over and extended till end of December 1994, by when it is hoped that the Uruguay Round accords, and the Textiles and Clothing Agreement in it, would have entered into force.

The agreement on this among a key group of negotiators is due to be endorsed Thursday at a scheduled meeting of the GATT's Textiles Committee which oversees the MFA.

The agreement has been already rolled over annually, after the extension of the Uruguay Round talks (at Brussels in 1990).

The US had attempted this time to put into the extension the provisions in the Uruguay Round in this area relating to circumvention.

This was ultimately given up.

Meanwhile, the negotiators have also been at work cleaning up the draft Textiles and Clothing agreement in the Uruguay Round.

Late Wednesday night, they reported that they had completed their work, but have sent up for decision at level of heads of delegations three crucial and substantive questions.

One relates to the question of dispute settlement arising out of the commitments on growth rates and the phased removal of the MFA quota restrictions in the course of the implementation.

The DFA text (as amended now to take account of the new date for entry into force of the accords, namely 1 January 1995) in this lays out the obligations of importing countries for derestricting the quota restrictions in three stages within an overall 10-year transition -- 16 percent annual growth rate of remaining restrictions in each bilateral accord in the first stage of three years, 25 percent growth rate for the restrictions in the second stage of four years, and 27 percent growth in the third stage of three years -- with all remaining restrictions to go at the commencement of the 11th year of implementation.

These are subject to a catchall escape clause of "Except where the GATT Council decides otherwise" -- after the Council undertakes before the end of each stage a major review of the implementation.

Whether this was to be done by the GATT Council or any other body was left open (in a footnote) for decision in terms of the overall institutional decisions which now provide for an MTO and an Integrated Dispute Settlement Understanding with automaticity in resolving all disputes and making panel recommendations final, unless decided otherwise by consensus.

The European Community wants a provision whereby the 'adjustment' of the phasing out of restrictions and phasing in of the derestricted quotas and categories into the GATT disciplines, to be dealt with in the GATT Council as a political body and issue -- and not through the automatic dispute settlement process.

The DFA provides for the GATT Council to undertake a major review before the end of each stage of the integration process, and take such decisions as needed to maintain the balance of rights and obligations.

An overall provision in the MTO precludes the grant of any waiver from an obligation under any of the agreements, during a transition period provided under it, except by consensus.

The exporting countries have not been agreeable to the EC view, and want any adjustments of the integration to be tackled by the Dispute Settlement Body and on its findings and recommendations by the relevant body.

If the EC view were to prevail, the claims of MFA phase out and benefits and integration would be that much less: as in the past, from 1961 when the initial cotton textiles agreement was entered into to provide a short breather for adjustment in the importing countries, but continually got expanded and extended for over 30 years now, towards the end of each phase the importing countries are likely to come up for special adjustments and dispensation.

The second issue that has to be resolved relates to the so-called downpayment.

The textiles agreement lists in an annex the list of all textiles and clothing products (covered by the MFA) at six digit level -- and includes both the products actually under restraint in the importing market and those facing no restrictions.

The agreement requires that prior to the start of the integration process, i.e. on 1 January 1995 (if the accords enter into force), four percent of the products in the annex are to be integrated, and then the phased integration beginning with a 16 percent of the first day of entry into force of the accord, another 16 percent in stage one of three years, 25 percent in the stage two and 27 percent in stage three, and all the remaining balance at end of stage three or the 10-year transition period.

The exporting countries have been insisting that the four percent initial downpayment should be in terms of products under restraint -- and not by choosing products (in each importing market) which has no restraint at all.

Given the difficulties of a common list of products for the four percent downpayment, the exporting countries also said that each of them would give a list of their products under restraint (from out of which the four percent downpayment should be made).

However the major importing countries have not been agreeable and have been insisting on a blank cheque so that they have no initial payment to make and nothing would have changed on 1 January 1995.

A third issue relates to the exclusion of cotton and cotton goods -- and their being covered under the agriculture accord.

Pakistan and Egypt as the two countries exporting cotton and its products, including cotton yarn and further stages of its processing including cloth, have been pressing for this.