12:04 PM Dec 14, 1995

TEXTILE ACCORD, TMB PROCESS CRITICISED

Geneva 13 Dec (Chakravarthi Raghavan) -- Three leading developing countries, exporters of textiles and clothing, were sharply critical Wednesday of both the way the principal importing countries have implemented the accord with any liberalisation, as also of the way the Textile Monitoring Body (TMB) was functioning at the World Trade Organization.

The sharp comments came from Hong Kong, Pakistan and India -- all of whom though preceded it by praise for the WTO, its bodies and chairmen and the WTO head and secretariat.

The Indian speech also raised a number of other questions about the gains to developing countries from the implementation of the Round and warned against the new issues being raised. Hong Kong said despite the achievements, particular difficulties remained and adverted to textiles issue as on top of his list.

While the TMB had performed "useful monitoring functions", on the crucial task of phasing out existing restrictions, neither the Ruggiero report before them nor the information received from the TMB had provided "an adequate basis for critical analysis of the significance to trade, or lack of it, of stage one of the integration exercise" under the Agreement on Textiles and Clothing (ATC) Hong Kong said.

The TMB documents, he said, had enhanced transparency, but WTO members should know more about the TMB's functioning -- "especially the rationale behind its recommendations, or, in some cases, the reasons why no decisions can be reached after long deliberations". Often the last had serious implications for trade, "especially in cases where restraint measures not endorsed by the TMB, for unclear reasons, are permitted to continue".

"In general, Hong Kong cannot help feeling that, although textiles and clothing have now been brought into the multilateral trading system, there are still those who seek to regard this area as not subject to the general principles by which we are normally guided in this organizations. We have seen this not only in the issue of transparency, but also in the question of the applicability of draft Rules of Conduct to the TMB."

Pakistan's Amb. Munir Akram complained that the TMB was not functioning well and thus discouraging from coming to it for relief but encouraging them to seek bilateral solutions.

While the UR had resulted in substantial reduction of tariffs, with largest cuts by the developing countries, the implementation of agreements of interest to them, such as on textiles, "have confirmed our fears that any benefits that may occur in market access will be at the very end of the process."

The integration programmes announced by major importing countries had failed to include any items which were actually under restraint under the MFA. While the ATC had called for particular interests of cotton-producing countries being taken into account through consultations, no such consultations had been held, nor had the TMB (which was supervising the ATC implementation) made any observations on this vital element of the ATC.

There had been "arbitrary protectionist steps" such as anti-dumping duties on Pakistani exports of cotton yarn, and unilateral cuts in quotas for alleged circumvention. These had raised genuine concern that even at end of the 10-year phase-out period, access for major textile producers to markets of major trading nations "may not be very meaningful."

The reference prices for cereals in the agriculture sector was contrary to the Uruguay Round Commitments and while Pakistan would pursue this matter on a bilateral basis, it hoped a resolution of the dispute would be possible without necessity of a formal recourse to the WTO dispute settlement process.

A major achievement of the new agreement was the WTO's "supposedly strengthened dispute settlement mechanism". But what they had witnessed in this matter in the textiles field, "raises little hope" that the new machinery would be able to challenge and reverse the unilateral protectionist measures being taken by some industrial countries.

There were "disturbing indications" that some countries had been discouraged from bringing issues before the TMB, while others had been persuaded to accept bilateral fixes, Akram said while endorsed the remarks of Hong Kong on this. He added: "Of course, the DSB has yet to be truly tested in this area."

On the services front, Akram hoped that the major proponent of financial services liberalisation (the US) would soon join the agreement concluded in mid-1995. The benefits of this agreement for developing countries, he said, were so far "ephemeral", while the offers made by major member states on labour services was "quite disappointing"

Since Marrakesh, whatever liberalisation had taken place was mostly outside the ambit of the WTO, within the context of regional trading blocs and arrangements. They might well contribution to trade generation and the benefits outweigh trade diversion.

But the fact remained that large segments of the world, specially poorest populations of Africa and South Asia, remained outside the most promising regional agreements and they could become well marginalised in global trade, the Pakistan Representative said.

India's Amb. Srinivasan Narayanan said the D.G.'s report in some portions was "slightly confusing" to him.

He was puzzled to note, for e.g., that the CTE was moving towards the goal of presenting for the Singapore ministerial meeting a report combining "substantive progress on a range of issues and the material that the Ministers may need to set a work programme". It was India's understanding from the Marrakesh decisions that the CTE had to present a report to the Singapore meeting, and it was for Ministers to decide whether the CTE should continue to exist or not and how the future programme in this area should be handled.

The references in the Ruggiero report about a WTO study on the shortcomings of existing rules and procedures and actions that could be considered, Narayanan that it was only a secretariat study and it could not be implied that the entire membership was a part to "all the assertions and value judgements made" in that report.

As for the "unified set of rules for the Appellate Body", Narayanan said that the appeal against panel rulings to the "new seven person Appellate Body", mentioned in the Ruggiero report, should not imply that all seven members would be involved in the decision-making process of each and every case.

(The agreement provides only for three of the seven would hear and dispose of appeals and there is no provision for a collegiate functioning of the Appellate Body).

On the question of investment and competition policy (as a future WTO trade agenda), Narayanan said, though carefully worded in the D.G's report, India did not necessarily agree with all the thoughts contained in the report on this.

Outlining some of India's concerns on the overall functioning of the system, Narayanan said that in the Uruguay round, developing countries had made "substantial and unprecedented" concessions. They had done so because of their faith in the multilateral system and their earnest belief and expectation that "such a system would be an insurance against arbitrary and discriminatory actions by developed countries under pressure from protectionist forces."

But a large number of studies had been brought out by international organizations, clearly indicating that the substantial benefits of tariff concessions would go to the major developed nations and not developing nations, the Indian representative said. This was because tariffs were no longer the major market access impediment faced by developing countries. The impediments arose largely from non-tariff barriers such as antidumping actions, voluntary export restraints, quota regimes etc.

While the Uruguay Round to some extent had addressed these, and there had been some improvements in use of trade policy instruments, the results had not gone as far as they would have liked and several provisions were being used to limit market access.

Major developed nations were better placed to use anti-dumping actions, sanitary/phytosanitary measures, technical health and safety standards as devices against exports of developing nations. The two major trading entities (US and EU) were most active in use of anti-dumping rules, and the WTO had to function decisively to ensure strict adherence to rules. Expanding and strengthening the role of the WTO Committee on Trade and Development, in a serious and focused way, could be one of the steps.

The D.G's report on textiles and clothing, Narayanan complaint was more relevant for what it omitted to say than what it said.

It was no exaggeration to say that the first phase of integration under the ATC by major importing countries had confirmed the fears of many delegations that the integration process was terribly back-loaded and that by including in the coverage products not restrainable under the MFA regime, the whole integration process "loses its credibility".

It was sufficient to say at this stage that for many exporting countries not even one product under a quota regime had been integrated in the first stage. While he would not deny the claim of the importing country claim that they had fulfilled their obligations under the ATC, India would still urge the importing countries to bring some credibility and substance to the remaining stages of integration in terms of the negotiations that preceded the agreement on textiles and clothing.

On the 24 requests for consultations for transitionary safeguards made by the US (and adverted to in the Report), Narayanan said Art. 6 of the ATC required application of transitionary safeguards "as sparingly as possible". WTO members had to ponder whether the US action in initiating a spate of consultations under Art 6 was consistent with the spirit of liberalization in the textiles sector which the ATC was supposed to herald.

On the TMB's functioning, Narayanan said that the TMB had been working very hard and that its structures and internal rules and procedures, were responsible for the many problems faced by the TMB. But India had placed great reliance on the TMB to ensure an effective fair and equitable implementation of the ATC.

It was therefore "with a certain amount of distress" that he had to say that the manner in which the TMB had functioned had given "considerable cause for concern" to India.

The TMB as a creature of the ATC "should not be afraid of or fight shy of the Agreement, its creator".

India had noticed with "a certain amount of dismay" that the TMB, while exercising its authority under a particular provision of the agreement was "reluctant to use in its decision or conclusion the words used in the relevant provision... We are worried that, when we describe something as a 'recommendation' of the TMB, strictly in tune with the provisions of the Agreement, the TMB is unwilling to state clearly whether they agree with us or not.

"Similarly when we sent a communication to the TMB under the appropriate provisions of the ATC, our government does not get to know whether the TMB has seriously discussed the various points raised in our communication, and if so, what was its reasoned response to the issues raised."

It was not India's case that the TMB should agree with whatever they raised nor that it should always give a verdict in India's favour. india would not be unduly distressed if, "based on sound reasoning and logic and with reference to the agreement's provisions, the TMB finds us wrong on any point," Narayanan said.

"Our regret is that we are mostly in the dark about the rationale of the findings of the TMB. We feel the TMB should give a reasoned recommendation, or finding, or conclusion, which will go beyond just summarising different arguments so that the parties concerned could know the view taken by the TMB on the points raised by them. If this is not done, I am afraid, the image, credibility and the authority of the TMB will suffer a serious set back. We are anxious that the TMB function as a multilateral adjudicating body with only ATC provisions as its beacon".

Referring to the notification requirements of the WTO, and some 74 provisions of the WTO for review of implementation and further negotiations, the Indian delegate said if the WTO was to acquire the necessary image and credibility it must give a signal that it was there not only to negotiate and conclude agreements, but also implement them in letter and spirit.

While there was much unfinished agenda of the Round and the WTO provisions for further negotiations, India was concerned over the efforts to burden the WTO with new issues like labour standards, investment rules. This would be "inappropriate" and an extremely short-sighted policy to think that problems confronting the world could be solved by linking them to trade and utilize the cross-retaliation provisions of the WTO.

"We have a genuine apprehension that new issues like environment, labour standards etc, are sought to be brought into the WTO with a view to deprive developing countries of the comparative advantage they have in some areas and reduce further whatever market access they have."

India had abiding faith in a non-discriminatory and equitable multilateral trading system, but multilateralism could not flourish in a situation where some had abiding faith in it and others felt there was no contradiction between adherence to multilateralism and recourse to unilateralism.

It was a matter of deep regret for India that legislation authorizing unilateral trade actions continue to exist on statute books of some of the major trading partners. This was inconsistent with the obligations envisaged under Art. XVI:4 of the WTO.