US BLINKS IN EYEBALL-TO-EYEBALL OVER TEXTILES?

9:17 AM Dec 15, 1993

US BLINKS IN EYEBALL-TO-EYEBALL OVER TEXTILES?
Geneva 15 Dec (Chakravarthi Raghavan) -- In a confrontation that was threatening at one stage to be a "deal-breaker", the United States backed down in the early hours of Wednesday on its demand for significant market access offers in textiles and clothing from India and Pakistan and accepted the Uruguay Round DFA text on Textiles and Clothing, with a small cosmetic change.

Other texts finally cleared in the early hours, with negotiators breaking up at 3.15 am after approving all the documents at level of heads of delegations, included those on Trips, on Services, and a few other related areas (where the texts had been held up pending decisions on these).

On Textiles and clothing, some delegates at the GATT later described it as an "eye-ball to eye-ball" confrontation between the US on the one hand and India and Pakistan on the other, with finally the US blinking and giving way on its demand that the two South Asian neighbours should allow imports of textile and clothing items or face the prospect of being denied benefits of the integration/MFA-phase out provisions of the agreement until the very end.

While the United States, which had put in the demand on its own and on behalf of the EC, as well as several other developed and developing country delegations were pressing India and Pakistan to make some "concession" and "sacrifice" and contribute to a successful conclusion, the two countries reportedly made clear that if the Round collapsed on this issue the responsibility would lie with the two major entities, and particularly the United States.

In bilateral negotiations through the evening and night of Tuesday, India and Pakistan made some market access offers, though the full details were not immediately known.

But India, which had an offer on the table to bring down its high tariffs on imports of yarn and fibres in several product lines to a maximum of about 40 percent, also threw in some industrial fabric items.

Pakistan is reported similarly to have agreed to bring down its tariffs on some yarns and fibres and some textile items.

The Indian offer is to reduce the tariffs over a 10-year period, the same as the transition period for integration of textiles and clothing and phase out of the MFA, and "calibrating" the reductions to the integration of their MFA-restrained items into the GATT rules. There is also a "snap-back" clause in the event of the integration process being reversed or "adjusted" by the importing countries.

A cosmetic change, or what one source described as "the most transparent figleaf", is also to be made to Art. 7 of the Textiles and Clothing Agreement which sets the general orientation and objectives, but sets no commitments.

This article provides that as a part of the integration process, and with reference to specific commitments undertaken in the Uruguay Round, all Parties shall take steps to abide by GATT rules and disciplines.

The action in 7.1.(i) provides that parties take steps to "provide improved access to markets for textiles and clothing through such measures as tariff reductions and bindings, reduction or elimination of non-tariff barriers etc."

The agreed amendment to the text, the only one, is for changing "provide" into "achieve".

Earlier on Tuesday, at his press conference with EC's Leon Brittan -- to announce their mutual accords after several weeks of intense negotiations and fights to protect and preserve market shares in variegated sectors ranging from farming, textiles, tuna fish, hightech items like semiconductors and industrial electronics (but protecting their consumer electronics etc) -- USTR Mickey Kantor with a straight face and unparalleled exhibition of cynicism and sanctimoniousness had spoken of how the two countries had resisted narrow protectionist interests to liberalise and free world trade.

"Now is the time to show political will and vision the US and EC have demonstrated," Kantor pontificated.

Brittan not to be undone spoke of how he and Kantor had settled the differences for enabling the conclusion of the Round and had reinforced rules to liberalise and facilitate growth of world trade.

If Kantor's remarks reminded one of a character out of Lewis Caroll, Brittan reminded one of Shaw who spoke of the capacity of the English to find a "principle" for everything they were fighting for.

But immediately after the press conference, Kantor went back to the US Mission to the GATT, and summoned there separately the Indian and Pakistani representatives to present to them a joint US-EC demand that the two immediately make significant market access openings in textiles and clothing or face the prospect of being excluded from the benefits of the MFA phaseout, through an integration and growth rates on existing quotas, over the ten years of the accord.

Kantor's own negotiators had reportedly advised him earlier that any such discriminatory quota actions or conditional reciprocity against India and Pakistan would be GATT illegal.

To get around this, Kantor reportedly told India's Balkrishan Zutshi, that the US and EC would propose and demand changes to the DFA text on textiles and clothing to legitimise denial of staged liberalization benefits in Art. 2 for countries who are identified and notified to the Ministerial Conference as those not providing adequate and reciprocal market access.

Free trade preaching Kantor and Brittan said they needed this to win over their own protectionist textiles and clothing lobbies!

India and Pakistan reportedly explained that whatever restrictions they had was on account of balance-of-payments considerations and that all luxury and consumer imports had been restricted in favour of industrial inputs and raw materials and other necessities.

Zutshi reportedly said that if the US persisted in its attempt to change the DFA text and if Kantor wanted "to put the round in jeopardy, it will be your responsibility".

Later, at an informal heads of delegations meetings, the US tabled its proposals for textual changes.

India and Pakistan said that they too had their own proposals for textual changes, and would oppose the US-EC proposals and deny consensus.

The two also said that they had been making market access offers, keeping in mind their development, finance and trade needs.

While no details of the nature of the textiles and clothing items on which the US and EC had sought market access was available, the Indian press for some weeks has been reporting that the US wanted market access on items like women's lingerie.

Just as Kantor (in his press conference) had presented the demand in audiovisual sector -- that the US be enabled to expand its 80 percent of the European entertainment market and capture the balance -- in terms of freedom, democracy and right of European viewers to be able to see American films without restrictions -- the Indian press had reported that US textile interests and officials had said that they had the ambition to clothe the more than 50 percent of Indian women (who wear saris and petticoats, and not lingerie or brassieres) with the superior and competitive American products.

In a day of considerable misinformation and disinformation from US sources, word also quickly spread among other delegates and media that Pakistan had in fact made some offers and that India was recklessly holding out and threatening to wreck the round.

Pressure mounted through the evening and night on India and Pakistan, and particularly on India, both directly by the US and the EC, and indirectly from others, for "concessions" to enable the Round to be concluded and the promised benefits ($220 billion to world income of the OECD/World Bank to Mickey Kantor's six trillion addition over the decade) for the world.

India however refused to yield, underlining that the responsibility for a failure of the Round would rest with the United States and the EC.

Pakistan which had been holding back its offers, reportedly put in a new offer for tariff reductions on yarns and fibres and some fabrics.

In night-long off and on bilateral discussions, India offered to improve on its initial offer on the table (for tariff reduction on yarn and fibres) by extending it to industrial fabrics.

According to Indian sources, their offer provided (in the specified tariff-lines) for reducing the current tariffs of about 90 percent to 30-40 percent and binding them over the same period of ten years as the MFA phase out. The tariff reductions are also to be "calibrated" to the integration and liberalisation and growth in quotas and with a "snap-back" clause to restore the tariffs to current levels if the integration process was interfered with and the growth rates "adjusted".

This, with a cosmetic change in the DFA text, and a general statement to be made by the Market Access Group Chair, Germain Denis, provided a formula for the acceptance of the textiles and clothing accord at the level of heads of delegations.

The chairman of the market access group, Germain Denis, is to make a generalized statement that some participants require better market access. This would be capable of interpretation to mean the US and EC need better market access -- and so could it be interpreted to mean that India and Pakistan too.

The change in the DFA text on textiles and clothing is to Art. 8.1.(i).

This now talks of all Parties as part of the integration process and specific commitments taking such actions as necessary to abide by GATT rules and disciplines so as to "promote improved market access for textiles and clothing through such measures as tariff reductions and bindings...".

The word "promote" is to be changed into "achieve".

It would be difficult to find a more transparent fig leaf for the US than this. However it could be interpreted, it does not alter one iota any of the obligations.

However, while Indian and Pakistani officials were looking with some satisfaction that they had escaped paying a bigger price, others said that just as over Nafta, Clinton and company would go back to delegations and capitals to demand more "benefits" in side accords to get the Uruguay Round package through Congress.

Asked Wednesday about the view that the US and Textile industry were really concerned over the prospect of massive exports to their market by China and Taiwan when they join, Zutshi dismissed such explanations and said that the US and EC textile industries were the "most unreasonable lobbies", and were worse than the European farmers. They don't the MFA to be phased out.

The agreement as it now stands would require in phased stages, 51 percent of the trade to be integrated over 10 years, and the balance of 49 percent overnight at the end of the tenth year.

"The US and EC industries would try even then to come up with a new demand, though it would now be more difficult for their governments to resile from these commitments. But we have to see," he said.