NEW ROUND AND SERVICES STILL AN OPEN QUESTION.

Oct 3, 1985

NEW ROUND AND SERVICES STILL AN OPEN QUESTION.

GENEVA, OCTOBER 1 (IFDA/CHAKRAVARTHI RAGHAVAN)— At the end of the second day of the special session of the GATT Contracting Parties Tuesday, the question of a new trade round, and issues to be included within it, specially new themes like "services", appeared to be very much an open one.-

On Monday, after the CPs session had adopted a compromise agenda, western sources had suggested that GATT was now moving towards a new round and including services and other new issues within it.-

However, statements of several Third World countries Tuesday, showed that many of them had not lifted their objections to GATT involvement in the area of services or negotiating an international arrangement on services within the GATT framework.-

Some of them specifically raised the question of lack of GATT competence in the area of services and other new themes, and the scope of GATT could not be extended except by unanimity.-

India perhaps went the farthest on this Tuesday, when its chief delegate and permanent Secretary in the Commerce Ministry, Prem Kumar, said that services were "a different specie" from physical goods and commodities whose movement across border was the concern of GATT.-

Any extension of the GATT treaty to "other specie outside its framework" could only be done through a plenipotentiary action or unanimous agreement of GATT Contracting Parties, and this was a "fundamental legal aspect", and not a procedural one, the Indian delegate insisted.-

This appeared to be a reference to the corridor talk by the U.S. and some other industrial countries, and some members of the GATT secretariat, that one or two countries could not be allowed to block GATT involvement or negotiations on services, and that these issues could be decided by a majority vote.-

Egypt made a similar point later, and referred to the wording of the preamble to GATT and its references to "exchange of goods", as well as the provisions of part one and its two basic articles identifying the scope of the agreement.-

Amendments to part one of GATT, under article XXX, the Egyptian delegate noted required acceptance by all CPs.-

Since new themes like investment: and services were not within the GATT mandate, any GATT work could only be with the unanimity of all Contracting Parties.-

Discussions in GATT on services, the Egyptian delegate further noted was based on the 1982 Ministerial declaration, and the 1984 decision of the CPs. "Any movement beyond that would need unanimity or consensus", he added.-

While India, Egypt and some others put the issue of GATT jurisdiction and need for unanimity in plain language, a number of Third World countries also gave support to this view indirectly, by reiterating their stands in their joint position paper on "improvement of world trade relations" presented to the GATT Council in June 1985.-

In this paper, 22 Third World countries had spelt out the conditions for launching of a new MTN in GATT, and for its being confined to trade in goods only.-

The specific reiteration by a number of third world countries of their positions in this joint paper, was seen as a response to the view being propagated by the U.S. and western media that the opposition to the U.S. drive for a new round and including new issues and themes, came only from four or five countries, and that the 65 countries who voted for the convening of the special session supported the U.S. position.-

A large number of Third World countries also put the trading problems in the context of the wider imbalances and crises in the world economy, the problems in the areas of money, finance, debt, trade policies, and commodity markets, to underline the need to deal with these issues and reform the institutions dealing with them simultaneously.-

The U.S. Deputy Trade Representative, Michael Smith had said Monday evening that while an agreement on the subject matter and modalities of a new MTN could not be expected in two days, "we must move ahead, without preconditions, to initiate an open preparatory process for a new round of negotiations".-

Speaking in the same vein, the representative of the European Communities, had called for the setting in motion of the preparatory process through a high-level body, and for the formal preparatory mechanism to be set up at the end of November.-

By then, the EEC believed, "an adequate consensus" would have emerged for the launching of the new round of MTNs.-

In a reference to the "services" issue, the EEC had said "in last analysis, in the GATT, a few should not block the wishes of the many to discuss new issues of importance to world trade

for inclusion in the negotiations. In the GATT, no one is obliged to negotiate or even participate in preparations for negotiations.

Equally no contracting party can veto what others may wish to negotiate".-

The Indian speech today appeared to answer this viewpoint, and for the first time presented in a cogent way the Indian objections to GATT involvement in services.-

Prem Kumar referred to the unfinished businesses of past rounds - escape clause and safeguard actions, dispute settlement and enforcement mechanisms (where the weak have no way of getting decisions enforced in GATT), textiles, tropical products - and expressed scepticism that all these issues would be solved through a new round of MTNs, and that even the start of a new round would contain protectionist pressures.-

"Family farmers", he suggested (in a reference to agricultural protectionist policies of Europe and U.S.A.), would not be satisfied because something was being attempted over high technology products of silicone valley.-

Despite their scepticism, India and other Third World countries were willing to explore modalities for a new round in traditional areas of GATT work, with parallel and supportive processes in international monetary and financial fields.-

This, Kumar said, was the essence of the joint paper in June of the Third World countries.-

On the issue of services, Kumar said that classification of economic activities in a country into agriculture, manufacturing and service sectors, did not mean that the "services sector" could be treated in a uniform or common manner for an international regime.-

The services sector consisted of disparate activities such as banking, insurance, transport, tourism and management on one hand and professional services on other.-

Many services would require "establishment" on territories of other countries or movement of people, and this could only be dealt with in accordance with national sovereignty and national policies.-

"Simply by prefixing the word 'trade' to services, it is not possible to obliterate this fundamental difference", he said.-

GATT disciplines and approaches were designed only to deal with problems of goods and commodities moving across border, and "cannot be transplanted to deal with the problem of services".-

In the case of banking and insurance, in many Third World countries these were nationalised, and used for achievement of socio-economic goals and for wider economic policies, "and it is not open to third parties to indicate what form these should take and how they should be regulated".-

Moreover, Third World countries were just in the beginning of developing their services sectors using government support, protection and participation.-

Many of the industrial countries had themselves had recourse to these measures to develop their services, but now were demanding liberalisation and GATT like approach.-

For particular service, including on their trade aspects, there were other fora, "more universal than GATT" - ITU for telecommunications, WIPO for intellectual property, UNCTAD and IMO for shipping, ICAO and IATA for air services.-

"There is no reason to assume that GATT is a more appropriate forum for dealing with these services sectors, and in any event the jurisdiction of these nodal agencies cannot be taken away".-

Yugoslavia’s Kazimir Vidas underlined the importance of effective implementation of the past standstill and rollback commitments, and the realisation of the current GATT work programme.-

MTNs within GATT competence should be undertaken when there was consensus on objectives, subject matter and modalities of these negotiations, he added.-

Earlier Vidas had referred to the viewpoints of some (like the U.S.A.) who had referred to the number of countries supporting the new round and their weight in world trade, and said this raised concerns about the future of consensus in GATT.-

Any future MTN in GATT, Vidas insisted, should preserve and improve the special and differential treatment for Third World countries.-

Also, future MTNs should only deal with trade in goods, and should not cover trade in services and any new issues like investment, high technology, intellectual property, etc., "as these issues are alien to the jurisdictional competence of GATT".-

Brazil’s Amb. Paulo Nogueira Batista expressed concern that progress in trade liberalisation in goods within GATT jurisdiction, could not be pursued because of insistence of some major trading partners on new issues that were unanimously acknowledged to be outside GATT jurisdiction.-

Industrial countries apparently would open up their markets to goods exports from the Third World, only if the latter became "permanent importers of services and high technology goods".-

Such a concept was totally unacceptable to the third world, apart from the issues of competence of GATT, Batista declared.-

The fundamental reason for rejecting "an obtrusive concept" in relation to services was "the fact that the service sector is too vital for our economic development and the preservation

of our autonomy in economic affairs to be considered as an area open to international regulations, particularly in mere exchange for vague promises of access to developed markets in the traditional area of goods", Batista added.-

Brazil could not accept that progress in areas traditionally within GATT competence should be indefinitely delayed, "while rise in protectionist tendencies in some economies is persistently used as a threat to achieve through pressure what persuasion has not been able to achieve".-

Singapore’s Tai Soo Chew, supported the early launching of a well-prepared and structured process for a new round of MTNs, and said towards this end all GATT members should recommit themselves to standstill and rollback, and industrial countries should set an example.-

ASEAN's priorities for a new round were textiles, tropical and natural resource-based products, tariff escalation, non-tariff measures, safeguards and trade in agriculture.-

ASEAN would be ready to work on new issues, provided issues of interest and concern to ASEAN and other third world countries were given priority, and commitments of the Tokyo Round and the relevant elements of the GATT work programme of 1982 were fulfilled.-

Thailand’s Vichern Nivatvongs, permanent secretary in the Commerce Ministry, referred to the viewpoints of industrial countries on agriculture trade issues, namely their difficulties in adopting a more open and liberal agricultural policy because of special characteristics of agriculture in their social and economic systems.-

Other countries, including Thailand, had similarly their own special concerns in other sectors, because of their importance to development or "high sensitivity to sovereignty and security", Nivatvongs stressed.-

Negotiations on trade in services and other issues should be conducted on a basis that provided adequate opportunity to take fully into account the needs of individual CPs, and particularly needs of third world countries "unable to make contributions inconsistent with their individual development, financial and trade needs".-

Jamaica’s Anthony Hill said confidence building measures, like implementation of standstill and rollback commitments, would create a positive climate for a new round.-

In what was seen as a reference to U.S. laws on the anvil, hill said framing of protectionist domestic legislation was not a positive contribution, nor were protectionist trade practices that shut out exports of third world countries and unfairly depressed the prices of their products.-

While unfinished business of the Tokyo Round should receive top priority for the new round, the new areas like services needed "much further discussion", and a consensus on application of. GATT rules and principles "seems some way off".-

Hill also stressed that at each stage of the process leading up to and including the launch of a new round of MTNs, CPs should take decisions only by consensus.-

The crisis in the trading system was inextricable linked with that in the world monetary and financial system.-

Failure to construct a coordinated strategy to deal with the continuing crisis in trade, monetary and financial fields in which debt, protectionism, persistent bop imbalances and exchange rates played a pivotal role, would cancel out the progress made through painful stabilisation and adjustment measures, he added.-