Dec 1, 1984

U.S. BACKS DOWN ON SERVICES.

BY CHAKRAVARTHI RAGHAVAN. GENEVA, NOVEMBER 29 (IFDA) -- A U.S. back down on the services issue, on the basis of a compromise understanding that did not go beyond the 1982 Ministerial declaration, lifted the air of crisis that had been hanging over the annual session of the Contracting Parties this week.-

The session due to end Thursday, has been extended to Friday.-

After all-night negotiations on Wednesday, and day-long negotiations on Thursday, understandings were reached on outstanding issues to enable the annual session of the Contracting Parties to adopt the work programme and budget of GATT on Friday.-

The four issues that had blocked the work of the Contracting Parties had been: the question of "trade in services", "trade in counterfeit goods", exchange rate fluctuations and their effects on trade, and high technology.-

The U.S., which had been threatening to hold up the budget approve and further action on GATT work programme, if it did not get its way on services, gave way considerably to achieve the compromise.-

The only gain, from its point of view was an ambiguously worded role for the GATT secretariat that would be a source of argument in 1985.-

It was a far cry from its "bottom-line" demand for a GATT working party, for substantive discussion of the issues, and a wording that would have prejudged the issue of GATT’s competence and jurisdiction in this area.-

The articles of the General Agreement only speak of trade in goods.-

Though William Brock, the U.S. Trade Representative, and his Deputy Michael Smith had staked their personal prestige behind getting some GATT endorsement of its competence and in services, and had threatened to block the GATT budget and other parts of the work programme over this, western sources said the Trade Representative's Office has had to give way under pressure from the U.S. agriculture department.-

The U.S. Agriculture Department apparently took a dim view of Brock's moves that would merely wreck GATT and its work programme on the services issue, when in the case of agriculture, the work programme marked some advance to the benefit of the U.S.A.-

The Contracting Parties session on Friday is expected first to approve the GATT budget, and then take up individual items on the work programme, and adopt the various reports and recommendations.-

On the services issue, the agreement reached, provides for "agreed conclusions" of the CPs, supplemented by agreed statements to be made by the chairman of the CPs, one before and the other after adoption.-

Before adoption, the chairman of the CPs is to read out a statement making clear that nothing in the agreed conclusions "shall" be interpreted as prejudicing the rights or positions of any CP in these matters nor as "prejudging the consideration by the CPs of whether any multilateral action is "appropriate and desirable".-

Only this statement had a mandatory "shall", all other parts being worded as "will", "could", and "would", to show they are more permissive than obligatory.-

The agreed conclusions provide:

-- That the chairman of the Contracting parties (who will be Amb. Felipe Jaramillo of Colombia for 1985) would organise the exchange of information of issues in the services sector, provided for in the 1982 Ministerial declaration.-

During 1984 Jaramillo, in his capacity as chairman of the GATT Council had been doing it on an informal basis, and in 1985 it would be done formally.-

This exchange of information would be on the basis of national studies, with any Contracting Party being able to refer to anything in this area which it considers relevant.-

GATT sources were suggesting Thursday night that this was a gain for the U.S.-

But others viewed it as nothing more than a face-saving device for the U.S. Trade Representative to take back home, since it was always open to any CP at any such forum to raise issues that it considered relevant, and the formal mechanism is only for exchange of information and nothing more.-

The chairman of the CPs is also to organise the compilation and, distribution of the information (from national studies) on as uniform a format as possible.-

This is also provided for in the 1982 declaration.-

-- The GATT secretariat will provide the support necessary for process.-

 An agreed statement by the chairman of the Contracting Parties, to be read out after the adoption of this agreed text on services, would say that in addition to servicing and keeping records of meetings, the GATT secretariat would prepare "an analytical summary" of national examinations, and "a summary of issues raised in the exchange of information".-

This makes clear that while the secretariat might be able to projects its views in summarising the national studies, it is precluded from doing so in posing issues.-

The secretariat would also prepare a format for the compilation and distribution of information exchanged among the CPs.-

"It is also understood that the secretariat could, on an agreed basis, undertake additional tasks as required".-

Any additional task to be undertaken by the secretariat, Third World sources said, would need the consent of all Contracting Parties.-

Third World sources said that this role of the secretariat, on which there would be much argument in 1985, could be a thin edge of the wedge, given the fact that the secretariat is oriented towards the U.S. and its interests. Much, these sources said, would depend on how alert Third World countries are to any secretariat "tricks".-

-- The Contracting Parties are to review at their next regular session in 1985, the results of the national examinations, along with information and comments from relevant international organisations, and consider "whether any multilateral action in these matters is appropriate and desirable".-

On counterfeit goods, the net result of the agreement is for the setting up in GATT of an expert group, open to all CPs, to examine the issue. The WIPO Director-General is to nominate an expert to participate in the discussions.-

In the view of the Third World countries only WIPO has jurisdiction and competence in this area.-

The expert group is to report not later than the next regular session of the CPs.-

On two other outstanding issues, the negotiators were still at work Thursday night, but were expected to agree on a text relating to the effect of exchange rate fluctuations on trade.-

The 1982 Ministerial declaration asked for an IMF study, which in effect supported the U.S. position that such fluctuations have no long-term effect on trade. The EEC challenged this as being "incredulous", and now wants the study by GATT, not on the issue of floating exchange rates, but on its effects on trade.-

The agreed text is expected to accommodate this view.-

On high technology, an U.S. issue, it has been agreed it should be pursued at the GATT Council (which has already been dealing with).-