BURNING THE MIDNIGHT OIL FOR A CANCELLED EXAMINATION

Jan 29, 1993

BURNING THE MIDNIGHT OIL FOR A CANCELLED EXAMINATION

Geneva Jan 15 (Chakravarthi Raghavan) -- The group of senior negotiators from some 20 key countries were due Friday to resume their discussions on changes to the Dunkel text of the Draft Final Act, with the discussions due to focus on changes to the Agriculture text in the light of the US-EC bilateral agreements, the so called Blair House agreement of November 1992.

The exercise which began in December, and has been conducted intensively since Monday, started off as an exercise to agree on the outlines and changes in the Dunkel text and other key parameters before President Bush leaves office on 20 January and President-elect Clinton takes over.

But it has now come to the stage of an exercise to identify the areas of difference where one or the other of the key countries need changes in the Dunkel text with all the changes sought out on the table.

A senior US negotiator suggested Thursday that this would be useful as "we will have a much better picture of major stumbling blocks to an agreement... a much clearer picture of what the universe of proposed changes will consist of, and enable the new administration and its negotiators to work with their counterparts in the future "to develop a package to resolve them (differences)".

While this view is also shared by some of the other participants, others were very sarcastic.

One Third World negotiator said: "We started this exercise to clinch a deal when Bush and the present team is still in office. Now it has ended up as an exercise to identify the problems for the new administration... If this is all the purpose, what is the point of our spending long hours into the night?".

Another Third World negotiator, who stressed that he was completely in the dark about what was going on in the 'Dunkel' consultations, said the exercise was like the last minute efforts of students preparing for an examination by burning midnight oil, only to discover that the examinations had again been put off.

"We missed the 1990 deadline, and then the 1991 deadline and the 1992 deadline, and now the mid-January deadline set by the US-EC summit".

On Thursday night, meeting till well past midnight, negotiators reportedly discussed the so called institutional questions: the proposals in the Draft Final Act for a Multilateral Trade Organization and the US proposal for an institutional arrangement through a contractual relationship (as the present General Agreement), through a protocol for a GATT-II.

The US which had been involved in the consultations throughout 1991 resulting in the text for an MTO, incorporated in the Dunkel text, suddenly reversed itself in December last and put forward its proposal for a GATT II which would in effect validate existing US domestic laws and unilateral procedures.

A senior US official had told newsmen Thursday that the US had no fundamental or philosophical objections to an MTO or to a revamping of the existing institutional framework (of the GATT) but that in either event it should not alter the substantive resultrs of the negotiations in particular areas -- about non- application, waivers etc.

Sources from delegations involved in the discussions said the US objection to the MTO and favouring a GATT-II could be merely tactical and intended to gain other points -- including ways to ensure that its domestic procedures and administrative hearings and decisions are not challenged in the MTO and its integrated dispute settlement system.

The US, some of them said, would seem to want a legal instrument that would compel everyone to accept all the agreements in the Round, but with each of the separate agreements being subject only to what had been negotiated (including its non-amendability in the case of the Trips), with no overall coherence that a substantive and procedural organizational instrument like the MTO would provide.

However, some of them thought that except perhaps for the Jones Act (which protects US ship-building industry), the US might change its position.

Prior to Thursday's Dunkel consultations, several of the participants (after exchanges with the US) had the impression that the major problem for the US was its "need" to ensure that the MTO or any overall Uruguay Round agreement does not invalidate its 'Jones Act' which prevents ships constructed elsewhere from plying in US waters in commerce.

The GATT provisional protocol of 1947 saved this by 'grandfathering' this and other pre-existing legislation.

While some of the participants see the US administration political compulsions and are ready to accept it for a stipulated period, others are not so willing either.

As one European source put it, in terms of the obstacles to conclude the Round, the US has to change its stand on national laws prevailing over international law.

"Our moment of truth in these negotiations was when we realized and agreed that our Common Agricultural Policy has to be subject to the multilateral trade disciplines, however long the transition period to achieve it. The conclusion of the Round depends on the United States realizing its moment of truth: subjecting its trade policy and congressional authority to legislate to international law and discipline".

In informal bilateral and other discussions prior to Thursday, the United States would appear to have suggested that environment lobbies in the United States and elsewhere had begun to agitate on the failure of the MTO and Uruguay Round to deal with environment issues and these had to be addressed.

However, other participants had the impression that while the environment issue was being raised up front, the major US objections was to the 'organizational' aspects of the MTO, as different from the 'contractual' relationships (between governments) envisaged in the current GATT institutional arrangements.

On environment, the MTO draft text (developed in the legal drafting exercise) stipulates as on objective in a preambular para "developing optimal use of the resources of the world on a sustainable basis".

The US in its GATT-II text, again in a preambular para says "desiring to undertake each of the preceding (objectives) in a manner consistent with environmental protection and conservation and that their trade policy and trade liberalization endeavours to contribute to the promotion of sustainable development."

Neither really advances the issue of environment protection or sustainable development and both, are based on the fundamental premise that all the GATT contracting parties appear to share namely that GATT is not the place to develop international norms or standards on environment or sustainable development and at best the present GATT or the new one could only take note of consensus developed on these issues in universal fora and treaties and try to ensure the compatibility of trade instruments with such widely accepted international consensus.

Privately, US officials say that the opposition to the MTO by NGOs and others, focussing on the environment aspects is only an attempt to ditch the entire Uruguay Round accords and hence their efforts to try to bring in environment and sustainable development more prominently.

Since the US put forward its GATT-II text, the EC has come with a revision of the preamble on this: "Recognizing that their trade liberalization endeavours should contribute towards the promotion of sustainable development in a manner which respects the environment."

The US proposal for a GATT II, is in two parts: a Ministerial decision and a Uruguay Round protocol.

The Ministerial Decision is to be adopted by a meeting of the Ministers in the TNC, meeting on the occasion of a Special Session of the GATT Contracting Parties, as called for in Part III of the Punta del Este Declaration, (when the results in all areas of negotiations have been established) to decide on the "international implementation of the respective results".

It will thus be a political decision without legal significance and would 'disappear' when the Uruguay Round protocol enters into force.

Under the US proposal, as in a Final Act at the end of a plenipotentiary meeting to negotiate and conclude a treaty, the Ministers, by signing the Final Act, would only commit themselves to carry the Uruguay Round protocol (and annexed agreements) back home for the consideration of their governments and seek their approval of the protocol. The signatures would mean merely that the texts were the authentic ones.

The Ministers would also agree that the institutional arrangements (set out in the protocol) for the post-Uruguay Round operation of the multilateral system (which the US suggests should be known tentatively as GATT-II) is to replace the institutional arrangements of the General Agreement 1947 (GATT- I), and would provide the common framework for conduct of trade relations among its parties in matters related to the agreements and instruments of the Uruguay Round protocol and provide "a forum for negotiations" concerning multilateral trade relations among its parties including negotiation of further trade agreements.

The decision would provide that its acceptance by governments is to constitute acceptance of all the agreements and associated legal instruments listed in the Annexes (similar to that for the MTO): an Annex IA containing all the Uruguay Round agreements relating to trade in goods including the various Tokyo Round codes and agreements, but excluding the plurilateral agreements (Agreement on Trade in Civil Aircraft, Agreement on Government Procurement, International Dairy Arrangement and Arrangement regarding Bovine Meat) which as in the MTO would remain optional, an Annex IB containing the General Agreement on Trade in Services (GATS); and Annex IC containing the Trips agreement; an Annex II containing the Understanding on Rules and Procedures Governing the Settlement of disputes; and Annex III Agreement on the Trade Policy Review. The General Agreement of 1947 (GATT, as amended by the various Uruguay Round agreements and understandings in Annex IA), will become the General Agreement of 1993 (GATT II) and the successor to the General Agreement of 1947 (GATT 1947) and GATT 1947 will remain in force only for those not accepting the Uruguay Round protocol or do not withdraw from GATT 1947 on acceptance of the Uruguay Round protocol.

The US draft of the Ministerial decision then says that "Ministers shall endeavour to take all necessary steps, where changes to domestic laws will be required to implement the provisions of the Multilateral Trade Agreements and where applicable the Plurilateral Trade Agreements, to ensure the conformity of their laws with those Agreements".

The MTO text too has only a similar 'best endeavour' clause (put in at the instance of the US negotiators who said that while the administration would try to get the law changed it might not succeed in getting the Congress to amend the Jones Act on shipping and ship-building).

But in the MTO, it is to be a 'best endeavour' of the Parties to the MTO.

As part of a legal treaty or protocol a 'best endeavour' is something less than a 'commitment' to change the domestic laws, but is something more than a 'best endeavour' Ministerial decision which has no legal significance. A GATT panel ruling on a complaint against Canada over practices of its provincial liquor boards (in their discriminatory treatment of domestic and imported beers and alcoholic beverages) had ruled that the Canadian government as a contracting party had not made the 'best endeavour' to get the provincial boards to change their practices, and thus Canada had violated its GATT obligation.

The US Uruguay Round draft protocol provides that its acceptance will mean acceptance of all annexed agreements, and will be open for acceptance by any contracting party to the GATT 1947, provided each contracting party annexes to its instrument of acceptance, its schedules of concessions and commitments in terms of GATT-II and the schedule of commitments for GATS. It also provides for future accession by others on basis of acceptance by a two thirds majority of the GATT II.

It also stipulates that GATT 1993 will be a successor agreement to GATT 1947 except for those not accepting GATT 1993 or not withdrawing from it on acceptance, a somewhat questionable provision for claiming 'successorship', particularly if GATT 1993 membership is less than that of GATT 1947.

It then provides for various institutional arrangements and organs (and subsidiary bodies) of GATT II:

(a)a Ministerial Trade Committee meeting once in two years to facilitate administration and operation and further the objectives of the Multilateral Trade Agreements and provide a forum for further negotiations and a framework for administration and operation of the Plurilateral Trade Agreements;

(b)a General Council to conduct functions of the ministerial committee during intervals between its meetings and also convening as (1) a Dispute Settlement Body to discharge responsibilities of the Dispute Settlement Body in the dispute settlement understanding and (2) as a Trade Policy Review Body to conduct the TPRM exercise

By stipulating the need for any GATT 1947 member, in joining the Uruguay Round protocol, having to annex to its instrument of acceptance, its schedules of concessions and commitments in terms of GATT-II and the schedule of commitments for GATS, the US seeks to provide -- what it could not achieve in the entire negotiating process of six years -- that all the GATT 1947 contracting parties (developing countries and mostly the least developed) who had become contracting parties without specifically negotiating and making specific tariff concessions and binding them will be unable to become members of the GATT II (even if they accept the Trips and the GATS and all the amendments of the GATT I) if they do not negotiate and bind tariff concessions in goods and initial commitments on services.

The US would then also be able to exercise its 'non-application' right to any existing GATT CP whose tariff schedules are not viewed by the US as sufficient. Under GATT 1947, a CP had only to engage in negotiations with another cp, and did not have to reach a satisfactory accord, but the MTO's 'non-application' provision made it clear that it could be exercised for existing GATT CPs only if it had been done at the time they had become members. Also, under GATT 1947 the ex-colonies which, on independence had continued to apply de facto the General Agreement (applied to them by the metropolitan powers), had only to notify the GATT Director-General and become GATT CPs, without having to negotiate or renegotiate accession terms and make tariff concessions.

The US Uruguay Round protocol would continue the existing arrangements for the GATT secretariat -- the ICITO which was the UN body created in 1948-1949 to facilitate the entry into force of the Havana Charter and its institutional and secretariat arrangements, and which meets only for formally naming the choice of GATT CPs for the office of the Director-General !

It contains no provisions whatsoever for amendments or waivers of the annexed agreements, except those in the agreements themselves. The GATT 1947 (and hence GATT II) has its own amendment procedures and provisions for waivers etc, and so has the GATS.

But the TRIPs accord does not have any. During negotiations the Trips negotiators from the ICs assumed it would go into the GATT itself, while the developing countries wanted to merely negotiate it and then hand it over to the WIPO. When the final compromise for putting it into the MTO was accepted, it was assumed that the MTO amendment and waiver provisions would apply. But if the US scheme becomes effective, the TRIPs cannot be amended by the normal processes.

In some private conversations, both US and Japan would even appear to have suggested this is a welcome development -- presumably to foreclose the technology options and competition from the South for ever.