Mar 3, 1993




Geneva 1 March (Chakravarthi Raghavan) -- The implementation of the Uruguay Round as outlined in the Dunkel text of the Draft Final Act would have a mixed impact for developing countries and would reflect an overall imbalance in the draft, according to Jose Antonio Ocampo, senior researcher of FEDESARROLLO in Colombia.

Ocampo's assessment of the DFA, from the perspective of developing countries, is in a study prepared for the 'Group of 24' (a developing country group at the IMF and the World Bank), published in the UNCTAD publication "International Monetary and Financial Issues for the 1990s" (UNCTAD/GID/G24/1).

The Punta del Este Declaration made clear that the Special and Differential (S & D) treatment for developing countries -- those set out in Part IV of GATT and the subsequent decisions of Contracting Parties like the 1979 'Enabling Clause' was a mandatory guiding principle of the negotiations. But this, like other mandatory requirements like transparency in negotiations was ignored if not turned on its head during the entire 5-year negotiation period.

Ocampo suggests that even this weakening may not be "a high price" to pay if it could strengthen the multilateral trading system and reverse protectionist trends of recent decades.

In the final outcome (of the DFA text), he points out, the S & D has "certainly come out weaker, if not totally obliterated, especially for those developing countries for which 'graduation' rules were made explicit".

"Particularly worrisome", he notes, is the upward harmonization of intellectual property rights which may generate significant costs to developing countries, and the significant discipline imposed on them in use of quantitative import restrictions (QRs) for balance-of-payments purposes, trade- related investment measures, and export and domestic subsidies. The developing countries have also been asked to increase considerably tariff bindings and contribute to the international liberalization of trade in services.

Multilateral rules, Ocampo says, have been strengthened. Although new institutions which are to come out of the Round are not free of risks, particularly cross-retaliation, they will be an improvement over belligerent unilateralism exercised by powerful nations over many developing countries in recent years.

Increasing discipline in anti-dumping and countervailing duty investigations and the substitution of clear safeguard mechanisms for 'grey area' measures is also a significant improvement. The flexible framework for liberalization of services likewise represents major progress. 

"Nevertheless," he points out, "the sluggish pace of liberalization of agricultural and textile trade by industrial countries and incorporation in both sectors of generous transitional safeguards, reflects an imbalance in the overall outcome, compared to the additional discipline imposed on developing countries, particularly but not solely in area of intellectual property.

The gradual introduction of GATT discipline in these two sectors (agriculture and textiles), however, will mean a long-run gain for developing countries, according to Ocampo.

One of the "most contradictory" results of the Round, he underlines, is the treatment of QR .

Whereas considerable discipline on use of QRs by developing countries for BOP purposes has been introduced, and preferences for price-based mechanisms has been clearly established in this area and in agriculture, QRs have emerged as "a rather easy alternative to follow as a general safeguard or as a transitional mechanism in textiles." 

"In these areas special and differential treatment has not only been eroded but actually turned upside down."

The assessment in the study is based on the state of play as of April 1992, four months after GATT Director-General and TNC Chairman Arthur Dunkel had presented his compromise text and negotiations had become stalled over the US-EC differences and bilateral talks on the agricultural trade issues.

It hence does not take account of subsequent developments -- the US-EC bilateral accord on agriculture subsidy questions (the Blair House accord of November 1992), the changes in the DFA text sought in other areas including about half-dozen changes in the texts sought by the United States and by a few others.

If these are taken into account, in terms of the Ocampo assessment, the outcome would be a further tilt in favour of the industrialized countries and a higher level of imbalance against the South.

The GATT process is non-transparent not only for outsiders but even for the GATT contracting parties and Uruguay Round participants. The latest phase of the consultations, the 'Dunkel consultations', aimed at having a full picture of changes that the key participating countries want in the text, was held in December 1992 and January of this year outside of GATT, at Dunkel's house.

 As a result of the consultations, some informal texts of changes sought by one or other participant have been circulating among delegations. But these are neither negotiated nor agreed upon texts even within that group. The reasoning behind them is known only to the small number of delegates who participated in the consultations. The informal proposals have not been consolidated or formalised lest they "freeze" positions. There has been so far no clear understanding even of how to proceed further in negotiating the changes. Everyone is awaiting word from the Clinton administration.

The Ocampo study illustrates the difficulties of researchers, even with access to some official documents and the information available from a country perspective (as in this case of Colombian negotiators) in deciphering the outcome of the GATT and the Uruguay Round negotiations. A footnote acknowledges that the study is based on 'helpful information' from Colombian officials and negotiators -- a necessarily subjective view of one country.

This perhaps explains a number of factual errors and misperceptions on both the process and the DFA itself, found in the study. If these had been corrected, the imbalance against the developing countries would be seen to be even more glaring. 

In assessing the outcome in terms of the institutional arrangements, Ocampo notes that while institutional matters and dispute settlement mechanisms were on the agenda, the proposal to create a Multilateral Trade Organization (MTO) as a successor to GATT was a "late and unforeseen outcome".

However, he then goes on to suggest that the proposal to incorporate all Uruguay Round agreements into a single legal instrument which participants have to accept as a whole or reject as a whole is a result of the decision at Punta del Este to treat the negotiations as a "single undertaking".

This was the intention of the draft proposals which Colombia, along with Switzerland, had prepared in the run-up to Punta del Este meeting. But a group of countries including Brazil, India and some 10 others did not agree to this view.

The final outcome at Punta del Este was a compromise between the views of the US and the others (reflected in the Swiss-Colombian text) and those of Brazil and India, with the EC brokering the compromise and the concept of negotiations in two separate tracks was evolved.

As a result, the "single undertaking" as a legal concept of the negotiations is only in the part of the negotiations relating to trade in goods launched by a decision of the GATT Contracting Parties and not to the services negotiations which, under the Punta del Este Declaration was a negotiation launched separately by the Ministers (i.e. in their political capacities rather than the GATT contractual one) and with the institutional implementation of the results left completely open and to be decided by the Ministers after the results in all areas are settled. At the time of the mid-term review and accord in April 1989, this was extended to the institutional implementation of any results in the TRIPs negotiations too.

The all-or-nothing approach of the MTO should hence be judged on its merits or as the outcome of negotiations among a small group of countries in 1991, but never formally placed before all negotiators, and included in the Dunkel text. There was no consensus on it, nor could it be blamed on the Punta del Este declaration and the references there to 'single undertaking'

A synoptic table is provided of the progress of the negotiations, in terms of the subject of negotiations, the state of play before the Uruguay Round, the Brussels meeting and the Dunkel text.

But this text too has many errors in attributing what was really the Dunkel proposals for a compromise as an agreed consensus text. And as was made clear at the 1992 January TNC, there was no consensus on the Dunkel text.

No doubt, many parts of the Dunkel proposals for the DFA was the outcome of negotiations among participants, though many of the texts were only negotiated in a small group in a non- transparent way, and were never before the negotiating groups.

Given the nature of the negotiating process, until the Dunkel text was put forward in December 1991 (and technically still a restricted document), the various informal texts had no basis and in many areas known only to the 5 or 10 negotiators. These 'agreed' texts among a few became a Dunkel text and can't be claimed to be consensus texts.

In other areas of negotiations there were gaps, which were filled in by Dunkel. But even if the material he added only related to a few figures here and there, the addition usually provided the linchpin.

On agriculture, Ocampo suggests that the Dunkel compromise was quite close to the EC's 1990 proposals. The EC opposition to the Dunkel text (as well as opposition within the EC from the French and others) to even the Blair House accord shows that this is not correct. In fact the Dunkel compromise, by changing the base period (for calculations and cuts) from 1986 to average of 1986-1988, ensured that the US had to make no cuts and only n the EC had to make cuts.

Similarly, the view that the textile negotiations were "less controversial" is a misreading of what actually took place. Also misleading, and erroneous, is the interpretation of the Agreement on Services about the scope for controversies based on the 'national treatment' principle. The interpretation in the study appears to rely on a draft version of an UNCTAD discussion paper (by Andrew Cornford) which in its final version has changed this interpretation. 

But these problems do not detract from Ocampo's overall assessments. If the erroneous interpretations and factual errors are corrected, the outcome of the DFA would be seen to be even more of an imbalance in favour of the industrialized countries.