Monday 29 March 1993




Geneva 26 March (Chakravarthi Raghavan) -- Western industrialized countries appear to be ignoring GATT and their obligations in offering free trade arrangements and other trade concessions to the former centrally planned economies of east and central Europe and the republics of the former Soviet Union.

Under the General Agreement on Trade and Tariffs, the contracting parties are obliged to provide most-favoured-nation treatment to all other members -- extending the same tariff and other trade concessions they extend to any other members.

But under the 1979 Enabling Clause adopted by the GATT Contracting Parties and in terms of Part IV of the General Agreement, preferential tariff treatment can be provided under the Generalized System of Preferences (GSP) to 'developing countries' by any contracting party without having to extend it to others. The GSP, in terms of the decision of the CPs on 25 June 1971, has to be "generalized, non-reciprocal and non- discriminatory preferences beneficial to developing countries."

The countries providing GSP under their individual schemes have always taken the position that there is no 'obligation' and that their doing so is an autonomous action, and have generally ignored some of the implications of "generalized, non-reciprocal and non-discriminatory preferences" -- seeking and obtaining bilateral trade and other benefits for themselves.

For any concessions that are sought to be provided by one cp to another or group of cps, not covered by these -- whether under free trade or other accords, particularly when they are not covered by the GATT provisions for customs and free trade areas --contracting party providing the concessions have to seek and obtain a waiver from the CONTRACTING PARTIES.

They also have to notify the GATT of all such benefits.

Ever since the collapse of the centrally planned economies, the OECD countries have been announcing and extending GSP benefits to the former 'socialists', even though these countries by no means come under the category of the 'developing countries' and without adequate notifications or seeking waivers.

Apart from these, the European Community has also been building up quite a web of preferential trade relationships in Europe, with several of the agreements and their provisions violative of the GATT, and without adequate notifications or seeking waivers.

Privately, the diplomats of these countries just shrug their shoulders when their violations of GATT rules are referred to, and implying to the developing countries that the in the new order they have to 'lump it'.

The issue has come up in the GATT's Committee on Trade and Development and in the Council too, but without any solution -- and with the former Socialists sometimes privately telling developing countries raising it that this was an "unfriendly act".

Most of the OECD countries have extended GSP privileges to the Czech and Slovak Republic (now replaced by its two constituent units as independent countries and cps), Poland, Hungary, the former Baltic States of the Soviet Union (Latvia, Estonia and Lithuania), several of the constituents of the former Yugoslavia (while withdrawing the GSP rights of the present Yugoslavia -- Serbia and Montenegro).

Canada has also extended GSP privileges to Russia, while many of the other OECD countries have either extended or appear to be in the process of doing so to the other constituents of the former Soviet Union now grouped in the CIS.

The extension of GSP and other such trade and aid benefits to Russia -- even as it is seeking and appears to be well-near getting a place at the Group of 7 (even if it be as a privileged supplicant) is not without some irony, Third World delegates privately note.

Apart from these, a number of other trading relationships are also being created or already in place in Europe, with almost three levels of free trade agreements with the European Community in the centre and some concentric circles around it.

The Rome Treaty by which the EC came into being itself was never formally sanctioned or approved by the GATT Contracting Parties, but the EC has proceeded always on the basis that what is not disapproved is approved!

There is now the wider EC agreement itself and the agreement with the EFTA for a European Economic Area which is more than a free trade area agreement. The original EC-EFTA accord for EEA was turned down by the EC constitutional court, and the revised one was turned down by Switzerland and a new one has been negotiated and concluded. This last is basically the same as the second, but with provisions for the aid quantum to be provided by Switzerland to the southern EC members (Spain, Portugal and Greece) being now to be provided by the other EFTA members.

Spain though is blocking ratification of this, tying it to the prior ratification of Maastricht, which is running into trouble now in the second referendum in Denmark and facing an uncertain prospect in the UK.

There are also coming up what are being described as the third generation free trade agreements in Europe.

The EC-EFTA agreement itself was buttressed by individual agreements of EFTA countries with the EC.

The EC and EFTA are also evolving several bilateral and plurilateral agreements with the former East Europeans involving trade, investment, etc. 

The EFTA countries have also free trade agreement and benefits with Poland, Hungary, Czech and Slovak republics and the socalled Vizegrad free trade arrangements among them.

All these web of agreements with the former centrally planned economies have though some 'special safeguard provisions' enabling the EC and EFTA to restrict imports in case of surges. Some of them also exclude agriculture products.

Several of the agreements provide for production out of new investments set up in the east and central european countries being exported to the preference giving country. But there is no multilateralisation of this even within the EEA arrangements.

The EC has also other webs of arrangements -- with the ACP, Mediterranean countries and several others being negotiated and formed. The EC and Israel have also a trade agreement, with Israel also having a free trade agreement with the US.

While all these regional and plurilateral agreements are being presented as compatible with and supporting the multilateral trading system, these as also others that the US is forging like NAFTA or its 'Enterprise for Americas initiative' appear to be gradually reshaping the world trading order into a new type of colonial relationships between the centre and the periphery in each region, with a collective Northern colonialism replacing the 19th century ones.