6:46 AM Jun 21, 1993


Geneva June 21 (Chakravarthi Raghavan) -- The defeat of the Miyazawa government and the snap polls in Japan has now clearly set back the hopes, fifty-fifty at best, of trade-negotiators of a "market-access" breakthrough among the majors at the G-7 summit leading to a successful conclusion of the Uruguay Round.

Japanese media have reported that the elections would be formally called on 4 July and the voting will take place two-weeks after wards, i.e. on 18 July.

This means Japan will be represented at the summit by a care-taker government and a care-taker Prime Minister who will not be returned to power.

The entire G7 meetings and trade issues etc will find Japan in no position to commit itself or provide leadership. The leading daily, Nikkei Shimbun, for example has said the Japanese government position will be weakened at the summit.

Some of the recent scenarios of a successful conclusion of the Round by 15 December have been postulated on the US and EC agreeing on a market-access package, then getting the Quad (the two plus Canada and Japan) and then the OECD and multilateralising it in Geneva to get the developing countries to fall in line.

Several negotiators have privately expressed some skepticism on this since even the US and EC bilateral talks do not seem to have made progress as generally made out.

Also "market access" packages to increase the opportunities for the enterprises of industrialized world would not lead to a big enough package for increasing the exports of developing countries and thus persuade them to fall in line.

Some of the recent statements out of Paris, from the French Prime Minister Balladur and now French President Francois Mitterand about erecting more trade barriers to imports from low-wage developing countries of Asia clearly suggest serious obstacles even on a market-access package.

But even more, the conclusion of the Round depends not merely on market access but on agreements over the changes to the text of the Draft Final Act, tabled by outgoing Director-General Arthur Dunkel in December 1991 and to which several of the key countries have put forward proposals for changes.

Some of the changes demanded by the US and the EC would in fact take away the claims that whatever the faults of the Uruguay Round, it would atleast usher in a rule-based system.

The changes in anti-dumping provisions sought by the US, for example, would be like the Lewis Carrol tale, "the evidence and the facts shall be what we determine it to be".

On the market access issue, a basic premise of the US-EC approach has been to use their bilateral agreements (on which there is still considerable gap) to force Japan to open up its own internal market and give up its attempts to protect its domestic rice production and the general view that others could join hands in forcing Japan to yield.

But a complication that has arisen is the EC banana dispute. The present regime has been declared GATT-illegal by a panel, whose report though is yet to be adopted and cannot be adopted if the EC's 12 members and the 46 ACP countries oppose it. Even if the Latins take it to a vote in the Council, the 58 could "bury" it.

But it would also polarise the GATT, since the report itself has great merit "in systemic terms" and calls into question the various assumptions that the majors have used to get around the GATT disciplines.

Even more than the old, is the new panel over the new regime entering into force on 1 July.

The EC has been hoping that by opposing a quick ruling, the banana problem of the new regime will get merged into the overall Uruguay Round accord and agricultural liberalization with complete "tariffication" and it could "resolve" the issue pragmatically. But the dispute in GATT over the new regime, and the likely EC court ruling on a German challenge before 1 July, would put the Community in a difficult position and might it find it seeking its own "exception" to tariffication.

Apart from the "technical" side of the trade negotiations, even before the defeat of the Miyazawa government and the snap elections, it was questionable whether the other G7 had, politically, any strong hand to play at Tokyo?

The heads of US, UK, Germany, Italy, France and of Canada all have domestic problems that have reduced their authority or their capacity to take decisions on trade running against domestic lobbies.

The Japanese developments have created major questions, not merely on the future of Miyazawa (who everyone believes will lose personally), of the ruling coalition and the political-bureaucratic-and private sector alliance (or Japan Inc) that has been running the show, but of the likely new political forces that will come up.

Even ordinarily, it would have been difficult on home soil for a Japanese government to have yielded on rice. But with the elections and the bitter and intense domestic fight involving political corruption and a generational gaps, no one would be willing to yield -- even if these matters are dealt with and decided by the powerful bureaucracy.

A success or failure of the Tokyo summit would not make any difference to the domestic election scene, a Japanese source said. It is even more doubtful that any of the visitors would want to do or appear to be doing to hit the ruling party and thus give a handle to its opponents.