7:10 AM Jul 7, 1993

TOKYO AGREEMENT COULD REOPEN GENEVA PROCESS

Geneva 7 July (Chakravarthi Raghavan) -- GATT negotiators gave a cautious welcome Wednesday to the news reports from Tokyo that the Quad trade ministers managed to agree on a market access package just hours before the G7 summit was due to start.

The 'agreement', in conjunction with the US fast track authority signed into law last week by President Clinton, would enable the Geneva process to be restarted, but it would quickly run into all the hard issues relating to the Dunkel Draft Text, so long kept under wraps, one of the key negotiators said.

The Trade Ministers of Canada, Japan, European Community and the United States, reports from Tokyo said, had reached an agreement on the market access package they had been negotiating among themselves for over eight weeks now and that this would be endorsed by the G7 summit and brought to Geneva to enable a resumption of the Uruguay Round talks.

The news reports quoted USTR Mickey Kantor as telling a news conference that "preliminary agreement" had been reached and that it represented "the largest tariff cut in history" and covered ten different sectors (of industrial products).

The agreement, Kantor was reported as saying, would involve eliminating tariffs in eight sectors -- pharmaceuticals, medical equipment, construction equipment, steel, farm equipment, beer, furniture and distilled spirits, while in four others -- ceramics, glass, textiles and apparel -- peak tariffs would be cut by "up to 50 percent".

According to a Reuters report from Tokyo, earlier President Bill Clinton had said there had been "a breakthrough on GATT".

The report also quoted a British official as saying "this will give (GATT Director-General) Peter Sutherland with something to work on", while a French official, presidential spokesman Jean Musitelli, was quoted as saying that the preliminary accord was broadly in line with French hopes and that France was "cautiously positive" that it would end in a firm accord on market access.

Beyond such general statements, no details of the package or its nature was available and without it, the talk of its effects on the economy or job creation would be merely subjective 'hype' that the negotiators have to use to put a positive gloss on what otherwise seems likely to be a summit which would have little to show in results to tackle the world economic crisis.

Probably all the details won't be available until the end when the participants have to file their tariff schedules, but some indication could come when the four file in the market access negotiations their "revised offers" and some of its fine prints, one GATT observer said.

Late last year, when the US had filed some of its 'offers', the media reports said that the US had 'offered' major tariff cuts, including zero tariffs on some fish and fishery products, but a closer scrutiny showed that one of the main areas of interest to the developing world, namely, tuna fish, was excluded.

Some indications of the nature of the market access package in industrial products and also perhaps the nature of the understandings among the four on market access in services would be available next week and could also see an understanding within the Uruguay Round process on how to move ahead for re-starting and concluding the stalled negotiations.

On Monday 12 July, Japan's ambassador to the GATT, has arranged to brief his colleagues on the outcome of the Tokyo talks.

The EC Commissioner for GATT and trade negotiations, Leon Brittan will also be in Geneva to brief Sutherland and meet the press to explain the "market access package", and will be meeting a key group of negotiators at lunch.

The lunch being hosted by the Chairman of the Contracting Parties, Amb. B.K.Zutshi of India who, as part of the GATT process for selecting a successor to Arthur Dunkel, was entrusted informally to deal with some of the chores of the GATT and the Uruguay Round and enable a smoother transition.

In that capacity, Zutshi is hosting a lunch which is expected to bring together Sutherland and the group of 19 countries, who in December 1992 and early in January 1993, were involved in what is known as the "Russin process".

Named after the village outside Geneva near which they met, under the chairmanship of Arthur Dunkel, over dinner either at his house or a restaurant nearby, and went over the Dunkel texts of the Uruguay Round package and the changes that one or the other key protagonists wanted in the text.

The nineteen had comprised Australia, Canada, EC, Japan, New Zealand, Switzerland, Sweden (representing Nordics) and the United States from the industrialized countries; Hungary (among the east and central Europeans); Argentina, Brazil, Chile, Mexico and Uruguay (from Latin America), Hong Kong, India, Korea and Singapore or Malaysia (for the Asean); and Morocco (whose permanent representative chairs the informal developing country group at the GATT).

Changes in the Dunkel text of rules and agreements, sought by one or the other, include changes in agriculture, sanitary and phyto-sanitary rules, anti-dumping, subsidies, intellectual property, dispute settlement, textiles and clothing etc, and the institutional issues including whether there is to be a Multilateral Trade Organization proposed by the EC and supported by a number of developing countries as well as other industrialized countries or a socalled GATT-II favoured by the United States.

Beyond the discussions within the Russin process, Uruguay Round participants have not been involved in any discussion or negotiations about the changes in the Dunkel text.

The changes proposed by the participants in the Russin process, and others (including Egypt, Jamaica and Sri Lanka) not in the process, have never been 'formalized' or officially made known by the GATT, on the argument that doing so would freeze the positions of parties and prevent compromises.

But the substance of the changes proposed were disclosed by Zutshi in January at an informal meeting of the developing countries, when several of them complained they had not been taken into confidence by Morocco, the chair of the group.

GATT negotiators in Geneva noted that at the minimum any resumption of the process at Geneva would require parallel processes on the market access negotiations -- which are essentially bilateral or plurilateral, whether on goods or on initial commitments for services -- and the several issues in the area of rules.

It would be clearly well-nigh impossible, for example, to discuss about the tariff cuts in textiles and clothing (agreed to at Tokyo) without simultaneously tackling the problems over the Textiles and Clothing agreement.

India and Pakistan, for example, have said that the present text must be changed to bring about a front-ending of the liberalization process, so that products not now under restraint would be "integrated" and brought under GATT rules immediately, and not used over time to achieve the yearly liberalisation of quota percentages envisaged in the Dunkel text, keeping all the quota restrictions on the socalled "sensitive" and "very sensitive" products till the end.

If this is not done, and if the "tariff cuts" between the US and EC take place, even if it is multilateralized and made applicable to all GATT cps, the developing country exporters would not be able to take advantage of it, since their increased exports would be hit by the discriminatory quota regime.

Jamaica and Sri Lanka, on the other hand, have demanded changes to extend the integration process for textiles and clothing trade from ten years to fifteen years.

The Tokyo package clearly does not include the agricultural sector and any "market access package" has to be include it.

Here, the negotiators will quickly run into the Dunkel Draft text in this area, the changes proposed to the text and agreed to by the US and EC at Blair House in November 1992, and the "offers" that all the parties have to be table on agricultural products in the light of the agricultural accord and the reduction of support and subsidies envisaged in it on the domestic, import and export areas.

The agricultural tariff and import offers that the EC put forward in December in the light of the Blair House accord was found unsatisfactory by the Americans, who said that in some areas it could even result in less access than before.

Japan, Korea, Switzerland, Austria and the Nordics are still to accept the Blair House accord and the "full tariffication" required under it and the Dunkel text.

Thus any agricultural "offers" package will quickly run into this problem.

As for tariff cuts on industrial products, where the US and EC are targeting among others Korea, Singapore, Malaysia, Indonesia, Thailand, India, Brazil etc (within the developing world) -- and also demanding from them a big package of initial liberalization commitments on services -- any market access negotiations will quickly be tied into the rules area, particularly changes in the rules on anti-dumping sought by the United States as also the dispute settlement procedures and processes and how far they would prevail over the domestic procedures and jurisdictions in the importing countries.

None of these major developing countries would commit themselves on market access concessions, in return for others promised or offered by the North, without knowing how "safe" the market openings for them would be and how much the new protectionist instruments like anti-dumping would negate them.

In earlier discussions, these countries have made clear that until the Dunkel texts are "locked" up and the anti-dumping disciplines are accepted, they will not be able to respond on their market access concessions.

Even the elimination of tariffs on steel, reported at Tokyo by Kantor, would run at Geneva into the problem of the anti-dumping rules and the US actions on steel.

A group of countries involved in steel exports, and working on a sectoral agreement on Steel, resumed Wednesday their talks in Geneva. The negotiations are outside the GATT, and have been held with the US providing the secretariat work. While ending all voluntary export restraints and other 'grey area' measures, the agreement will define 'actionable' and 'non-actionable' subsidies. The rules governing these touch on the US actions on steel imports, levying counter-vailing duties that make many imports prohibitive. Its outcome would have a great deal of bearing on the Uruguay Round, and its provisions on anti-dumping and subsidies as well as on dispute settlement.

The Tokyo market-access accords of the majors would open the Geneva process once again, but would bring it against stark realities of disagreements in the rules. And while everyone is anxious to get the "embarrassment" of the multilateral negotiations out of the way, no one is ready to assert an outcome.

Few negotiators, whatever their public posture, are convinced about the figures being bruited about, whether in terms of the billions of dollars of boost to trade and growth or reduction in unemployment. All that most of them agree upon is that a "failure" could be one more negative factor in business confidence.