5:51 AM Jul 9, 1993

TOKYO ACCORD DETAILS INJECTS MORE CAUTION IN NEGOTIATORS

Geneva 9 July (Chakravarthi Raghavan) -- After some initial hype about the Tokyo G7/Quad accord on tariff cuts in industrial products, negotiators at the GATT have become more cautious and view it as no more than something to reopen the Uruguay Round processes in Geneva.

Some of the media reports from Tokyo and comments on them have been positively "gushing" and misleading, such as the projected time-table for concluding the negotiations and bringing the new agreements into force on 1 January 1994, GATT participants note.

Given the likely scenario for resumption and the conclusion of the negotiations by mid-December and the legislative processes involved in giving effect to it, the earliest that the agreements can come into effect is 1 January 1995, GATT delegates said.

The details that have now become known, through the communique issued in Tokyo (after the meeting of the ministers of the Quad countries -- Canada, EC, Japan and the United States), is seen as much less than what was made out in initial reports.

"The tentative quad accords on tariff cuts opens the way for resumption of the blocked multilateral process here, but the cuts seem much smaller than originally anticipated, and not enough to overcome other obstacles for concluding the Round," one negotiator said.

EC GATT Commissioner Leon Brittan will be on hand Monday in Geneva to brief the GATT Director-General and later a group of key negotiators over a lunch organised by the Chairman of the Contracting Parties, Amb. Balkrishna Zutshi. Also on hand will be the US chief official Uruguay Round coordinator, John Schmidt.

The meeting was arranged even before Peter Sutherland took over last week as GATT Director-General and on Monday as official level Chairman of the TNC.

It is not expected to get into substance, but could agree upon the processes for resumption of multilateral negotiations.

Sutherland, after taking over, reportedly suggested to a key group of negotiators that the GATT and negotiators should forego their traditional August vacations and work through it to help keep up the momentum and conclude the Round.

"The suggestion was met by a thundering silence," one negotiator said, and suggested that the negotiations could perhaps really pick up pace only from early September.

And while considerable amount of work would be needed, everyone knew what the issues to be resolved were, and it should be possible to conduct hard negotiations and reach compromises needed over a 4-6 week period, he said.

So much hope for pulling the world economy out of its current malaise and recession has been placed on a successful conclusion of the Round, and so much has been written about the negative effects of a loss of business/investor confidence by a failure or prolonged deadlock that most trade negotiators are trying to find a way to conclude the negotiations and not get the blame, a relatively junior official in another delegation said.

But the very small pickings in the package, in terms of market access, over the short- to medium-term, and particularly for the developing countries, would be such that it is difficult to see any re-igniting of the world output and growth and trade, and when the details become public may even have a counter-effect of "disappointment", he said, adding, but it would atleast force re-thinking on the basic problems plaguing the world economy -- the globalization processes that have negated national autonomy and capacity to deal with problems and creating unemployment with growth.

Though reports out of Tokyo, have made it appear that the quad have agreed on a set of zero-tariff measures in some sectors, and to lower peak tariffs on others, and that everything now depends on the over 100 other participants, particularly the developing countries, to do their share, the reality appears to be somewhat different.

In theory, nothing prevents the quad from going ahead with their tariff cuts -- and practice what their top economists and those of the Fund/Bank/GATT often preach, namely that unilateral liberalization benefits the liberalizing country.

The four have identified and agreed upon sectors of their major trade exchanges for zero-tariffs and others for harmonization of peak-tariffs at lower levels.

In some, such as pharmaceuticals and chemicals, the other major suppliers are within the OECD countries -- the Nordics and Switzerland, for example, in pharmaceuticals, and the quad must negotiate and win equal concessions.

In the case of developing countries, they are not competing suppliers, except for a few in one or two product lines of generic drugs and formulations.

Some of them have said they could not bring down the tariffs on this or some other "luxury" imports which, though there are no domestic production now in place or envisaged, carry high tariffs as a revenue-raising measure.

In the area of textiles, where the US has resisted the EC demand for a major reduction of peak tariffs, the Wall Street Journal reported from Tokyo that the Clinton administration has made clear to its counterparts that it can't move much more now since it "simply can't afford to alienate any Democratic senators, several of whom are fierce protectors of the industry, while the Clinton administration's big tax bill is pending, and the defection of just one senator would very likely doom the bill."

The US negotiators have also been telling several of the developing country delegations that they should not be expected to yield very much on improving the textiles and clothing agreement and "front-load" the liberalization process until the tax bill is through.

But this is an argument that the successive administrations have been using, even from before Punta del Este, to say that they would "liberalize" in textiles and clothing, but at their time. Yeutter, Carla Hills and now Kantor have trotted this, and 7 years later, the restrictions are more and not less.

For their part, some of the MFA exporting countries have also turned down the demands of the US textile lobby for concessions and market access for their exports.

Apart from considerations of equity that having paid the "price" for giving up their GATT rights and agreeing to discriminatory trade restrictions on their exports over a 30-year period they can't pay a price a second time for regaining their GATT rights, any further concessions on textiles and clothing would make the overall package even more imbalanced and unsaleable domestically for many of them.

"it isn't only Mr. Clinton who has a Congress and domestic lobbies to face; others too have legislative pressures and lobbies," one of the negotiators commented.

With the original idea of a Tokyo-round type tariff-cutting formula for cutting tariffs and reducing or eliminating peak tariffs having been given up, and virtual product-line bilateral negotiations and deals forced on negotiators, it would be more difficult for many to yield on individual product-lines.

And beyond the tariff cuts and negotiations, which clearly will not be one "big package" as had been talked about, the problems of "rules" and "changes" sought in the Dunkel texts will be even more arduous, particularly the US view that its domestic laws and procedures should prevail, such as in anti-dumping investigations and assessments etc or in continuing in some form the instruments for bilateral pressures and unilateral actions. The letter by several key US Senators, while endorsing the fast-track is clear notice on this to the administration.