8:20 AM Sep 29, 1993

US WANTS WEAKER DISPUTE SETTLEMENT MECHANISM

Geneva 29 Sep (Chakravarthi Raghavan) -- The United States appears to be aiming at a trade dispute settlement mechanism in the post-Uruguay Round trading system that would place its domestic actions and decisions beyond multilateral challenge and weaken a primary objective of developing countries in the Round, namely a rule-based system to safeguard their rights and ensure that the more powerful obey the rules and disciplines.

The US ideas on a post-Uruguay Round dispute settlement mechanism are reported to have been aired Tuesday in an open-ended informal group of the TNC under chairmanship of Uruguay's Julio Lacarte-Muro.

At the TNC on 31 August, GATT Director-General Peter Sutherland, in constituting the group had said it would work "to complete the work still required" on institutional issues surrounding the proposed Multilateral Trade Organization (MTO) to emerge out of the Uruguay Round and the Integrated Dispute Settlement System under it,

The Lacarte group began its work on Tuesday.

The texts in the December 1991 DFA, as further refined by a legal drafting group in 1992, dealing with the question of the Multilateral Trade Organization (MTO) and its integrated dispute settlement mechanism, are reported to be two of the items before this group.

According to some participants, with the US administration not ready as yet to take a position over the MTO (to which it is opposed, and wants a looser arrangement that would preserve its own leeway on trade policy matters), the Lacarte group has tacitly decided to put aside for the moment the MTO text and instead has taken up the integrated dispute settlement text.

The legal drafting group prepared a revised text in June 1992 on dispute settlement, leaving a few provisions within square brackets and the Lacarte group reportedly has taken up work on the issue from this point.

Among issues left open by the legal drafting group on the Integrated Dispute Settlement System is one related to the coverage of the integrated dispute settlement system, namely, whether disputes flowing out of the violations of the proposed MTO agreement and its integrated dispute settle system would be covered.

The Lacarte group Tuesday reportedly heard some general statements and outlining by the United States of the kind of changes in the text it wants.

But the general debate in the informal group and the suggestions for changes in the dispute settlement text, aired by the US, is reported to have brought out the differences over the scope of its work.

At the 31 August TNC, questions were raised on the scope of the work of this group, with India (indirectly supported by the EC) making clear that its consensus was on the basis that the group could only deal with the outstanding issues from where the legal drafting group had left matters, and not substantive changes in the DFA texts in these areas.

In January-February 1992, when the TNC discussed the DFA texts that had been tabled by the then GATT Director-General Arthur Dunkel, a four-track process was set up to deal with the various questions and complete the negotiations.

Under that decision, which so far has not been changed, the TNC agreed that market access issues (in goods) should be dealt with in 'track one', issues relating to the services questions (both the finalisation of the framework text and the negotiations on initial commitments) should be dealt with in 'track 2', the scrutiny of the various draft texts to make them internally consistent to be looked at in 'track 3', and a 'track four' process to consider any changes in the DFA texts.

One of the changes sought by the US is to change the language to provide that any violation of the MTO agreement or the Dispute Settlement System, procedural or otherwise, would not be subject to challenge, but only substantive rights and obligations of the various agreements themselves.

In the informal discussions so far, this view has not been accepted by the EC, India and several others -- all of them arguing that if procedural rights and obligations are not respected, and violations may not be challenged, it would create for uncertainties.

Another change sought by the US is one that it put forward in December 1992 in the informal Dunkel's Rossi process (private consultations at Rossi, near Geneva, on the textual changes in the Uruguay Round texts) in relation to the anti-dumping rules.

At that time, the US had sought to change the anti-dumping text to provide that decisions by its domestic courts and authorities in assessing evidence and facts or departures and violations of the procedures in the anti-dumping rules, should not be subject to challenge at the multilateral level or reversal on those grounds. It had also sought to stipulating that where a particular exporter of a country did not make any representations or context the issue in a US country, the country concerned should be estopped from challenging it at the multilateral level -- a curious case of a citizen's failure becoming an estoppel preventing the State from acting in the interests of its collective citizenry.

Everyone else at that time had rejected the US proposals, with a few asking the US why such an extraordinary provisions should be limited only to anti-dumping issues and their multilateral disputes and settlement and not everything else, including TRIPs or other rules and agreements.

The US has now sought to counter these by having a provision inserted that would apply to all disputes and their multilateral settlement, with provisions more or less similar to what it had sought in respect of anti-dumping alone.

The exact wording, one participant, was yet to be provided by the US.

A participant noted that from the beginning of the Round, it was the US that had sought to change the multilateral dispute settlement process and make it a highly legalistic one. Now, it wants to change all this and go back to the free-wheeling days of old.

The US has also sought 'transparency' of the panel proceedings, and wanting to make them open not only to the parties to the dispute, but other interested parties including non-governmental groups.

Some of the participants said that this was an attempt by the US to satisfy its domestic business and protectionist lobbies as well as some of the environment groups. They saw the real result would be to make the multilateral dispute settlement process cumbersome and costly and basically alter the entire nature of the contractual rights and obligations assumed by States within the trading system.

It was for each country and its government to provide for the transparency of its actions to its concerned public by whatever means it chose, including if it wanted to make its lobbies part of its delegation (with its full implication that the government and the state has to undertake the responsibilities flowing out of this).

At the international and inter-governmental levels, at present agreements and disputes arising out of them are between States and cannot be a matter between a private party in one State and another State at the international arena or for public interest actions by others, a Third World participant suggested.

A third US proposal apparently relates to the provisions in the Integrated Dispute Settlement System which allows for cross-retaliations, but subjects it to a hierarchial system (of first looking for retaliation within a particular agreement and only failing that to look across sectors). The rules in this area provide for developing countries to seek 'arbitration' over whether or not cross-retaliation is called for and its extent.

The US would appear to want to ensure that the arbitrator's views are not necessarily binding on the System and the Contracting Parties -- a view that has not found favour with the developing countries.

In the general discussions Tuesday, a number of developing countries including Brazil, Egypt, India and Pakistan reportedly stressed that the US views and proposals would involve substantive changes, and could only be addressed as part of the track four process for consideration of substantive changes to the Dunkel Draft text and not in isolation.

While technical and legalistic, the issues really are crucial to the entire GATT and Uruguay Round participants, particularly the developing countries, in terms of balance of rights and obligations and how effective a post-Uruguay Round trading system and its institutional structure would be in safeguarding their rights and ensuring that the major players function in good faith, in terms of the rules and disciplines of the system and not get around it, and where they are in transgress, they carry out panel rulings, one of the participants said.

Also of importance to the developing countries, who have limited manpower and financial resources, any multilateral dispute settlement mechanism and its enforcement should not become too costly.

From this perspective, the US ideas aired at the informal group on dispute settlement would make it a cumbersome and very costly process, and thus beyond reach of the weaker trading partners, particularly from the Third World, and even more, place beyond challenge any procedural irregularities of the domestic tribunals and proceedings, as well as their decisions on 'facts and evidence', one of the participants said.