A SPECIAL FOURTH TRACK PROCESS FOR US?

6:39 AM Dec 6, 1993

A SPECIAL FOURTH TRACK PROCESS FOR US?
Geneva 3 December (Chakravarthi Raghavan) -- Informal consultations among a small group of negotiators began Friday, outside the GATT, on the US proposals for changes in the anti-dumping rules text of the Uruguay Round Draft Final Act (DFA).

About a dozen delegations are reportedly involved -- US, Canada, Japan, the EC, Australia, New Zealand, Nordics, Asean, Brazil, Egypt, Hong Kong, India, Mexico and one or two others.

Of these, the US, Canada, EC, Australia have been making extensive use of anti-dumping investigations and the power to take countervailing measures as an instrument of domestic protection against imports from a particular country or even a particular enterprise.

The US proposals got a first reading, with some strong opposition from some of the participants, and the EC slightly muted or occasionally providing support to the US or a compromise nearer to its own rules and regulations.

The discussions are to continue on Monday, with some suggesting that after the ad text, other proposals would be taken up.

Meanwhile, the antidumping issue and US proposals would appear to have come up also at the Friday evening meeting of the Heads of Delegations.

While everyone at the meeting reportedly expressed concern over the extensive changes sought, some of the US "friends" like Australia and New Zealand and the EC too, felt that the political problems faced by the US should be recognized and solutions found.

India said the process for completion of the Round could not address the political difficulties of only one or two partners, but had to similarly take account of problems of others which, though repeatedly brought up, had been ignored.

Supported by Brazil and Hong Kong, India also reportedly made clear that any changes in the 'standard of review' for panels (sought by the US in antidumping) could be made only in the wider context of the integrated Dispute Settlement Understanding (DSU) and not agreement-specific. There was no reason why the US should have this 'privilege' in antidumping cases, without others getting a similar benefit in other areas like TRIPs, TRIMs etc where their domestic judicial processes and findings could be called into question at the multilateral level.

The discussions, earlier Friday, in a smaller group of delegations on the US proposals for changes in the AD text were conducted by Michael Cartland, former Hong Kong representative to GATT who has been named as 'friend of the Chair' by GATT Director-General and TNC Chair Peter Sutherland to hold consultations on changes to the DFA text in the rules area.

Early in 1992, the Trade Negotiations Committee (TNC) agreed on a four-track process for concluding the negotiations on the basis of the DFA texts tabled by then GATT D.G. and TNC Chair, Arthur Dunkel - the first track for market access negotiations, the second for initial commitments on services, the third legal drafting process for cleaning up the texts and ensure internal consistency for the DFA as a whole, and the fourth for effecting changes in the DFA on the basis of consensus.

Dunkel avoided opening up the fourth track process, waiting for completion of the processes in the first three, so as to ensure minimum changes.

But in December 1992, when the Bush administration in the US was trying to clinch an agreement (after the US-EC Blair House accord of November), Dunkel did hold some informal dinner consultations (a smaller group of the participants in the normal 'green room' consultations), so that an overall picture of changes sought by one or the others would be known.

With Clinton about to take over in the White House (and some of the Bush officials already tapped for office in the new administration on hand to slow things down) and France objecting to the Blair House deal itself, the process did not go far.

After Dunkel left, and Sutherland took over, he dispensed with the 'green room' type consultations and, while pushing the US and EC publicly and privately to patch up their differences and help conclude the Round, did not allow any process for negotiators sitting together and addressing proposals of others for changes, preferring instead to have bilateral consultations.

But on Friday, Cartland convened informal consultations among a small group of about dozen countries to consider the US proposals for changes in the anti-dumping text of the DFA.

As one of the participants put it, "It was like Harrods Department Store (in London) opening its doors one day, only for the Queen and the Royal Family, ahead of its annual sales opening to the public".

The US proposals for changes in the ad text were gone through, with the US reportedly explaining its rationale and others voicing their opposition.

The proposals discussed included socalled standard of review (to restrict the power of GATT panels to upset decisions of the US bodies judging dumping complaints), anti-circumvention provisions, the sunset clause, cumulation of imports from different sources, the parties within a country which can make a complaint against dumped imports, calculation of dumping margins and of 'below cost sales' in domestic or third country markets to assess fact of 'dumping', price averaging for comparison of prices, criteria for 'profits' to arrive at a constructed value of an imported product.

On 'standard of review', some of the delegates made clear that any such change could not be agreement-specific, but must be a change in the integrated dispute settlement understanding (DSU), and should be considered overall in the context of the consultations on institutional questions (the MTO and the DSU consultations, chaired by Julio Lacarte of Uruguay).

While this may weaken the quasi-judicial DSU, the dispute settlement panel's powers could not be abridged only in areas where it suited the US.

On the other US proposals, it became clear to other participants in the Cartland consultations that the US proposals for changes in the ad text had no other rationale than to get the text amended to bring it into conformity with the US law!

In trying to get the NAFTA through the US Congress, the Clinton administration reportedly promised US Congressmen and Senators that the US law and its powers and processes (both to initiate investigations and make findings and take countervailing measures) would be preserved.

The US law reportedly has no de minimis market share criteria below which the authorities are obliged to drop the investigations and save small suppliers and supply sources from lengthy and costly investigations, while the AD text provides for a two percent share - a compromise that developing countries and others had reluctantly accepted instead of their proposals in the 4-10 percent range.

Similarly, the US wants to change the one percent de minimis dumping margin in the DFA to 0.5 percent, but was unable to provide any economic or other rationale. But this is the margin in the US law.

In regard to the anti-circumvention provision in the DFA, it allows components and parts of a product (judged to have been dumped and subjected to additional duties), imported from the country concerned from the manufacturer of a product or his suppliers for assembly in the importing country through related firms to be automatically subject to the same antidumping duties. The US wants to widen this, and extend it to sources of supplies of parts and components from third countries too. It will hit mainly the Asian NICs.

The DFA text has a 'sunset' clause which would bring to a close the levy of the antidumping duty and the original finding of dumping and injury automatically at the end of five years, with the option to continue on the basis of a finding of likely continued dumping and injury to domestic suppliers. The US would change it in such a way that its authorities like the ITC could allow for automatic continuance. Some antidumping duties levied in the US are known to be in force even after 20 years.

The EC reportedly suggested a compromise on the lines of its own 'sunset clause' which it claimed had been in operation for several years and had not elicited any complaints.

The discussions are to continue next week, with some sources suggesting that other proposals for change by other participants would also be addressed.