Jun 17, 1982




Geneva, Jun 16 (IPS/by Chakravarthi Raghavan) -- US efforts to initiate studies and negotiations in GATT on capital investment issues and trade in services appears to be coming up against increasing resistance from the Third World countries, and at best cool to lukewarm support from some of the industrialised countries.


This was the assessment of Third World sources in GATT after the two-day meeting of the preparatory committee of GATT, now engaged in making preparations for the GATT ministerial meeting slated for November 1982.


After initial consideration in the GATT Consultative Committee of 18, and informal consultations with individual delegations, the GATT secretariat had prepared what is called 'a first approximation' of the document to be adapted by the ministerial meeting. This was considered at length at the two-day preparatory committee meeting last week. The secretariat is now expected to come up with a 'second approximation' in the light of the discussions, to be considered by the preparatory committee on July 27 and 28.


As at present envisaged, the final document of the November meeting will be in three parts.


The first part will be a political declaration by the ministers and their commitments to the maintenance of the GATT open trading system.


At last week's meeting, the draft of the first part was considered by many Third World countries as being very weak in content, with serious gaps specially in the diagnosis of the current ills and in highlighting the particular goals to be achieved. Another meeting is to be held early next week to lock into this part.


The second part of the document is to deal with various issues pending in GATT, and which are considered ripe for some action and on which the ministers could take some decisions and provide some guidelines for followup actions.


'Issues relating to the safeguards actions, structural adjustment, trade in agriculture sector, tropical products, tariff and nontariff barriers to trade, and implementation of special and preferential arrangements for Third World countries are some of the issues that are intended to be covered in this part.


The third part is to consist mainly of new ideas where further GATT studies would be needed before any negotiations or actions could be agreed upon.


The United States had originally sought to launch "negotiations" on investment and trade in services through the ministerial meeting. Subsequently, it lowered its sights and since then has been seeking studies to be completed by 1983 and for actions on them by the Contracting Parties at their 1983 annual meeting.


When the United States originally broached the idea, it had received support of sorts from some of the industrialised countries while Brazil and one or two other Third World countries had opposed it, arguing the subjects were beyond the competence of GATT.


At last week's preparatory meeting, according to some Third World sources, several of the industrialised countries sought further clarifications, while a few gave some lukewarm support for 'studies' without committing themselves to any course of action.


Excepting for South Korea that supported consideration of the 'trade in services' issue, a large number of Third World countries are however reported to have spoken out in opposition to the US move.


In seeking to raise the issue in GATT, the US is reported to be seeking some multilateral negotiations and framework about the kind and extent of conditions that governments could lay down in restricting or regulating foreign capital investments, and in regulating actions in sectors like banking, insurance, shipping, consultancy services etc.


In the area of capital investments, the US is trying through this to restrict or prevent governments laying down 'performance criteria' on foreign capital investing in their countries. It has in mind specifically conditions like asking the foreign investor to agree to buy a minimum percentage of domestic inputs - raw materials, intermediate goods, ancillaries and other inputs -

and also agree to export a minimum percentage of the final product.


The US has been having running disputes an this with Mexico and Canada, and appears to be basically seeking to multilateralise its bilateral problems, and prevent other countries from having recourse to similar actions.


The US hope is to secure through GATT some leverage to influence other governments in this area. It wants to have the power, in cases where US capital investment is hindered or performance criteria about inputs and exports are laid down, to be able to hit the exports of the country concerned into the US markets. Such retaliation is not permissible now under GATT.


The US argument is that these regulations 'distort trade' and is against the theory of comparative advantage. However, while US wants 'comparative advantage' theories of Ricardo to prevail for capital movements, it does not accept it in regard to free movement of labour or other factors of production.


Many of the Third World countries reject such a concept. They have argued that even if such actions in regard to capital investments have a 'distorting' effect on trade, the issue could not be considered within GATT whose competence extends only to tariffs and related trade issues. Also, distorting effects of actions an capital could not be considered in isolation from others.


In any event if the US sought multilateral negotiations an these issues, it should be done through an international conference an trade, or in universal organs like UNCTAD which has a wider jurisdiction on the issues of trade and development, rather than the narrower framework of GATT and its limited membership of contracting parties.