GATT - THE MTNS, AND ITS PROMISES AND PRACTICES.

May 24, 1985

GATT - THE MTNS, AND ITS PROMISES AND PRACTICES.

AN IFDA SPECIAL FEATURE,BY CHAKRAVARTHI RAGHAVAN,GENEVA, MAY 22 (IFDA) -- It was Lewis Carrol who said it in the 19th century: "The rule is jam tomorrow, jam yesterday, but never jam today".

For most Third World countries (whose poor merely ask for bread, and not butter or jam), Lewis Carrol appears very much relevant today, while they face pressures to agree to a new round of Multilateral Trade Negotiations (MTNs) in GATT, and when hey judge its "promises" with the experiences of the past.

The U.S.A., is trying to launch another new round of MTNs in the GATT, and bringing into GATT "services", and is pressuring the Third World, through promises and threats, to agree to it and come on board.

The Third World countries, quite chary of the outcome of earlier GATT rounds, are insisting on prior implementation of commitments and undertakings of past rounds, and of the 1982 Ministerial declaration commitments.

The U.S., and the GATT secretariat, are arguing that without the launching of a new round, and the opportunities provided in it for trade-offs, the protectionist barriers against the Third World would not come down.

To the Third World countries, past experience has shown that new rounds and Ministerial declarations and commitments in GATT have an unbroken record of focusing essentially on issues of interest and concern to the industrial trading partners, and have invariably resulted in discriminatory and restrictive measures against the Third World.

At a recent informal meeting of the GATT Consultative Group of 18 (CG-18), several Third World delegates reportedly made the point that the basic issue was not implementation of the GATT work programme vs. new round, and whether the two could be merged for progress, but a question of establishing the very credibility of GATT for the Third World.

This credibility, they insisted, could not be established without implementation of past commitments.

And the record of GATT since 1947, cited by Third World delegations, appear to bear out their fears.

The Third World experiences of GATT are seen in two phases - the first from 1947 to early 1960’s, when there were few Third World members, and the period from mid-60’s, when they increasingly came into GATT but gradually discovered the realities of GATT.

There have so far been seven tariff conferences and multilateral trade negotiations (MTNs) - Geneva (1947), Annecy (1949), Torquay (1950-1951), Geneva (1956), "Dhillon Round" (1961-1962), "Kennedy Round" (1963-1967), and the Tokyo Round (1973-1979).

The 1947 Geneva meeting was essentially to put into effect some of the tariff and trade provisions of the Havana charter, and to take some tariff liberalisation measures, pending the ratification and establishment of the International Trade Organisation (ITO) under the Havana charter.

The general agreement was put into force "provisionally", pending the entry into force of the Havana Charter. But when the U.S. senate made clear its objections, President Truman did not even send it up for ratification, and the provisional "GATT" has remained "provisional" for 37 years now.

Though called frequently a "contract", it is a contract not enforceable in international law.

The first five MTNs in GATT were concerned with tariff reductions only, while in the Kennedy round, though tariff reduction was still the main element, there were some non-tariff issues tackled, specially an agreement relating to the U.S. minimum sale price requirements for imported chemicals.

In all the first six rounds, the negotiations were on the basis of "reciprocal and mutually advantageous arrangements". Under this concept, there were bilateral tariff reduction negotiations, which when put into force became applicable to all under the GATT’s most-favoured-nation (MFN) clause.

Though from the time of Annecy negotiations in 1949, this formula was found to be unsatisfactory, particularly for countries with an already low tariff and/or those like Third World countries who have little to offer to secure benefits, the bilateral negotiating approach prevailed.

It was only during the Tokyo Round negotiations that the linear tariff cut formulae, namely percentage reduction across the board for all products, except those specifically excepted, was adopted.

In 1947, when the general agreement was signed, of the original 22 CPs, there were eleven from what subsequently became known as the Third World.

Of the eleven, Kuomintang China withdrew, while Lebanon and Syria did not finally join.

And for a long time, until early 60’s, the number of Third World countries were small, and played no real role in GATT, or its MTNs.

And as late as the 1956 MTN, GATT had 35 CPs, and of them only 22 participated in the round.

Currently there are over 90 members.

Due to the GATT practice of "reciprocal and mutually advantageous" bilateral approach even in MTNs, only trading partners who could offer something have a chance of requesting and getting something in turn.

And while GATT secretariat itself made some "noises" in its publications about the problems of primary producer-exporters, little attention was ever paid.

In 1957, an expert group, chaired by Harvard University Professor Gottfried Haberder, and which included Jan Tinbergen, was set up to review trends in international trade, agricultural protectionism resulting in building up of stock and creating sharp variations in prices for primary products and fluctuations in export earnings.

Unlike the latest Leutwiler group, which was a creation of the GATT Director-General, the 1957 study was mandated by the CPs themselves.

The four-member committee, among other things, focused also on problems of the Third World, and called for expansion of economic aid, more adequate domestic measures against business cycle recessions, provision of greater international liquidity, setting up of a fund for buffer-stock actions for commodities, reduction of revenue duties and consumption taxes in industrial countries on tropical products and beverages, moderation of agricultural protection in Western Europe and North America, and avoidance of trade diversion through regional arrangements like the European Economic Community.

The Heberder report was discussed by the CPs, but the specific actions recommended were not taken. The U.S. suggested a new tariff conference and MTN, during the course of which it was suggested these issues could also be addressed.

At this time, with the signing of the Rome treaty, creating the EEC, the need for re-negotiation of EEC’s common external tariffs became necessary.

And the GATT CPs launched a two-stage negotiations, the first to be confined to re-negotiation of EEC tariffs, and the second a general MTN, called the "Dhillon Round", after the U.S. under-secretary of state who had proposed it.

Meanwhile, a GATT Committee ("the Committee III", which later became the trade and development committee or TDC) had been set up to look at the trading problems of the Third World CPs.

The committee reported that the problems of the Third World could not be solved by mere export of capital, but only through measures for substantial expansion in their export earnings through the opening up of markets for their exports in the industrial countries.

The Committee came up with an elaborate study of various obstacles faced by these countries for the export of raw cotton, cotton textiles, jute manufactures, timer, oil seeds and oil, light engineering industry goods, leather and leather goods.

The committee called for specific actions by industrial CPs on all these products, and for elimination or reduction of customs tariffs, internal revenue or fiscal duties and quantitative restrictions (QRS) on these products.

And while some small liberalisation action was taken, overall nothing much came out - and in some cases the restrictions actually increased - and the Third World countries expressed "disappointment" at the November 1960 meeting of the CPs.

The Third World then got promises of "earnest efforts" by industrial countries, but were also advised to develop "inter-regional trade" among themselves as the best way of promoting investments and production.

Meanwhile the Dhillon Round had been launched on May 29, 1961.

The Trade Ministers met in November 1961, and among other things called for swift removal of QRS, and for their non-discriminatory application where maintained under some GATT authority.

They also called for special attention for tariff reductions benefiting the Third World, elimination of tariffs on primary products and end to undue differentiation between primary and processed products, priority for removal or reduction of revenue duties and fiscal charges inhibiting consumption of imports from Third World.

The Dhillon Round ended on July 16, 1962, with none of the special measures promised in 1961, actually implemented.

But before it ended the Third World got its first dose of "liberalisation" through long-term cotton textiles agreement (LTA) of February 1962, imposing discriminatory quotas on imports of these products from the Third World into the industrial countries.