May 25, 1985
WILL NEW MTN CREATE THREE-TIER GATT?
BY CHAKRAVARTHI RAGHAVAN, GENEVA, MAY 23 (IFDA) -- The U.S. moves for the seventh round of Multilateral Trade Negotiations (MTNs) in GATT, came when the golden age of growth of the industrial market economies was coming to an end.The Third World was becoming a sizeable element in world polity, and was no longer taking things for granted, but trying to function together collectively. Soon this disillusionment of the Third World with the international economic relationships, was to lead to the declaration and programme of action by the UN General Assembly for a new international economic order. But the U.S. call for a new MTN in GATT came before these new forces in world polity became fully evident. When the U.S. gave its call, it got support from the EEC and Japan. But unlike in the past, the third world countries in GATT raised some questions. While welcoming the new initiative, they wanted to have "a clear view" of what they would be expected to contribute in the negotiations and how it would deal with problems of concern to them. Pending this, they reserved their position on the launching of the new round. In November the third world countries were promised "additional benefits" through the new round, to get their participation in the preparations. In September 1973, at Tokyo, the Trade Ministers finally launched the Tokyo Round, and in doing so, promised in their declaration that the aim of the MTNs would be to secure, through trade liberalisation, "additional benefits" for the international trade of the Third World so as to achieve a substantial increase in its foreign exchange earnings. The other objectives of the new round, the Ministers declared, would be the diversification of exports of the third world countries, acceleration of rates of growth in their trade, better balance in trade between industrial and Third World countries, substantial improvement in conditions of access to products of particular export interest to the Third World and evolving a multilateral safeguard system aimed at further liberalisation of trade. Soon after the launch of the Tokyo Round, in December 1973, the third world was forced to agree to the multifibre arrangement (MFA) which extended the restrictions on trade in cotton textiles to non-cotton textiles and clothing. The net effect of the MFA was a sizeable increase in the amount of trade formally exempted from the normal GATT rules and principles and sanction for discrimination against the Third World. And before the Tokyo Round negotiations were concluded, in December 1977, the Third World was again forced to accept the even more restrictive MFA-2, which authorised "reasonable departures" from the principles of the MFA, which itself was a departure and derogation from GATT. The Tokyo Round itself concluded in October 1979. During its six year span, the negotiations were mostly amongst the U.S., the EEC and Japan, with the other industrial countries and the third world largely side-lined. When the three reached compromises, they were presented to the others on a take-it-or-leave-it basis. At the end of the round, third world delegations openly complained that their offers and requests for liberalisation of trade in tropical products and other products of export interest to them, had never received any response from the major trading partners. There was also no agreement on an effective safeguard system. The negotiations foundered on the insistence of the EEC and some other Europeans, that any such safeguard system should enable them to take "selective" or discriminatory action against particular sources of import. Under the GATT article XIX, such safeguards action could be taken only on most-favoured-nation, non-discriminatory basis. The Third World refused to agree to any such "selective safeguards", rightly interpreting the EEC demand as an effort to extend the discriminatory trading rules of the MFA to the general GATT trade. Apart from the tariff cuts, the Tokyo Round also resulted in a number of codes, providing agreed interpretations of various articles in contention. But the benefits of the code were available, in practice, only to the signatories, even though the Contracting Parties in incorporating the out-come of the Tokyo Round into GATT framework, clearly reaffirmed that the rights of CPs under the general agreement (including the MFN right in article one). The effort at liberalisation in the seventh round, and its promises of additional benefits for the Third World, resulted in what has now come to be known as the two-tier GATT, in which most Third World countries, non-signatories to the code agreements, have less rights and benefits. The Third World dissatisfaction was sought to be met through a GATT work programme, adopted in November 1979, which promised further work on unfinished business of the Tokyo Round. These included: trade in agriculture, a multilateral safeguard system in accord with GATT principles, continuation of trade liberalisation measures, and for priority to GATT work in relation to the Third World. But within a few months of the start of this work programme, the U.S. again began talking of a new round in GATT. The then U.S. Trade Representative, William Brock, aired this idea before the U.S. Congress, and subsecuently in international fora sought to garner support for a "Reagan Round". The U.S. said the new round should cover investment issues, to enable free movement of capital, trade in services and high technology, as well as a north-south round of trade negotiations. The U.S. sought to push these ideas through the ministerial meeting in GATT in 1982. The U.S. moves met with resistance from the EEC and the third world, and ultimately, the Ministerial meeting ended with a declaration and a work programme for the 1982. But undaunted, the U.S. renewed its pressures for a new round, promoting the view that the work programme was mainly a process for identifying issues for negotiations, to be tackled through a new round. The declaration committed the CPs "to make determined efforts" to ensure that their trade policies and measures were consistent with GATT principles and rules, and to resist protectionist pressures. They also committed themselves "to refrain from taking or maintaining any measures inconsistent with GATT and to make determined efforts to avoid measures, which would limit or distort international trade". Despite these standstill and rollback commitments, since 1982, there has been a proliferation of protectionist actions, outside of GATT or in defiance of it. The other areas of the work programme included efforts to develop a comprehensive understanding on safeguards based on GATT principles. The work programme also provided for individual and collective consultations with CPs on the implementation of the special treatment for the third world trade in agriculture, tropical products, elimination of quantitative restrictions (QRs) maintained illegally against Third World. Little progress has been made on any of these, and in several of them even the chances of progress have been stymied with the U.S. and Japan renewing their call for a new round, and the GATT director-general voicing the view that implementation of the various parts of the work programme, and the mutual trade-offs involved, could best be done through a new round. Third World countries complain that in this atmosphere, even the removal of illegal restrictions was being made a quid pro quo for third world concessions in goods and the nee areas like services. However, learning from past experience of seven rounds, the third world countries are insisting on implementation of past commitments, to re-establish GATT credibility, promising in turn an initiative of their own for specific trade negotiations, confined to trade in goods. They are opposing any effort to bring services into GATT, or creating a new code in GATT on services, linked to trade in goods, that would provide to signatories better conditions of trade in goods as a quid pro quo. Such a three-tier GATT, they say, will really be the end of GATT as an international trading system.