Nov 7, 1985

GATT OVERVIEW FOUND "AN UNDER-STATEMENT".

GENEVA, NOVEMBER 6 (IFDA/CHAKRAVARTHI RAGHAVAN)— The GATT secretariat has painted a sombre picture of trade policy developments in the first half of 1985, but Third World countries have found even this to be "an under-statement" of a worsening situation.-

The differing views came Tuesday at the half-yearly special session of the GATT Council to review overall trade policy developments.-

The outlook for international trade painted by the secretariat was used by the industrial countries to argue in favour of taking the next steps for the launching of a new round of Multilateral Trade Negotiations (MTNs).-

However, India, supported by Egypt, Yugoslavia and a few others, said any new round would have little meaning unless it be "rooted on firm ground of standstill on protectionism, and clear and precise understanding of the concept and mechanisms to oversee and monitor it".-

In its overview, the secretariat had said new restrictions were "comparatively few", but equally there were "few liberalising ...actions ... and ample further evidence of continuing trend towards bilateral trade relations, managed trade and competitive subsidisation of exports".-

The secretariat sought to place these developments in the context of the overall economic background - marked slowdown in growth of world trade and output and high unemployment, and major current account imbalances contributing to protectionist pressures.-

The western industrial countries viewed this as a realistic political assessment of factors behind protectionism, implying presumably that little could be done to stop them without a new round of MTNs.-

But India noted that far from there-being "few signs" of liberalisation, there were "no signs at all".-

It cited its own experience where anti-dumping cases had been started when the market share involved was less than one percent.-

The secretariat review also underscored that the heavily indebted countries were under renewed difficulties in first half of l985. With exports falling, they had been forced to cut back on imports, and with consequent depressing effects on exports of their industrial trading partners.-

Growth in western Europe continued to lag, and that in south-east Asia has slowed down, while both exports and imports of the OPEC countries have fallen sharply.-

The U.S. dollar prices of Third World commodity exports (other than oil) were 13 percent lower on average in first half of 1985, compared to a year earlier.-

Growth in volume of world trade in first half of 19859 while three percent above that in 1984, was only one-third of the growth rate recorded in 1984.-

For 1985 as a whole, the volume of world trade is now expected to be less than four percent higher than in 1984.-

In the monetary and financial field, while the trade-weighted average value of the U.S. dollar had fallen by 14 percent between February-August, with a further sharp fall after the September New York meeting of the group of five, the lower dollar value is expected to have little impact in the near future on the U.S. trade balance.-

But if the decline in dollar is supported by "appropriate fiscal policies", there would be an eventual easing of competing pressures on U.S. producers that was currently fuelling demands for protection of the American market, the secretariat has argued.-

The report notes that of some 300 protectionist bills pending before the U.S. Congress, a great majority had minimal significance, there were a number of important ones on which decisions were expected before end of the year.-

Chief among them were:

-- The Jenkins bill to cutback textile and clothing imports from the third world, and an alternative less draconian version but with additional restrictions on footwear,

-- A bill to impose an emergency 25 percent surcharge on countries with large trade surplus with U.S.A. (Japan, South Korea, Brazil and Taiwan),

-- A bill to levy countervailing duties on imported goods based on natural resources where the producer paid below-market prices, proposals for levy of tariff surcharge to finance worker adjustment, and

-- A number of bills for reciprocity in market access for particular groups of products.-

The secretariat notes that these measures have not yet been approved, nor supported by the administration.-

However it points to the "perceptible and general shift" in U.S. policy discussions, with emphasis on bilateral and regional trade arrangements, setting up of a " war chest" to match subsidisers exports of other countries, and talk of "fair trade" (usually defined to focus only on "malpractices" of one's trading partners) replacing "free trade".-

There were few signs of easing of problems in the troubled sectors of agriculture, steel, textiles, clothing, footwear, automobiles or electronics.-

A number of new disputes have developed.-

There were several striking examples of bilateral agreements for subsidised sale of temperate agricultural products, and an appreciable increase in use of subsidised export credit.-

In steel, and textiles and clothing, market-sharing trends have been carried further, with further agreements negotiated to close "loopholes" in existing restraint arrangements.-

There have also been a further increase of counter-trade transactions, though some of the oil-producers who in the past had relied heavily on this, were reasvwnbverits of this strategy.-