"CONSENSUS GAP" ON NEW ROUND.

Mar 2, 1985

"CONSENSUS GAP" ON NEW ROUND.

GENEVA, MARCH 1 (IFDA/CHAKRAVARTHI RAGHAVAN) – U.S. efforts to initiate preparations and to launch a new round of trade negotiations in GATT in 1985, with focus on services and investment issues have again been turned down by the Third World countries.

A high level group in GATT, the Consultative Group of 18 (CG-18) would appear to have ended its meeting Thursday night in what some participants called "a consensus gap" on the new round or the preparations for it through a high-level meeting of GATT Contracting parties this summer.

The United States has made it clear that it is not interested in any trade negotiations in GATT unless it included issues of trade in services and investment procedures and conditions.

And if Third World countries and GATT partners are not ready for it, the United States with its weight in the world economy and international trade, would be forced to achieve its objectives through bilateral arrangements, the U.S. representative was reported to have told the group.

Third World countries however stood firm by their position paper presented to the November 1984 meeting of the GATT Contracting Parties.

Under this, they insisted on implementation by industrial countries of their 1982 GATT Ministerial commitment for standstill and rollback of existing protectionism.

Also, the Third World group said, there should be progress on the priority areas of concern to the Third World in the GATT work programme.

And depending on these two elements, the Third World had said, it would be ready to initiate proposals for "specific trade negotiations" in GATT, but confined to "trade in goods only".

The sharply contrasting viewpoints was such that there was not only no consensus on the new round, but even on the efforts of the U.S. and others to hold a high-level meeting of the GATT Contracting Parties in June/July this year to set up a preparatory Committee for launching the new round in 1986.

As some of the Third World participants put it, prior GATT precedents of such preparatory process would not avail, since for past negotiations everyone knew what was to be negotiated – reduction of tariff and non-tariff barriers to trade in goods.

But the issues being raised by the United States were not within the purview of GATT at all, and would amount to rewriting the general agreement.

Even the U.S. as protagonist had been unable to spell out what it wanted to be done through liberalisation of trade in services, and why it should be done only in GATT, and not other bodies who were dealing with some of the services issues for a long time.

According to one participant, the U.S. representative himself said to pointed questions "we ourselves do not know" on what should be done and what was specifically sought in the services area.

Even the national studies so far circulated via GATT do not clearly bring out any of the "international trade issues" in the services area.

And without even the U.S. not clear as to what it wants in services, or unwilling to spell it out, no one can set in motion a preparatory process for new round of negotiations, one Third World participant said.

According to some participants, there was not even any consensus on holding a series of new meetings of the CG-18 (which normally meets three of four times a year), in the next month or two, in order to forge a consensus.

Before the CG-18 considered the new round issues, it would appear to have discussed the general trading scene, including the growing sectoral "grey area" measures and the efforts at bilateralism.

There was also wide-spread concern over the U.S. economic scene – burgeoning budget deficits, which was drawing in capital from everywhere, pushing up the value of the dollar, and fuelling protectionist measures in the U.S.

The United States would appear to have underscored its huge trade deficits, to make the point that this was becoming intolerable and the Congress would take measures to deal with it.

There were a lot of protectionist pressures, and hence the U.S. view for launch of a new round, which has now been formally proposed by president Reagan in his inaugural speech.

The launch of a new round was "a political requirement" in the U.S. and the process must start now to launch the negotiations.

If negotiations are not launched in 1985, there could be no negotiations till 1989, and the U.S. would have to look to bilateral methods and "free trade agreements" to get its way.

The 1984 U.S. trade law has empowered the administration to do this.

While the U.S., and some of its supporters, saw some merit in the issues raised by the Third World in its position paper, the U.S. made clear that it had no interest in any negotiations unless it focussed on and included "trade in services and investment rules, and other new issues".

According to one Third World participant, the U.S. position appeared to be that unless it had its way on trade in services and Third World countries agreed to relax their investment rules for U.S. capital, the U.S. would not be interested in other current issues in GATT sought to be brought to negotiations (like agriculture).

Even more, U.S. comments would appear to suggest that it would not even implement the 1982 Ministerial commitments on standstill and rollback of measures inconsistent with the general agreement.

Though the U.S. formally disavowed it was holding everything – including rollback of measures inconsistent with GATT, agreed to under para 7 (1) of the Ministerial declaration – hostage to the services issue, the net effect was still the same, another participant said.

The Third World countries however said the issue of agreeing to new negotiations, or even setting in motion the preparatory process, was linked to what was to be negotiated, and if there was no consensus on this, none of the other things could achieve a consensus.

Consultations should be continued to clarify issues and enable consensus to be reached.

But till then, the work programme in GATT should not be held up, but should be pursued.

Many of the issues of concern to the industrial countries themselves, such as "grey area" measures could be tackled within the framework of the work programme, such as safeguards.

But the services issue was outside the scope of GATT, and was in a totally different category, and none of its sponsors were able to say what they wanted.

A GATT spokesman however claimed Friday that there was a consensus that there should be trade negotiations "sometimes", but that there were differences of interpretation as to when, and on the subjects for negotiations.

There were some who felt that negotiations should start as soon as possible, and that the work programme had gone as far as it could and nothing more would be done without negotiations.

But there others who differed from this, and felt that unless one knew what was to be negotiated about in each area, there could really be no negotiations.

The spokesman also said that there was concern about the state of trading system, and the view that it was affected not only by trade policy, but also by the international monetary, financial and debt issues.

The spokesman envisaged a couple of more meetings of the CG-18 before June-July, to continue consultations and create a consensus.

However Third World participants questioned this, and said that a consensus even on the timing and agenda for the next CG-18 would need considerable consultations.