Jun 15, 1985

A NEW "GAS" TO SOLVE GATT PROBLEMS?

GENEVA, JUNE 13 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The idea of a separate General Agreement on Services (GAS), put forward by Brazil last week-end at Stockholm could provide a solution to contentious issue now before GATT, according to some western sources here.

At the informal meeting of some Trade Ministers on June 8-10, Brazil is reported to have proposed this, and for some "parallel discussions leading to this" being held in GATT, using "GATT facilities".

Whether U.S. would accept this, and the de-linking of the GATT negotiations in GATT on Trade in Goods, and whether other Third World countries would accept use of GATT forum for the "parallel discussions" remains unclear at the moment.

Third World countries say that apart from other issues (like standstill and rollback), before a high-level meeting is set or new negotiations are agreed to, the conflicting views on the issue of "services" would have to be squarely faced and solved.

The Third World countries have challenged GATT jurisdiction, and argue that the present general agreement covers only trade in commodities and goods, and not services.

The U.S., has so far been arguing that GATT does cover the trade in services.

However, it would appear that during informal discussions at Stockholm the U.S. delegates conceded that the General Agreement as it stands, does not cover services. But whether this would be reflected in future discussions in GATT remains to be seen.

Also, at Stockholm, India and several other Third World countries present reiterated their positions on the services issue, and their objections to GATT being distracted over "new themes", while the fundamental problems of the system are being neglected.

Brazil while taking a similar position appears to have shown some nuances in its approach.

Like other Third World countries, Brazil insisted that any negotiations in GATT should be confined to "trade in goods" only, but said that there could be "parallel discussions" on the problems on services.

If such discussions resulted in a consensus that a new multilateral framework is needed, a conference of plenipotentiaries could be convened to negotiate a new "General Agreement on Services" (GAS).

Interested countries could participate in such a plenipotentiaries conference and become parties to GAS, which would have its own principles and rules.

Some industrial countries share this view that the services area may need a different set of rules and principles of trade that may not apply to the trade in goods covered by GATT.

The U.S. has been arguing that to enable it to stem the domestic protectionist lobby, not only should new round be launched in GATT, but that it should include services.

This argument has not convinced several Third World countries who wonder how or why if "silicon valley" interests would benefit from "liberalisation of trade in services", the steel or textile or other protectionist lobbies would keep quiet.

In what some see as a concession to the U.S., Brazil reportedly suggested a Stockholm that such "parallel discussions" and the convening of the plenipotentiaries meetings, etc., could use the GATT secretariat facilities.

This suggestion, apparently made by the Brazilian finance Minister at Stockholm and without prior consultations with other Third World countries, has received the support of some industrial countries. But the U.S. position is not clear.

But the Brazilian compromise does not seem acceptable to several other Third World countries either.

India and other Third World countries say that any discussions or conference towards a multilateral treaty or framework in services must be in "a neutral forum" that would not prejudge the outcome.

Discussions in GATT, or through "GATT facilities", in this view, would prejudge the outcome.

Any prior discussions and/or negotiations towards a multilateral framework and its contents, should be held in UNCTAD or the UN, which also have the merit, unlike GATT, of being universal forums.

More substantially on the services issue, India and others argue that though this term is being used to cover a wide range of activities, there is no particular commonality among them to warrant a common multilateral approach.

Some service activities (shipping, patents, civil aviation, communications, etc.), are already being dealt with by existing international organisations, and, as the GATT director-General reportedly told the Stockholm group, these organisations are not prepared to yield their jurisdiction to GATT.

Of the remaining service activities, it is not clear what the Americans want, and these would have to be clarified and discussed in depth, before any efforts could be undertaken, in a neutral forum, to negotiate a new multilateral framework.

Solutions to long-pending issues of trade in goods, and in its various sectors, could not be held up on account of services, nor could both goods and services be dealt with together, so that concessions on services (from the Third World) could be traded off for concessions on goods (from industrial countries).

Nor could Third World countries agree in principle to negotiate on services, without knowing what the end results would be and merely wait for it to evolve or unfold itself.

"It would be like asking us ‘to buy a pig in a poke’, as the Americans are fond of saying", one Third World delegate commented.

The U.S. failure so far to clearly delineate what it wants to negotiate on, and on which, service activities, is apparently because of their fear that if they clarified them, there would be many more objections than now, even from its industrial partners.

The U.S. recently been privately saying that it wants only "internationally tradeable services", or services that could be traded without any need for establishing an enterprise on a foreign territory, to be covered.

And to start with they want to cover high technology, computers and computer software, and communications.

The Third World countries say that if services are to be covered in any new framework, it should not be only those where the industrial world has "comparative advantage", but also those of the Third World, including such factor services as labour, and particularly skilled manpower and technical staff.

The U.S. argues that these are covered by "consular treaties", a view that Third World is not prepared to accept.

The U.S. also would like to get some of the general GATT principles applied to "tradeable services" and create a kind of umbrella, and then have detailed codes for each of them.

The umbrella principles it seeks to apply would appear to include the most-favoured-nation treatment principle, the GATT provision that "imported" and domestic goods should get "equal treatment", prohibition against government subsidies, and "retaliation" for injury in third markets.