Jan 30, 1986

PREPARATORY COMMITTEE DISCUSSES ROLLBACK AND SAFEGUARDS.

GENEVA, JANUARY 28 (IFDA/CHAKRAVARTHI RAGHAVAN) The GATT Preparatory Committee for a new trade round ended its first round of meetings Tuesday, after a preliminary discussion of standstill, of rollback, treatment of third world countries, and safeguards.

The Committee is to meet again on February 4 and 5, when it will take up trade in agriculture and other subjects.

The Committee is presently engaged in the task of having a preliminary exchange of views on the subjects to be covered in a new round, and not attempting to reach any conclusions or recommendations to be incorporated in a draft declaration for the consideration of the Ministerial meeting in September.

This work is expected to be taken up in March after completing the discussion of all the subjects.

Standstill, rollback, special and differential treatment for third world countries, and safeguards, have been identified as priority subjects for the consideration of the Preparatory Committee by the November 1985 annual session of the Contracting Parties.

Third world participants said Tuesday that despite their best efforts, none of the major industrial economies were forthcoming on any of these issues, and some of them even presented a picture of "disinterest" in the traditional areas of GATT focus or activity.

Like all GATT meetings, the Preparatory Committee too is closed to the press, and a GATT spokesman who briefed the press would not specify the views of participants, but merely identified the issues under various subjects.

Even this appeared to be merely the views of the secretariat, put forward by the chairman of the Preparatory Committee, GATT Director-General Arthur Dunkel while opening the discussions on each of the subjects.

The GATT spokesman said the discussions on rollback covered the issues of the legal status of such a standstill and rollback, whether it should be part of negotiations in the new round or a precondition, the measures to be covered under a rollback, and the question of monitoring and surveillance.

The idea of a rollback, agreed to at the 1982 GATT Ministerial declaration and at UNCTAD-VI in Belgrade, has been with reference to any protectionist actions in place and maintained either in violation of specific GATT provisions or not specifically sanctioned by the general agreement.

Quantitative restrictions on imports and other non-tariff measures put in place by industrial countries, often only against imports from the third world, are generally in violation of specific provisions of the general agreement or taken outside the general agreement, including through so-called voluntary exports restraints, forced upon third world countries bilaterally.

In introducing the subject, Dunkel would appear to have raised the question of the legal status of a rollback - whether it should be a contractual commitment or merely an autonomous undertaking, and whether it should be part of the negotiating agenda of the new round or a precondition.

Also involved was the question whether such a rollback should merely cover measures which were either illegal or not conforming to GATT provisions, or also legal restraints.

Another was what were the what sectors the rollback should cover - industrial, agricultural, tariff measures, non-tariff measures, etc.

Also at issue was the question whether a rollback would be a commitment by all, or by industrial countries in favour of the third world countries.

The duration within which the rollback should be achieved, and the surveillance mechanism to oversee compliance were also issue involved in any rollback commitment.

Third world participants said that while several of them spoke and presented their views, the major trading partners, and especially the European Community and the U.S.A. were reticent, and not at all forthcoming beyond stating that their views on rollback were also covered by their views on standstill.

The EEC has taken the position that standstill and rollback were essentially autonomous actions.

The U.S. has said that there should be a standstill prior to and during the negotiations, and that it also envisaged a phasing out of trade restrictions inconsistent with GATT one form or another.

The positions of industrial countries, and specially the U.S. and EEC, would appear to be that the phasing out of the restrictions would have to be negotiated, implying that in return for their removal of illegal measures, specially those in place for a long time, they would expect the third world countries to reduce or remove some of their legal restrictions.

However, the third world countries have been arguing that removal of illegal restrictions was a contractual obligation of any contracting party, and any restrictions put in place since GATT came into being, would have to be removed or phased out.

Such a rollback should cover all sectors industrial and agricultural, and also those covered by special arrangements like the textiles and clothing trade.

Other Contracting Parties, and third world Contracting Parties, were not compensated when the illegal restrictions were put in place, and should not be expected now to provide any concessions or reciprocal benefits for the removal of the illegal restrictions.

Also, in the view of third world countries the removal of the illegal restrictions or rollback, might need a 2-3 year time span for phasing out, and this might need negotiations, but this could not be part of a new round.

Rather it should precede the new round and agreed upon, even if the implementation would take a little time.

The second subject discussed Tuesday related to the question of special and differential treatment to the third world countries within GATT, and in the new round.

There are several GATT provisions, including part IV of the general agreement and the "enabling clause", incorporating the outcome of the Tokyo round negotiations into the GATT framework.

Several of these provisions provide for special benefits to be provided to third world countries without their being asked to give any reciprocal concessions.

But third world countries complain that these provisions have remained unimplemented, and instead they have been singled out for discriminatory measures.

A number of third world participants underlined the importance they attached to this issue, and wanted to know what the industrial trading partners planned to do about this in the context of their proposals for a new round.

A GATT spokesman said that the discussions centered on whether third world Contracting Parties would be expected to reciprocate, in any limited or lesser way, for the benefits that they might be granted, and the extent of possible reciprocity.

Other issues posed included whether all third world Contracting Parties should be treated alike or whether there could be differentiation amongst them, and whether the special treatment could be also addressed in giving priority to trade issues of special interest to the third world countries like tropical products.

According to third world participants, Norway made clear that the question of special and differential treatment was not a matter of negotiations, but a principle incorporated in the GATT, and the only issue for negotiations could be how to implement it and make it operational.

However, other industrial countries, and specially the major trading partners were equivocal on the issue.

Japan suggested that the concept should be implemented "wherever appropriate and feasible".

The EEC argued for a "dynamic" interpretation, with third world countries taking on increasing GATT obligations, so that the provisions would be ultimately phased out.

Several third world countries criticised tile idea of implementation as "appropriate and feasible", and pointed out that no one suggested that the MFN principle of GATT should be implemented only when "feasible or appropriate", and the special treatment to the third world was as much a fundamental principle of the GATT system as any other.

The securing of additional benefits for the third world was one of the foremost objectives of the Tokyo round, while now the talk was of "wherever appropriate and feasible", and of how to phase it out.

If this were the approach, third world countries would not be very interested in the new round.

Not only had these GATT provisions remained unimplemented all these years, but there was even resistance to make an inventory of the progress in implementation.

Rejecting the idea of "reciprocity", several third world delegations also stressed that any trade benefits granted to them resulting in increased export earnings were translated into increased imports for development.

This was a built-in reciprocity in the development process, and no additional reciprocity could be expected from the third world countries.

Also, in recent years, even without any trade negotiations, several third world countries had taken autonomous trade liberalisation measures, and perhaps the GATT secretariat should make an inventory of these and quantify them.

On the issue of safeguards, the GATT Director-General would appear to have posed the question whether there should be a new mandate on the issue, in the light of past failures, and whether this should not include the renegotiations of article XIX - the GATT article enabling countries to take emergency safeguard action to protect domestic production.

The question of a safeguards agreement was one of the priority items for the Tokyo round, but no agreement could be reached, in view of the insistence of some of the industrial countries, and specially the European Community, that such an agreement or understanding should include the right to take "selective" actions, namely restricting imports from particular sources, and not all sources as GATT now requires.

The 1982 GATT ministerial declaration called for a comprehensive understanding to be reached based on the principles of GATT and containing provisions for: transparency, coverage, objective criteria, temporary nature and degressity of safeguard actions, compensation and retaliation, and notification, consultation and multilateral surveillance.

However repeated efforts to negotiate an understanding have failed over the issue of selectivity.

Third world countries and several others have said that a safeguards agreement or understanding should be a high priority for negotiations in any new round, since without such an agreement any concessions exchanged in the new round would be meaningless.

However, third world countries have also made clear that they would not accept the concept of "selectivity", since in practice it would mean empowering the industrial countries to take actions in a discriminatory way against third world countries.

Canada and Australia among the industrial countries underlined the need for a comprehensive understanding based on GATT principles, while several third world countries said without such an understanding even any standstill would be endangered.

Australia reportedly made the point that this was not a north-south issues but between the major and smaller trading partners, since the latter could not "retaliate", and were thus the victims of "selectivity".

There should be a commitment to negotiate this issue in the first phase of the negotiations, and any such understanding should be in line with the most-favoured-nation principle.

But the European Community was reticent in its views, while the U.S. noted that its efforts to promote an understanding had failed.