Feb 7, 1986

PRIORITY FOR TROPICAL PRODUCTS IN NEW ROUND COLD-SHOULDERED.

GENEVA, FEBRUARY 5 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The mayor trading nations appear to have cold shouldered the call by third world countries for priority to trade liberalisation in tropical products in any proposed new round of trade negotiations.

The question of Tropical Products (TPS) was among the subjects that came up for discussion at the meetings of the GATT Preparatory Committee here this week.

Participants in the Preparatory Committee said that the U.S., EEC and Japan, the three major trading nations and markets for the tropical products exported by the third world countries, turned down the idea of any priority to the subject in the proposed new round, or of implementing the outcome of negotiations ahead of any negotiations or actions on other subjects of the new round.

Trade in tropical products Ė a term covering a wide variety of agricultural products (raw and processed) grown in the tropics, is of particular importance for the export trade and earnings of the third world countries, and especially of the least developed among them.

The issue has been on the GATT agenda since the Haberler Committee reports to GATT in the late 1950ís.

The Haberler Committee recommendations for specific actions on trade problems of the third world were put off at that time, and subsumed in then pending trade rounds - the Dillon round.

But no real actions were ever taken in GATT - neither in the Dillon round of May 1961 to May 1962, nor in the Kennedy round of November 1963 to May 1967, and not even in the Tokyo round of 1973-79 which promised to give priority to trade issues of the third world including in tropical products.

In the discussions in the Preparatory Committee, a large number of third world countries would appear to have expressed their deep frustration with lack of progress on the subject for several years.

They suggested priority to the issue in the new round, conclusion of negotiations within a specified period, and implementation of the results ahead of other subjects or issues.

Several of the third world countries also said that third world countries should not be expected to provide reciprocal concessions for the industrial countries in this area, particularly in the light of the past history of this issue in GATT and the unfulfilled past promises and commitments.

Industrial countries however turned down this request, and said that in any new round third world countries should make their own "contributions" for the new round.

In turning down the idea of priorities, the U.S. is reported to have remarked that "someone's priority is someone else's non-priority", and the issue should be handled only as part of a package in the negotiations.

Some third world participants said the attitude of the major trading partners on the issue came as a bitter disappointment to several of the smaller third world countries, who have so far adopted a "low profile" on the U.S. push for a new round with service and other new themes, or have even given some oblique support to the U.S., in the hope of getting negotiations on issues of interests to themselves.

Earlier the Preparatory committee had discussed the issue of trade in agriculture.

GATTís Committee on agriculture, set up after the 1982 Minister declaration and work programme, has reached a consensus on a possible basis for negotiations in this area.

However, the European Community has also made clear, in the context of a new round, that its common agricultural policy could not be negotiated in a new round.

At the 1982 Ministerial declaration, the EEC had entered a specific reservation that it was not committed to any new negotiation or obligation on trade in agriculture.

At the meetings of the senior officials group in GATT in October-November last year, the Community spokesman had underlined that the reservation "had not been withdrawn" and that the objectives of the EECís common agricultural policy (as defined in the Rome treaty) were just as valid now as when the treaty was signed.

The EEC was willing to negotiate and elaborate the conditions under which "substantially all measures affecting trade in agriculture could be brought under effective GATT rules and disciplines, but that "the fundamental mechanisms, both internal and external of the cap should not be placed in question".

"Agriculture in all its forms is at the heart of the European model of society, and the Community intended to defend it", the EEC spokesman had said in the senior official group.

Discussions in the Preparatory Committee, some participants said, had not advanced, with the EEC perhaps a shade stronger in its position.

On the question of more effective and credible GATT dispute settlement procedures, the GATT Director-General (who chairs the Preparatory Committee) would appear to have stressed that while there was always scope for improving the procedures, the procedures would work only if they were respected.

"In the final analysis it is a reflection of the lack of commitment and political will to make the system work, and when governments are ready to accept judgements against them".

Participants said that while some old ideas like "binding", arbitration, or application of a consensus rule but excluding the parties to a dispute, were aired, it did hot find favour with the major trading nations.

The EEC made it very clear that the GATT rule of consensus must apply to adoption of panel reports and recommendations.

The U.S. which at one stage in recent periods, has been very critical of GATT on dispute settlement and stressing the need for establishing GATT credibility, however was quiet.

The U.S. International Trade Commission has recently reported that on balance the GATT procedures on dispute settlement have not been to the disadvantage of the U.S.

On the subject of Quantitative Restrictions (QRS) and other Non-Tariff Measures (NTMS), some of the participants in the Preparatory Committee noted the overlapping of this issue with the question of rollback.

Discussion would also appear to have centered on the scope for unilateral removal of measures not conforming to GATT, and the possibility of negotiations to remove QRS and other non-tariff measures that were in conformity with the GATT provisions.

There were also differences as to what measures could be considered in conformity with GATT and what were not in conformity.

Third world countries have been insisting that QRS and other NTMS per se illegal should be removed, irrespective of whether they are in place since recently or for a long time, and third world countries could not be expected to hake any concession or provide any reciprocal benefits for the removal of the illegal QRS and other NTMS.

Industrial countries have been calling for "negotiations" on these issues, with the objective of "changing the rules" to enable continuance of some of the QRS and NTMS, and get concessions from the third world countries for removal of others.

Several third world countries again made clear that this was "simply not on".

The question of tariffs, it was underlined that though tariffs have been considerably reduced in general after the Tokyo round cuts, there were tariff peaks, with tariffs as high as 40 percent or over on individual products, especially those of export interest to the third world.

There were also products where the current tariffs were below five percent, and thus served no purpose other than being a "nuisance", and these could be negotiated and eliminated.

Tariffs of some of the industrial countries, and of most third world countries, are not "bound" in GATT, and thus could be varied by the countries concerned.

One idea is to make the tariffs "bound" to start with, so that in future they cannot be raised unilaterally by the country concerned.

Several third world countries are reported to have underlined that in many of them in recent periods, there have been unilateral actions to reduce the tariffs, and in all such cases they should get some credit for it in the new round.

The issue of tariff escalation on imports of processed commodities at every stage of processing - a major obstacle against exports from the third world, is also reported to have been raised at the Preparatory Committee.

This too is a very old issue on the GATT agenda, where the industrial countries have repeatedly promised actions but the promises remain mere promises.

On the question of various Tokyo round agreements and codes, the problems faced by third world countries joining such codes, and whether the new round should address these issues and how to promote third world accession to the codes was reported to have been raised.

Though industrial country participants in the various codes have claimed "satisfactory working", very few third world countries have joined them, and even those few have found little benefit accruing to them.

There is also the general issue of GATT having now become "a two-tier arrangement", with some obligations and benefits accruing only to adherents of particular codes (thus violating the MFN principle in GATT).

Australia and a few others also feel that the subsidies code itself has not functioned well, and the entire issue of subsidies should be negotiated in the new round as a separate issue.

However, the EEC would appear to have reacted strongly and made clear that the question of subsidies in agricultural trade must be negotiated as part of a package on the trade in agriculture, and the EEC would just not participate in any separate negotiations on subsidies.