Apr 18, 1986


GENEVE, APRIL 17 (IFDA/CHAKRAVARTHI RAGHAVAN) Ė The need for a comprehensive agreement on safeguards, based on the GATTís Most-Favoured-Nation (MFN) principle, is reported to have received wide support in the GATT Preparatory Committee, when it discussed the issue Thursday.

But the EEC continued to resist the MFN principle, according to participants.

In a paper presented on behalf of a group of third world countries, Brazil had said that before launching a new round of negotiations, the GATT Contracting Parties (CPS) should commit themselves to conclude a comprehensive safeguard agreement, based on the MFN principle.

Such a safeguard agreement should be concluded at the very first stage of negotiations in a new round, and should be independent of the results of the negotiations in other areas, the paper said.

In presenting the paper, Brazilís Amb. Paulo Nogueira Batista is reported to have underlined the close linkage between commitments to standstill and rollback, and the conclusion of a comprehensive safeguard agreement.

The ideas presented by Brazil are reported to have received wide support from other third world countries, both cosponsors of the paper and others.

The U.S. and a few others, while supporting the issue of a comprehensive safeguards agreement on the agenda of a new round, baulked at the idea of any priority for it.

The EEC would appear to have gone further in suggesting that there should be no "blind application" of the MFN principle, and that possibilities of other principles being used in a safeguard agreement should be left open.

The negotiations on the safeguards issue during the Tokyo round, and since then, have broken down over the EEC efforts to secure the right to impose discriminatory restrictions against imports from some, and not all sources.

Though unstated, there has been little doubt that the third world countries would be the recipients of such discrimination, because of their inability to retaliate.

The EEC ideas of negotiations on safeguards without being committed to the MFN principle was however reported to have been firmly rejected by all the third world countries.

Both Brazil and Hong Kong would appear to have sharply rejected the EEC view, and underlined that it was not the application of the MFN principles that had created problems in GATT, as contended by the EEC, but its non-application.

The EEC however apparently continued to argue about the MFN principle not being "mechanical" or "automatic" in GATT, citing the restrictive actions that could be taken under article six (for levy of anti-dumping and countervailing duties).

Brazil is however reported to have pointed out that the provision in article VI dealt with restrictions against "unfair trade practices", and the only provision for emergency protective actions or safeguards against "fair trade imports" lay in article XIX, and the MFN principle was basic and automatic.

The EEC view that the third world countries were laying down "preconditions" for negotiations, and that this would prejudice the position of others, is reported to have brought a sharp response from Brazilís Batista that to some even affirmation of GATT and its provisions was becoming a "precondition".

The representative of Hong Kong would appear to have rejected the EEC suggestion that the MFN was not basic to GATT, and that it was only one of the principles.

The Hong Kong delegate is reported to have underlined that the MFN and non-discrimination provisions (in article one of the GATT) was so fundamental that when a textiles agreement involving discrimination had to be negotiated, it had to be outside of GATT and in derogation of GATT.

"We want to quarantine and kill the discrimination principles in it (the MFA), and cannot allow it to be brought into GATT. There is no way we can allow it to be done".

The question of differential and more favourable treatment to third world countries in the negotiation was also reported to have evoked some sharp exchanges between third world countries and the U.S.

A third world paper calling for strict adherence to these principles in the new round negotiations, and for quantification of these principles, to the extent possible, during the negotiations itself, was presented by India, on behalf of the informal third world group in GATT.

The U.S., EEC, Japan and several of the industrial countries saw no need for reaffirmation of the principles in the Ministerial declaration launching the new round.

The EEC is reported to have suggested that no one had questioned these principles, embodied in Part IV of GATT or in the 1979 framework agreement (incorporating into GATT the results of the Tokyo round negotiations). But in the EEC view the application of the principles should be on a "dynamic interpretation".

India and other third world countries are however reported to have pointed out that the experience of the third world countries in GATT and during the Tokyo round had been "totally negative" in the application of these principles.

Third world countries were hence not prepared to face the prospects of a new round without specific reaffirmation of the principles, and evolving agreed modalities for its actual application in the course of the negotiations in the new round.

A large body of "secondary literature" over the new round would make it appear that a prime agenda and target in the new round was the third world countries themselves.

There was talk of greater "integration" of the third world, and "graduation" of the third world countries.

The unilateral and autonomous actions taken by third world countries in recent years to liberalise their imports should not be belittled; India is reported to have argued.

Many of these countries, the Indian delegate is reported to have pointed out, had taken liberalising actions at considerable "cost" to their economies.

The U.S. is however reported to have scorned the talk of "costs" and said that being a Contracting Party to GATT carried obligations and this "cost" could not be used as an argument.

In further exchanges, India and other third world countries however reportedly pointed out that none of the major trading nations have been known to have taken any liberalisation measures "at cost to their own economies".

This was a reference to the EECís failure to liberalise agricultural imports and refusal ton liberalise on the ground of its impact on EEC farmers, and the U.S. stance and actions in the textiles and clothing, where it not only opposes liberalisation but wants more restrictions.

Unless the third world countries could be clear about the parameters of negotiations in the new round, and unless the industrial countries, and the major trading ones among them, restored confidence in the GATT system among the third world countries, there could be no meeting of minds over a new round, the Indian delegate is reported to have remarked.

The Preparatory Committee is to meet next on May 5, when it is expected to take up agriculture.

GATT sources said that efforts at drafting a declaration for adoption by Ministers, or even to agree on a structure, would apparently have to wait further informal consultations and efforts to solve the issues of standstill, rollback, safeguards and the treatment of third world countries in the new round.