Jul 19, 1986

EFFORTS CONTINUE FOR CONSENSUS IN PREPCOM.

GENEVA, JULY 18 (IFDA/CHAKRAVARTHI RAGHAVAN) - The work of the GATT Preparatory Committee (PREPCOM) for a new trade round is moving into the stage of informal drafting sessions among small groups to prepare an agreed or consensus draft recommendation for the September 15 Ministerial Meeting, GATT sources reported Friday.

The sources said that the PREPCOM itself would not meet formally until the very final moment to adopt its recommendations to the Ministerial Meeting, but informal work in small groups would continue over the next several days.

At an informal meeting of the PREPCOM Thursday afternoon, Colombia and Switzerland jointly presented formal proposals for a draft Ministerial declaration.

The PREPCOM has already before it a formal paper presented by a group of ten third world nations, and an informal paper by a group of nine industrial nations.

In introducing their paper, both Colombia and Switzerland are reported to have said that they had drawn up the paper "following intensive consultations with a large number of delegations", and the document reflected a "dynamic process" which could be perfected in the consultations of the PREPCOM chairman.

The paper would appear to be the outcome of the consultations involving the group of 20 third world countries (led by Uruguay and Colombia) the group of nine industrial countries and the three major trading blocs, the U.S., EEC, and Japan.

According to third world sources, the remarks of Brazil and others in the group of ten third world countries, made clear that they had not been "consulted" in the drawing up of the document.

GATT sources, who would not be named, said that the Colombian-Swiss paper was "loosely based" on the informal paper of the nine industrial countries, though there were also areas of differences.

These sources said that a number of Contracting Parties (CPS) indicated that they had worked hard on the paper and could not "move significantly" from it, while a large number of other CPS found the document to be "an acceptable starting point" for the further stage of the work.

The sources said that is was however clear that further drafting work had to be done, with smaller groups getting together to look at the texts, with work continuing informally over the next week.

Other third world sources however said that only three of four countries expressed full support for the paper, while many others from the group of 20, while welcoming the paper and commending the effort, made clear that they viewed the paper as only the starting point to build a consensus in the PREPCOM.

Brazil and others in the group of ten reportedly welcomed the Colombian-Swiss proposal as another contribution to the work of the PREPCOM, but stressed that any effort to build a consensus within the PREPCOM could not be based on any "exclusive" document, but must take account of all the proposals.

A number of countries are reported to have suggested that a smaller negotiating group under the GATT Director-General and chairman of the PREPCOM, Arthur Dunkel, should begin the work of drafting.

The EEC is reported to have said that it could participate in a drafting work, but "no one can force us" to discuss any paper, presumably a reference to the proposals of the group of ten. In the EEC view, the ten should make "a gesture" and say something on the non-traditional items for negotiations.

Dunkel is reported to have stressed that the negotiations would be between the CPS and not with the chairman, but that he would try to ensure transparency in the work of the smaller group for the other CPS.

Canada however is reported to have expressed some reservations to the negotiating group idea for drafting.

Some third world sources viewed this as an attempt by Canada and other industrial countries to persuade the members of the group of 20 and others to join the Colombia-Swiss draft, and thus isolate the group of ten and their viewpoints within the PREPCOM, before moving into a final negotiating or drafting exercise.

However, a number of countries in the group of 20 said that they had not so far agreed to join the Colombian-Swiss proposal both because they were seeking instructions from capitals, and also because they want to await the outcome of the negotiations for MFA, due to begin its serious final phase next week.

The formal work of the PREPCOM will be suspended next week, as the final phase of negotiations over the future of the Multifibre Arrangement, and the drafting of an MFA-4, is taken up in the formal and informal meetings of the textiles committee.

The Colombian-Swiss joint draft contains a number of square brackets around the formulations, meaning that the sponsors themselves are unable to agree on the formulations.

Of the over 40 brackets in the text, about six are of a formal nature, relating to the nature of the Punta del Este meeting, whether it would be a GATT CPS meeting at Ministerial level or an ad hoc Ministerial meeting.

But the others are more substantial, some very fundamental, relation both to the traditional areas of GATT, namely trade in goods, as well as the new themes sought to be introduced.

In the traditional areas of trade in goods, the differences relate to the question of the nature of the standstill and rollback commitments, the question whether GATTís fundamental provision of unconditional MFN treatment would apply to a safeguards agreement, and the issues to be negotiated in agriculture and whether this would include a phasing out of agricultural export subsidies.

There are also differences in the approaches to the negotiations, whether the entire negotiations should be treated as "one undertaking", including both the negotiations on trade in goods and on new themes, and its outcome implemented as a package, or whether the negotiations should strive for early results in as many areas as possible.

Third world countries have been seeking priority for negotiations on a safeguards agreement, liberalisation of trade in tropical products, agriculture, dispute settlement and trade in natural resource products.

However, the industrial countries, and specially the EEC and the U.S.A. are not agreeable, since they hope to use these negotiations to pry concessions from the third world in services and other areas in return for liberalisation of trade o even reduction or elimination of illegal barriers.

On standstill and rollback, the differences relate to whether these should cover only measures illegal in GATT or also the so-called "grey area" measures, and whether sanction for protective measures should be on the basis of the general agreement alone, or more loosely worded to include "instruments negotiated within the framework of GATT or under its auspices".

But in any event, the Colombia-Swiss paper does not envisage a standstill and rollback commitments to be anything more than the unimplemented commitments of the 1982 GATT Ministerial meeting or the 1983 UNCTAD-V commitments.

The subjects set for negotiations include the safeguards issue, improving GATT disciplines on subsidies and countervailing measures, review of other GATT provisions and disciplines requested by GATT CPS, negotiations on services, intellectual property rights, investment measures, agriculture, GATT dispute settlement mechanisms, tariff and non-tariff negotiations, textiles and clothing, tropical products, natural resource products, and high technology products.

On services, the paper envisages negotiations to establish a multilateral framework of principles and rules for trade in services with a view to increasing transparency and liberalising this trade, as also elaborating possible disciplines for various service sectors.

When the framework is established, it suggests, the GATT CPS should decide on its incorporation into the "GATT system".

On intellectual property rights, it suggests negotiations to promote "a more effective and generalised applications of existing international standards in intellectual property matters", and to ensure that measures and procedures to enforce such rights do not themselves become barriers to legitimate trade.

The negotiations would also aim to develop a multilateral framework of principles, rules and disciplines dealing with international trade in counterfeit goods.

On investments, the negotiations are to examine adequacy of existing GATT rules related to "trade restrictive and distortive effect" of investment measures and elaborate "further disciplines" to avoid adverse effects on trade.

In effect this would deal with the restrictions and conditions sought to be imposed by third world countries on foreign direct investment (FDI) in general, and activities of TNCS in particular.

On agriculture, the only agreed formulation is that negotiations should aim to achieve grater liberalisation of trade and bring all measures affecting import access and export competition under strengthened and more operationally effective GATT rules and disciplines.

This is to be achieved by improving market access through reduction of import barriers and improving the "competitive environment" by increasing discipline on use of all subsidies in agricultural trade.

Issues of disagreement in the agricultural sector, denoted in square brackets, include the idea of phasing out of export subsidies and examination of domestic agricultural policies causing structural surpluses and distorting international markets, implying thus an examination of the EECís common agricultural policy, as well as policies of countries like Switzerland and the U.S., which have "waivers" form GATT obligations in agriculture.

Apart from this, there appears to be disagreement even to the idea that the agreed recommendations of the GATT CPS in 1984 on agriculture should be the basis for negotiations.

The concept of increasing disciplines on agricultural subsidies, rather than ending them, favour the EEC view and to some extent that of the U.S. Third world temperate zone producers, and countries like Australia and New Zealand want the subsidies to be phased out, since they can never compete with the major trading blocs in subsidising their exports.

On textiles and clothing, an issue also in brackets, the negotiations are to aim at formulating modalities to permit eventual integration of trade in this sector into GATT.

In effect, even this disputed formulation would put the phase-out of the MFA regime into the far distant future.

On tropical products, the negotiations are to aim at fullest liberalisation of trade in these products.

However the idea of special attention and priority for these negotiations, and their implementation ahead of other results in the MTN is in brackets.

There are also difference in the formulation about participation in the new round Ė whether it should be only by GATT CPS, countries applying GATT de facto and those in the process of acceding to GATT, those whose status as a GATT CP is under consideration, and other third world countries wishing to participate in the negotiations.

The negotiations themselves, it is suggested, should be organised under a trade negotiations committee, working in three groups.

An issue of disagreement in this relates to the EEC idea that all the negotiations relating to agriculture should be cemented in one single negotiating group.