Sep 2, 1986


GENEVA AUG. 30 (IFDA/CHAKRAVARTH RAGHAVAN) -- The GATT exercise on exchange of information on services was brought to an end Friday, with major protagonists divided on fundamentals, but agreeing on the emergence of "a convergence of views", that could lead to some compromise on this issue at Punta del Este.

The exchange of information, mandated by the GATT contracting parties (CPS), has been conducted over the last 18 months or so in a separate exercise from the GATT preparatory processes for a new round of multilateral trade negotiations (MTNS).

The exercise, chaired by Felipe Jaramillo of Colombia, had been mandated to make recommendations to the CPS to enable them to decide on the appropriateness and desirability of multilateral action on services.

In summing up the work Friday evening, Jaramillo noted the group had been unable to agree on any recommendation. But some delegation saw "elements of convergence emerging between previously opposed views" that showed solutions were possible, while some other delegations remained sceptic.

In this situation, it was for the ministers to tackle the issue at Punta del Este and reach a solution "satisfactory to all contracting parties", taking account of the work done in the exchange and the records of the meetings.

Though, both at the Friday meeting and afterwards, major protagonists were highly reticent on possible compromises, this would appear to hinge on the possibilities of organising at Punta del Este an ad hoc ministerial meeting, outside the formal GATT meeting, and agreeing at such a meeting to set in motion a process leading to negotiations on a possible multilateral framework on services in general or in specific service sectors.

Apparently some of these ideas are very much in the stage of exploration in bilateral contacts, with the European Communities apparently playing a key role in an effort to promote a consensus and avoid any confrontation or even decisions by voting at Punta del Este.

In the statements yesterday, the key protagonists on either side of the controversy did not give any ground on their fundamental positions.

The US, EEC and other industrial countries continued to insist on the competence and jurisdiction of GATT in this area, the desirability and appropriateness of multilateral action, and including as part of a Punta del Este round of MTNS, negotiations to create a multilateral framework on services.

India, Brazil and several other third world countries for their part insisted on lack of GATT competence, and warned against any effort at Punta del Este to force a consensus.

The Indian delegate warned: "We would object to any attempt to force a consensus decision on this issue (service) at Punta del Este which does not take care of our fundamental concerns. Further we could not conceive of participation in any exercise that may be decided on such a basis".

The Brazilian delegate said: "An attempt to force a consensus decision to include services in the new round would constitute a serious threat to our fundamental interests as a contracting party to the GATT and could not but be met by a straight objection. We would moreover certainly refrain from participation in any such negotiations which might come to be decided by vote, if the rule of consensus does not prevail".

But within these parameters, the EEC, Switzerland, India, Brazil and others all reportedly spoke of some elements of convergence emerging, and the need to pursue them to seek a consensus.

And while some of these elements were spelt out by some of them, all appeared to be unanimous that it would be premature and even dangerous to try to set out and agree on the points of convergence at this stage, presumably pending further informal consultations.

The US however remained sceptic. It viewed some of these points as "interesting", but saw no need for complex procedures and programmes to deal with services at Punta del Este, since they were "heavy on procedure, light on substance and totally unwarranted".

As far as the US was concerned, the negotiations to be launched at Punta del Este should be one undertaking, "both politically and legally", and to enable US participation must include services as one of the subjects for Negotiations.

Friday's formal final meeting of the Jaramillo group is reported to have been preceded by an informal exchange of views on Wednesday, when the EEC is reported to have distanced itself somewhat from the US in opposing any effort "to isolate" one or more of the CPS, or taking decisions in GATT except by consensus.

The EEC, which would appear to have set the ball rolling in Friday's meeting, is reported to have suggested that there had been too much emphasis within the group on differences, and too little on the points of convergence.

Among the points of convergence of views cited by the EEC were:

* Many obstacles to trade in services lay in national regulations conceived for domestic rather than external reasons, and the appropriateness of such regulations as a legitimate constraint on international action on services had to be recognised.

* There should be a balance between benefits of liberalization of trade in services and national regulations for promotion of economic and political goals, such as development.

* While trade in services had some elements common with trade in goods, it had also its own specificity, and any agreement on services would need a structure different from that of the general agreement.

The community spokesman would appear to have repeated Friday, his statement in the preparatory committee on July 31, namely, that the community would be willing to consider the possibility of an dad hoc ministerial meeting at Punta del Este, outside the GATT CPS meeting, if that would help promote compromise solutions over services or other new themes.

India agreed with the EEC that despite the divergences, the exchange process had also brought out some shared common concerns: the role of services in the development process, recognition of role of national regulation of service sectors, and role of TNCS.

India would also agree with the EEC that should multilateral action in services be found to be desirable and feasible, it would have to take account of importance of services in promoting national economic and political goals like development, recognise the specificity of services and individual sectors, and that given the differences between goods and services, "any multilateral action to deal with trade in services would have to be structurally different from the GATT".

If India's basic concerns and preoccupations were met, India would be willing to explore further possibilities of multilateral action, provided "the appropriate institutional arrangements independent of the GATT framework for initiation and conduct of such process" could be agreed upon.

Brazil reportedly supported the view that domestic regulations in services, for the promotion of economic and political goals dan reflecting the constitutional structure of government and the social and economic system of a country, could not be considered an obstacle to trade and subordinated to the concept of liberalization.

"Any attempt to regulate trade in services would have to start from that basis, and the legitimacy of national regulations".

Any assumption that a trade round in GATT or in a GATT framework could include matters outside GATT jurisdiction assumption would be an attempt to change GATT rules without observing the amendment procedures.

"It would be a challenge to the integrity and unity of our basic contract, and furthermore create opportunities for unacceptable trade-offs between the goods and services sectors", and would meet with Brazilian objections.

The Brazilian delegate however agreed with the EEC on the emergence of some convergence, and said Brazil would be willing to participate in exploring them further "if an appropriate institutional framework of a distinct legal nature can be found for the exercise".

Brazil had taken note of the EEC statement that it would not exclude the possibility of dealing with this issue at Punta del Este through "an Intergovernmental Ministerial Meeting".

Brazil would be prepared to consider with favour such a possibility as a means of examining the conditions and purposes of multilateral action on trade in services.

Canada is reported to have said that the Ministers should agree to multilateral action at Punta del Este and launch negotiations in services, making it an integral part of the multilateral trade negotiations (MTNS).

Peru reiterated its opposition to any tie-up or trade-off between trade in goods and trade in services. But in an effort to promote a consensus and launch the new round of MTNS, Peru would be willing for an ad hoc Ministerial Meeting at Punta del Este to deal with the services issue, and the launching of a process of multilateral action in this area.

Citing the nonaligned declaration in New Delhi opposing GATT role in services, Zimbabwe said that nevertheless to facilitate the launching of a new round, "we are prepared to continue the present dialogue in a framework which is parallel but legally separate from GATT. This is the price we are prepared to pay, if industrial countries are prepared to make credible commitments on standstill and rollback in the area of trade in goods".

But any discussion on services should be enriched by the issue of development and should avoid reproduction of the assymetric trade relations and inequities now prevailing. Also, any decision on services should be on the basis of consensus and with full respect to national sovereignty and make a positive contribution to the establishment of the NIEO.

Switzerland too saw flexibility in the positions of delegations, and saw some points of convergence on which decisions could be taken at Punta del Este.

The convergence included the need for preparing rules in the area of services before any exchange of concessions. Also, any concessions in the area of services should not involve counter-concessions in the area of goods. The economic situation of third world countries, the aims and objectives of national laws, and work of other international bodies would have to be fully taken into account.

Egypt said that in view of the high priority attached by some industrial countries to the services issue, Egypt was willing to consider the initiation of a process for examination of possibilities of multilateral action in services, in a general and sector-specific manner, "provided it is in a format legally separate and independent of the GATT framework, and there is full dichotomy between trade in goods and trade in services".

Argentina supported the view that any action on services should be external to GATT. It recognised that services accounted for an increasing share of world trade. But services also had serious implications for the economic development of the third world countries.

While agreeing on some of the emerging points of convergence, Argentina underlined that any action in services should be in the interests of all CPS and their capacity to participate in international trade, without the distortions and imbalances now characterising it.

Any multilateral action should also be based on universality, and must provide for special and favourable treatment to the third world.

Also, incorporation of any rules on services into the general agreement would require amendment of the GATT, and this must conform to the procedures for amendment.

Tanzania was willing to respond positively to the idea of an Ad Hoc Meeting, outside GATT framework, to give an early start to a process on trade in services. But any multilateral action should first identify and define the services now dealt with in other international organisations. In respect of other clearly defined service sectors, any regulatory framework should take full account of the ground already covered and the socio-economic and political realities and aspirations of the third world countries.

In Nigeria's view GATT as presently crafted could not deal with services, and it was premature to contemplate multilateral actions.

But Nigeria also recognised the emergence of some convergent views, including the legitimate role of national regulations, the role of TNCS in this area, and the inextricable link between some service issues and the priority in third world countries, in their trade and development policies, to socio-economic goals. Questions of national security were also involved.

Bearing these in mind, Nigeria was however prepared to join in an exercise on services "provided it is in a legal separate framework, totally separate and independent of GATT".

Yugoslavia agreed with the EEC, India and Brazil that there were points of convergence which could enable a compromise consensus decision at Punta del Este.

However, any attempt to bypass GATT rules for amendment was bound to meet with objections of the CPS.

But in order to facilitate the launching of a new round, and taking account of the high priority attached to the services issue by some industrial countries, Yugoslavia would be prepared to initiate a process for examination of multilateral action in services, provided it could be initiated and conducted in a format that could be agreed upon.