Sep 13, 1986


GENEVA SEP. 11 (IFDA/CHAKRAVARTHI RAGHAVAN) -- Trade Ministers, Senior Officials and Diplomats from the four corners of the world began heading towards the Uruguayan Holiday Resort, Punta del Este, for next week's Ministerial Meeting of GATT Contracting Parties (CPS), AMIDST signs that next week's meeting could be the most fractious and contentious international economic gathering of recent years.

An whether the Punta del Este meeting would end in confrontation, and a weakening of GATT whatever the outcome of the confrontation, or a compromise and consensus could emerge might well depend on the United States, and a group of third world countries who have been mutually on a collision course over the last couple of years.

The European Community, perhaps because of its older colonial connections with the third world appears to have a better perception of some realities, and has been trying to promote a compromise and consensus, and prevent a confrontation.

But the EEC finds itself thwarted at the moment by what EEC sources, after the recent quadrilateral (US, ECC, Japan and Canada) at Cintra in Portugal have been describing as "the Rambo-Style US approach to multilateralism".

The US has been threatening that if it does not have all its way at Punta del Este, it will "walk out", and at least treat GATT and its GATT obligations with indifference, though other Washington Reports suggest this may be "posturing" and the US would yield to some extent.

The other protagonists, Brazil, India and others are also insisting that they will not accept "a forced consensus" but would object to one, involving services, investment, etc., being dealt with in GATT, not through an amendment of the articles, but through a collateral process of the trade round and ancillary codes.

The US claims it is quite willing to start a decision-making by majority vote in GATT, and feels it has a majority in its pocket.

The European Community on the other hand is worried about this aspect, and feels in the medium to long run, the resort to majority voting would boomerang on the industrial world.

There are some outside observers who believe that the efforts at compromise and consensus would perhaps emerge, but only after a confrontation and some bruises for both sides. But whether it would only bruise the antagonists, or also affect the GATT system which has already lost considerably its credibility, seems to be an open question.

The Ministerial Meeting of the GATT Contracting Parties (CPS), the first ever to be held in a third world country, has on its Agenda the launching of a new round of Multilateral Trade Negotiations (MTNS) in GATT, and agreeing on the objectives, subject matter and modalities of the new round, as well as on the participation in the new round.

GATT, founded in 1948 as a temporary arrangement till the Havana charter and its international trade organisation came into being, but has been subsisting till now as a provisional treaty, and is a "peculiar animal" in the postwar international system - "a contract" but not "an organisation" or "institution" or "forum" in the traditional sense.

There have been seven previous MTNS in GATT, but the proposed eighth round will be different, and could well determine the international economic and trade relations well into the next century, and the very nature of the North-South relations and the third world efforts at a more equitable and just international order.

Over the last decade or more, every international conference has convened AMIDST considerable differences, but despite dire predictions, the conference concerned has managed partly to resolve differences, and partly papered over them.

But seldom has a meeting, like next week's GATT meeting, convened in such an atmosphere of confrontation, where the preparatory process became so sterile that it was even unable to produce a single text, even with large parts of it in square brackets and alternate formulations, as is normal practice, to suggest differences of opinion to be resolved in final negotiations.

That this has been the fate of an organisation which for 38 years has been functioning on the basis of consensus is perhaps a commentary not only on the current state of international, and particularly north-south relations, and of the high stakes involved for all, but also of the international officials involved and their mediatory capacities.

On the face of it, the division is between a group of ten third world countries, who are supposedly following a hard line, and a larger group of all industrial and some 20 or 50 third world countries who have been more moderate and willing to compromise.

But beneath this appearance, are serious differences and divisions, within the industrial market economy countries, among the two groups of third world nations (functioning within GATT as an informal group), and within all of them.

And the three of four years of fractious debates, and public name-calling has resulted in a situation where there are very few "intermediaries" whose good faith is accepted without question.

This somewhat contentious and fractious international gathering is to be chaired by the Foreign Minister of Uruguay, Enrique Iglesias.

In the final stages of the preparatory process, uruguay has been in the group of third world and industrial nations involved in the consultations leading to the Swiss-Colombian text or draft for the consideration of Ministers.

However, Iglesias has been known in the third world as an associate of Raul Prebisch, and for his work as the Executive Secretary of the UN Economic Commission for Latin America and the Caribbean, before he took this job as Foreign Minister, when Uruguay moved towards democracy, and commands considerable respect, and thus could play a conciliatory role as he plans to do.

Formally, the Punta del Este meet has before it three alternative drafts for the consideration of the Ministers and decision, and in GATT parlance they are known by their official document numbers.

In chronological terms, there is the W/41.REV.2, put forward in the name of then third world countries - Argentina, Brazil, Cuba, Egypt, India, Nicaragua, Nigeria, Peru, Tanzania, and Yugoslavia.

There is the later draft, W/47.REV.2, tabled by Switzerland and Colombia, after "consultations" with a larger group of industrial, third world, and East European Socialists, and which its sponsors and supporters believe has large support and hence should be "the basis" for consideration of Ministers.

While the GATT Director-General, Arthur Dunkel, in his transmittal letter as Chairman of the PREPCOM has indirectly thrown his weight behind this view, Iglesias as a politician has carefully steered clear of this, and has taken the public view that the Punta del Este meeting has three documents, all of equal status, though some have more support than others.

Besides the 41/REV.1 and 47/REV.2, there is also the argentinean text, W/49, in the form of an amendment to an earlier version of 47/REV.2, which Argentina has said is aimed at being "a political bridge" between the two, and uses the same language as in 41/REV.1 in the area of "goods" (to amend the 47/REV.2), and provides for a separate process on services that could lead to negotiations.

In the consultations leading to the tabling of 47/REV.2, there was "a group of 20" third world nations, as they have become know, led by Colombia, and including some who in GATT are accepted a "developing" nations but not in other parts of the UN System.

These are the five Asian Countries (Indonesia, Malaysia, Philippines, Singapore and Thailand, Bangladesh, Chile, South Korea, Jamaica, Mexico, Pakistan, Rumania, Sri Lanka, Uruguay and Zaire (all in the Group of 77 in UN), Hong Kong (a British Crown Colony still), and Turkey (an OECD member) which actually makes 17.

Since the PREPCOM ended reportedly three Franco-phones, and Trinidad and Tobago from the Caribbean, are reported to have been attending the group's meetings.

Apart from these, Australia, Austria, Canada, Finland, Iceland, Norway, Sweden, the USA, the EEC and Japan (among the OECD members), and Hungary and Poland have been involved in the consultations leading to 47/REV.2.

The US, as well as some of the hard core countries behind 47/REV.2 have been describing it as a group of 48 countries, and a majority (of GATT's 92 CPS), and presenting the opponents as mainly India and Brazil, both of whom are being described as "isolated".

The effort at putting 47/REV.2 itself originated in the US effort, acting behind Switzerland, to isolate India and Brazil, and force them to back down, apparently still the US strategy for Punta del Este.

But when the PREPCOM ended, the isolation effort did not appear to have succeeded.

The records of PREPCOM show that besides Switzerland and Colombia, the 47/REV.2 document got support of eight others who offered to cosponsor ti, and 22 others supported the view (with varying nuances) that it should be "the basis" for the Ministers at Punta del Este.

At the final stages of the PREPCOM, the 12 members EEC, which had been involved in preparing 47/REV.2 and is still involved in that group's meetings, however did not throw its full weight behind it, and chose to keep its options open.

This is partly due to differences over the "agriculture" issue, but also partly because the EEC is unwilling to "confront", and wants a new round to be launched "taking everyone on board" (and by that it clearly says it means countries like India, Brazil, etc, whose large domestic markets are of importance for EEC), and hence find compromises that would meet views of everyone.

At the end of the PREPCOM, the ten sponsors of 41/REV.1 and 47/REV.2 have been painted as one relating to the inclusion of new themes (services, investment rights, and intellectual property rights) into GATT, in fact a careful reading of the documents and the views expressed in the PREPCOM records show that there are also serious unresolved differences over the traditional areas of trade in goods.

During his visit to Geneva late in August, Iglesias told newsmen that the differences also relate to standstill, rollback, safeguards, textiles and clothing sector, and a few other areas.

At least one of those associated with 47/REV.2 (Jamaica), at the meeting of third world countries, with Iglesias, is reported to have expressed strong disagreement, for example, with the agreed formulations on standstill and rollback in the 47/REV.2 paper.

Also, others within the group of 20, say that several of them have major problems over the new themes, and that the issue is not merely one of the principle whether it should be included, and with the US projection that all of the countries behind 47/REV.2 support the US on the services and investment issues are wrong.

These sources say that even within the Asian countries, for example, Malaysia has very strong objections, but has so far not been strident.

But whether any of them would actually voice these at Punta del Este, or are going to be silent in the hope that the Indias and Brazils would fight it out remains to be seen.

Sensing all these currents and cross-currents, the EEC, and particularly after the end of the PREPCOM, began informal discussions with India and Brazil to find possible ways of compromises over the new themes, and persisted with it despite strenuous direct objections from the US to the EEC at Brussels.

Apparently, some kind of a compromise is seen by the EEC as feasible, involving the launching at Punta del Este of the new round of MTNS as a "single political undertaking", but whit two legally distinct and separate exercises.

The firs would be an MTN in the traditional GATT area of trade in goods to be launched and controlled by the GATT at their meeting.

The second, a parallel exercise of a process in services, leading to negotiations to create a multilateral framework, through and intergovernmental meeting (outside the GATT CPS meeting), and with the multilateral framework to be based on rules and principles different from that of the general agreement.

The EEC has already hinted at its willingness to accept such an approach, through what it called in the PREPCOM and in the exchange of information on services, as "not excluding the possibility of an Ad Hoc Meeting outside the GATT CPS Meeting".

Unlike the US, on the services itself, it has taken the position that national regulations in countries are motivated by a variety of domestic rather than "external" and "protective" reasons, and the "appropriateness of national regulation of service sectors would need to be respected as a legitimate constraint on multilateral action on trade in services".

The EEC has conceded in effect also the legitimacy of national regulations by countries for pursuit of their social, economic and political goals and objectives, and development plans and policies.

However, at the quadrilateral meeting, the US shot down the EEC approach, and reacted violently against a compromise, insisting that the issue, and the US demand for including them in GATT, should be pushed through via a vote.

The EEC reportedly said at the Cintra Meeting that while it could "live with" the formulations on services in 47/REV.2 it did not believe that India and Brazil, and some others would back down, but that they would object to a consensus, and that the EEC would not favour the US "Rambo-Style" tactics but would prefer compromises and consensus that would meet the essential interests of all.

The US so far is persisting in its approach of decision by vote at Punta del Este if necessary, but several of the third world nations behind the 47/REV.2 effort say that they would not like a vote, and would at least informally throw their influence behind moves for consensus.