THE PROMISES OF THE NEW MTNS IN GOODS.

Sep 24, 1986

THE PROMISES OF THE NEW MTNS IN GOODS.

PUNTA DEL ESTE, SEP. 22 (IFDA/CHAKRAVARTHI RAGHAVAN) -- At the Punta del Este meeting here third world countries have played an active role, unlike in the past in GATT when they were mere spectators, the conference Chairman, Foreign Minister Enrique Iglesias told a news conference at the end of the meetings here last week.

But whether their active role will really enable them to get concrete results, or whether they would once again (as in previous rounds) find that the major actors would in fact decide on issues of concern to them, and sweep other issues on to a new work programme, only the next four years would tell.

The new round on trade in goods covers a wide area of traditional GATT activities, and the negotiating agenda is quite ambitious for the four year time span.

Apart from the Agenda on the new round, the decision of the GATT CPS on the new MTNS in goods, calls for a standstill and rollback commitment from all the participants in the new round, and for a multilateral surveillance mechanism to oversee its implementation.

The commitments on standstill and rollback, are perhaps not too different from those given in 1982, at the GATT Ministerial meeting, and repeated thereafter at the OECD, UNCTAD-VI and other Fora.

A GATT Secretariat note to the PREPCOM had said that despite the commitments, the protectionist measures had in fact proliferated, with over 200 measures identifies by GATT Secretariat as "grey area" measures of protection.

Whether the surveillance mechanism now to be put in place, the only new measure in the area of standstill and rollback, would be sufficient to ensure better implementation during the trade round remains to be seen.

The commitment for standstill and rollback, adopted in the decision to launch the MTNS in goods, are based on the formulations in the Swiss-Colombian draft. It is much weaker than the language used in the draft of the group of ten - apart from the form itself, where the group of ten had sought a higher level of commitment through a GATT protocol.

The standstill commitment would cover any trade restrictive or distorting measures inconsistent with the provisions of GATT, or instruments negotiated within the framework of GATT or under its auspices. many of the "grey area" measures, which are perhaps not illegal but are not based on any GATT provision either, would not be covered by the commitment.

The standstill would also require all participants not to take any trade restrictive or distorting measure, in the legitimate exercise of its GATT rights, beyond those necessary to remedy specific situations, nor take any trade measures in such a manner as to improve its negotiating position in the MTNS.

Under the rollback, all trade restrictions or distorting measures, inconsistent with GATT or instruments negotiated within GATT or under its aegis, should be phased out or brought into conformity.

This is to be done within an agreed time-frame, but not later than by the date of the formal completion of the negotiations, but without seeking any GATT concessions for their elimination.

Third world countries privately agreed that they had allowed the controversies over the new themes to overshadow some of these issues. The Swiss-Colombian draft, which the group of 20 third world nations had supported as "the basis" for GATT CPS at Punta del Este, was a weak formulation to star with several of these countries had called for strengthening of these provisions, when Iglesias had held a heads of delegations committee meeting to consider these outstanding issues. The group of ten countries had also tabled specific amendments in this area.

But in the final negotiations on Thursday night and Friday night, when the issues relating to the new themes were settled, the U.S. and other industrial nations did not agree to any amendments in these areas to the Colombian-Swiss draft, with the result that the weak formulations have remained.

The negotiating agenda includes a long-pending issue in GATT, namely the conclusion of a comprehensive agreement on safeguards, or the permissible protective actions in certain contingencies spelt out in article XIX of the general agreement.

This issue figured in the Tokyo round agenda, but negotiations then led to nothing. The EEC had insisted at that time that the safeguards agreement should permit "selective" safeguards, or protective action against imports from some sources and nota all. The intention was to get GATT legitimacy for discriminatory actions against third world countries and goods from them that compete with the products of industrial world in areas where comparative advantage has passed to the third world.

After the end of the Tokyo round in 1979, there have been repeated efforts to reach an agreement, but time and time again they have run into the same problem.

The decision on the new MTNS calls for a safeguards agreement based on "the basic principles of GATT", without any specific reference to article one of the general agreement, which calls for most-favoured-nation treatment.

With the EEC contending that non-MFN principles could be applied for safeguards, as it has been in some articles as an exception to the MFN clause, the failure to mention the MFN clause could well result in a similar exercise in the Uruguay round also.

Another area or subject for negotiations is in tropical products, where the decision calls for "fullest liberalisation of trade in tropical products, including in their processed and semi-processed forms", and covering both tariff and all non-tariff measures affecting trade in these products.

This issue too has been long pending in the GATT - almost from the end of the 50's, and despite the promises of the Tokyo round never got addressed.

The decision launching the MTNS in goods, refers to the importance of this trade to a large number of third world nations and agrees that il should receive special attention, including the timing of the negotiations and the implementation of the results.

The negotiations are also to cover natural-resource base products, both in their processed and semi-processed forms, and are to aim at reduction or elimination of tariff and non-tariff measures, including tariff escalation.

The attempt of the African countries to get some special attention to the commodity trade problems failed, and they have to content themselves with the statement from the chair that this issue would need to be addressed.

On textiles and clothing, the negotiations are to aim at formulating modalities that would permit the eventual integration of the trade in this sector into GATT. It is now governed by the multi-fibre arrangement which is a derogation from GATT rules.

Despite the formulation - without any mention of a phase-out that even the very restrictive MFA-4 just concluded calls for - there is considerable doubt whether the U.S. textile lobby and interests will allow the administration to negotiate this.

Agriculture, another controversial area, is also to be addressed in the new round. But the fudged language to enable compromises to be reached between the EEC on the one side and the Cairnes Group on the other is such that there is no clear-cut mandate to negotiate and end to the export subsidies.

The language adopted in the formulation, at EEC insistence, has nothing about "phased reduction and elimination of export subsidies" it merely calls for "phased reduction of their negative effects and dealing with their causes".

The formulation, as the EEC interpreted it immediately, would mean that not only would EEC policies be subject of scrutiny and negotiations but also policies of other countries, including that of the U.S. and others maintained under some waiver or other from GATT obligations.

The negotiating agenda also calls for a review of GATT articles, the issue of MTN agreements and codes, the problem of a strengthened and more effective dispute settlement mechanism, and other issues.