Feb 1, 1990

BRAZIL CALLS FOR COMPENSATION OVER RBPS.

GENEVA, JANUARY 30 (BY CHAKRAVARTHI RAGHAVAN) Ė Brazil suggested Tuesday that the Uruguay Round negotiating group on Trade-related Investment Measures should address itself to the adverse trade effects on Third World countries of the restrictive business practices of private operators and providing appropriate compensation for such effects.

The Brazilian view was put forward in an intervention by the Brazilian delegate who reportedly outlined some of the thinking of his country and indicated Brazil might put forward a proposal on these lines for the next meeting.

In the Brazilian view, the identification of direct and significant adverse effects caused by investment measures is a key element of the groupís mandate and must precede any attempt to discuss, as appropriate, new multilateral provisions.

The discussions could not cover "possible, potential, indirect or secondary" trade effects, but "direct" and "significant" effects. Discussion of investment measures themselves was neither a step nor a goal of the groupís discussions. The group had not been called upon by the mandate to elaborate a set of disciplines Ė prohibition, elimination, reduction, etc. Ė concerning investment measures.

The type of significant and direct adverse trade effects to be discussed are those causing nullification or impairment of any benefit accruing to a CP directly or indirectly under the General Agreement. For such adverse effects, in the Brazilian view, GATT already provided adequate means of control.

A number of participants in the group, Brazil complained, had addressed investment measures per se. But the provisions of GATT as well as the agreement of Ministers at Punta del Este, clearly recognised the sovereign right of countries to maintain investment measures as a legitimate instrument for promoting development. It would hence be illogical to consider their abolition or reduction.

But a type of adverse trade effect not yet covered by GATT relates to investment measures taken by private operators. To the extent that they directly and significantly affected international trade, they should automatically be included in the Groupís agenda.

As long ago as November 1960, the Contracting parties had recognised that "business practices" which restricted competition in international trade might hamper the expansion of world trade and the economic development in individual countries, thereby frustrating the benefits of tariffs reduction and removal of quantitative restrictions or otherwise interfere with the objectives of the General Agreement.

Since then the issue had been thoroughly discussed among CPs and the negotiating group could make a positive contribution by addressing the issue of adverse trade effects of restrictive business practices in the area of TRIMs, Brazil said.

Towards this end, the group should identify the adverse trade effects of measures adopted by private operators, discuss existing mechanisms to deal with such adverse trade effects, and consider possible new mechanisms designed to eliminate, reduce or inhibit such adverse trade effects.

"Development aspects", Brazil insisted, should also permeate every discussion in the Group. In practical terms, the discussion of direct and significant adverse trade effects must include the notion of "development priorities". This meant right of Third World countries to take measures in line with their development projects and consistent with the provisions of GATT.

When any CP claimed nullification or impairment of benefits caused by such measures, it would be necessary first to assess the development implications of the measures before considering recourse to the dispute settlement mechanisms of GATT.

Third World countries should receive appropriate compensation for the adverse trade effects caused by the restrictive measures of private operators. The adverse trade effects of both governmental measures of ICs as well as measures of private companies aimed at limiting access to modern technology of Third World countries should receive adequate treatment in the groupís discussions, Brazil added.