Feb 10, 1989

U.S. UNILATERALISM ASSAILED IN GATT.

GENEVA, FEBRUARY 8 (IFDA/CHAKRAVARTHI RAGHAVAN)ó The U.S. recourse to unilateralism in trade matters, and particularly its recourse to section 301 of its trade and tariff act against imports from trading "partners over their refusal to yield to U.S. demands, came in for sharp criticism at the GATT Council meeting Wednesday.

GATT Director-General Arthur Dunkel, in a statement made to the available to the press and which the GATT spokesman characterised as made in his capacity as "custodian of the general agreement", said that the actions, in shape of discriminatory trade restrictions, taken under section 301 were contrary to the general agreement

"The rather severe debate on unilateralism", as the GATT spokesman described it, occupied the Council's time for the whole of Wednesday morning, and took place ahead of the council's adoption of its agenda and regular business.

Three of the agenda items relate to unilateral U.S. actions: a panel ruling against the U.S. over its recourse to section 337 of its tariff act in a dispute over patent rights, U.S. import restrictions in the shape of 100 percent tariffs against certain products from Brazil over drug patent disputes, and U.S. duties against certain EEC products over the dispute over hormone treated meat.

The last two actions, taken by the U.S. under section 301 of its trade and tariff act, are on the agenda for reference of the disputes to GATT panels for adjudication. The U.S. had blocked actions on these at past meetings.

The EEC Council of Ministers, which have already announced of its own counter-measures against the U.S. over hormone dispute, had "suspended" its implementation, asking the community representative to seek GATT "condemnation" of the U.S. actions. EEC spokesman, Amb. Tran Van-Thinh had raised the issue in this light.

Every speaker in the debate condemned unilateralism, a few generally and blaming everyone, and most others specifically with reference to the U.S. recourse to section 301. A few like Australia and New Zealand however also blamed the EEC and its own agricultural policies.

The council itself took no action. Whether the outcome would be "satisfactory" enough for the EEC not to implement its own counter-measures, to which the U.S. has vowed to further retaliate, remains to be seen.

But the debate apparently had no effect on the U.S. it blocked later in the afternoon adoption of the panel ruling against it and blocked the reference to a panel of the Brazilian complaint.

But GATT Director-General Arthur Dunkel, in an unusual intervention in the debate on unilateralism, expressed the authoritative GATT view and said:

"Discriminatory import tariffs are contrary to article one of the general agreement".

"There is no exception in the general agreement which could justify discriminatory import tariffs imposed for the particular purpose of inducing another contracting party to bring its trade policies into conformity with the general agreement".

"Where it is found that a Contracting Party is maintaining measures contrary to the general agreement, the Contracting Parties (acting jointly) could be requested to authorise the suspension of obligations towards another contracting party in accordance with article XXIII: 2."

Earlier, Dunkel had quoted Clair Wilcox, a U.S. draftsman of the Havana Charter, as stating about the provision in the Havana Charter corresponding to article XXIII: 2, that it was introducing a new principle in international economic relations, under which nations were being asked to confer upon an international organisation "the right to limit their power to retaliate".

Wilcox was quoted as having added: "by subjecting it to the restraints of international control, we have endeavoured to check its spread and growth, to convert it from a weapon of economic warfare to an instrument of international order."

In initiating the debate Wednesday morning, Amb. Tran underscored that he was doing so with reference to several points on the agenda, one of which was the U.S.-EEC dispute over hormone treated meat.

Tran said the multilateral trading system was in danger and GATT CPS had to be collectively aware of the fact.

At the centre of the problem for the community were its disputes with the U.S. and in particular the section 301 of the U.S. trade and tariff act, which gave the administration the possibility of taking unilateral actions. The U.S. had used that power without the authority of the GATT Contracting Parties.

However powerful it may be, no Contracting Party had the power to impose unilateral measures without authority of the CPS.

The U.S. was required to notify the GATT before taking any action. Whatever the reasons why the U.S. had not done so, its actions were not authorised.

The Community was entitled now to impose its own counter-measures. But the Community would request the U.S. to withdraw its measures.

U.S. delegate Michael Samuels argued that everyone was guilty of unilateralism, and the entire multilateral trading system was facing a big crisis. This was what had impelled the U.S. to initiate the launching of the Uruguay round.

The hormone dispute was "a very small crisis", involving a small amount of trade.

But there were a number of areas where the Community's actions could be challenged on a similar basis, and cited in this connection EEC changes in rules of origin relating to micro-chip imports.

(The EEC has announced that for microchips to classify as "EC products", and thus escape dumping duties, the products should have undergone in the EEC the complex diffusion process for conversion of silicon wafers into functioning electronic components.)

Unilateral actions, he argued, did not take place in vacuum, and hence its efforts over a long time to reform and change the system through the Uruguay round.

Japanís Amb. Yoshio Hatano expressed his country's concern over proliferation of unilateral actions without authorisation by GATT CPS. Non-discrimination was the corner stone of the GATT and unilateral actions weakened the GATT system.

The U.S., he said, should show restraint in using section 301.

Brazilís Amb. Ruben Ricupero said the U.S. should withdraw and review all its unilateral actions under section 301.

The general agreement had been accepted by everyone, and without it the trading system would revert to "the natural state where the strong always prevailed over the weak".

Brazil was glad that one important trading partner, the EEC, had joined Brazil in raising its cry of alarm over unilateralism and U.S. recourse to section 301.

Underscoring the proliferation of such measures, ricupero noted that since the launching of the Uruguay round, on 18 occasions the U.S. had taken action under section 301. In most of them it was an exercise of pressure, like trade harassment, to force its trading partners to comply with U.S. demands.

The U.S. was trying to justify its actions by arguing that it was resorting to unilateralism to promote multilateralism and against "unfair practices" of others.

This was a strange way in which the party who made the charge was also the judge in its own cause.

In GATT everyone had equal rights. If the U.S. law were to determine what was "unfair" or "unjust" practice by others, it would mean that as between various national laws the U.S. national law would be imposed on everyone, and U.S. law "was more equal than that of others".

Argentinaís Amb. Tarramanti spoke of the difficulties in the Uruguay round because of unilateralism.

Indiaís Anwar Hoda expressed his country's deep concern at the threat of unilateralism to the multilateral trading system. While India did not agree with some recent comments about "GATT being dead", the major trading partners had the capacity to inflict a mortal blow. Recourse to section 301 was one such weapon.

Any actions in GATT required prior authorisation. Hence all section 301 measures should be withdrawn, Hoda added.

Others, who spoke critical of the unilateral actions, with some specifically referring to the U.S., included Canada, Chile, Pakistan, Peru, Nicaragua, Switzerland and Finland.

Australiaís Alan Oxley, in criticising unilateralism, sought to blame both the EEC and the U.S., and questioned the Community's motivation in raising this.

Oxley also referred to other unilateral actions, such voluntary export restraints imposed by the strong trading partners on the weak. In the agricultural field, both the U.S. and EEC had demonstrated, "roughly comparable levels of ingenuity" in unilateralism.

In the hormone dispute, both sides seemed to be guilty. The EEC was refusing to test its actions in the Committee on Technical Standards, while the U.S. was refusing to test it in terms of the GATT right to take actions to protect human health.

The Uruguay round, Oxley said, was now on the rocks over agriculture. And yet the U.S. and EEC were squabbling over a small trade item that had been on their agenda for over 18 months and which they had been unable to settle.

The Uruguay round and the multilateral trading system were at risk, mainly because the U.S. and EEC were incapable of agreeing to address systematically the most persistent cause of trade disputes between them in agriculture.

If the council were to express a view it should be that both the U.S. and EEC should assume their responsibilities and devote their time and effort to putting agricultural trade reform on the road.

New Zealandís Amb. Fortune agreed that the U.S. had been in the wrong in taking unilateral actions, but the EEC too should put its own house in order.

Responding to the U.S. view that the EEC should withdraw its hormone restrictions and in turn the U.S. would withdraw its own unilateral actions, the Community spokesman said this would create a dangerous precedent.