US ACCUSED OF 'BAD FAITH' AND 'BETRAYAL OF TRUST'

7:18 AM Feb 17, 1994

US ACCUSED OF 'BAD FAITH' AND 'BETRAYAL OF TRUST'
Geneva 16 Feb (Chakravarthi Raghavan) -- Japan charged the United States Wednesday of 'bad faith' in the market access negotiations and 'betrayal of trust' in revising its Uruguay Round tariff offers and taking back what it had agreed to in the tariff negotiations in December.

In making this charge at a news briefing, Japan's chief Uruguay Round trade negotiator, Amb. Nobutoshi Akao, said that if the US persisted in its course, Japan too would have to withdraw some of its own offers, but do so in picking products where the US is the principal or sole supplier so that other 'innocent' third parties are not affected.

"We don't want to break any rules and would like to abide by the decision that the negotiations were concluded on 15 December, that all tariff offers on the table were final and could not be modified or withdrawn, but that parties could always improve on the offers," Akao said. "But only one country cannot be allowed to do it," he added in a reference to the constant US changes and attempts to extract more concessions from others, not on a reciprocal basis by offering its own concessions, but taking back its original offers and making their restoration conditional on more concessions."

In Washington, the US Trade Representative Mickey Kantor was quoted in the Wall Street Journal as denying that the US had 'withdrawn anything' and that it was engaged in "quiet discussions" on the tariff cut issues but had withdrawn no offers.

GATT sources said this would be 'technically correct' since the US had no offers on the table on 15 December deadline when the negotiations were ended at the TNC.

Other Uruguay Round participants said that the US has been engaged in some very sharp practices, bordering on lack of good faith negotiations, taking advantage of the anxiety of everyone to conclude the Uruguay Round negotiations and complete the efforts through a successful 'Marrakesh Ministerial meeting', in the entire matter of its schedules.

The US tactics and conduct, one participant said, has been facilitated by the way the negotiations were kept hanging until the very last, and parties had to be put in their "offers" -- of market access in goods and commitments in agriculture and of initial commitments in services, with the further stipulation that the "final offers" of 14 December on the table could not be taken back or reduced, but that they could be improved in the schedules to be filed by 15 February and the further process of verification till end March.

The United States put in its 'schedules of initial commitments' in services only at 4 am of 15 December, its earlier schedules of 'offers' circulated to the participants being of 7 December. It had no real schedule of 'offers' at individual tariff line (the US has 8995 tariff lines at 8 digit level under the Harmonized System) as required under the agreed procedures for the conclusion of the Round on 15 December. According to several participants even by 20 December, they did not get the US 'offer' list, but only some kind of an indicative or outline.

Even early in January, the US was telling some newsmen that it was merely due to the very large number of tariff line schedules and a schedule was being sent in to the GATT.

According to Akao, such a US 'final offer' or schedule was put in only on January 14.

The US services schedule, as that of others, are being scrutinised currently under a process of verification chaired by a GATT official. During that scrutiny, participants are discovering several variations and modifications by the US.

Through its schedule, for example, the US has sought through a footnote to add on its own interpretation of 'national treatment' for financial services, applicable to itself as well as to other participants, and which is at variance with the provisions of the General Agreement on Trade in Services which stipulates the 'national treatment' and its meaning.

During the GATS negotiations, and plurilateral discussions of schedules, it had been repeatedly brought up and the US had been told that it could not through it schedules, provide its own interpretation of the provisions of the GATS, without attracting similar actions by others.

"By sending its services schedules to the GATT secretariat only at 4 am on 15 December, and thus effectively preventing others from looking at it, the US succeeded in freezing offers of others on the table earlier, while it quietly modified its own to improve its negotiating position," a participant said.

But with scrutiny/verification process being dealt with at junior levels, and many Third World negotiators not always present, and everyone anxious not to jeopardise the final conclusion and signing of the package at Marrakesh, the US appears to be getting away with its sharp tactics.

In another case apparently again involving the US, India objected Wednesday to the US having attached to its schedule of initial commitments, in relation to movement of natural persons for delivery of a service (the fourth mode of delivery of service contemplated in GATS), in respect of movement of personnel in 'speciality occupations'.

In the bilateral negotiations, the US agreed to provide a bound commitment to allow up to 65000 personnel annually, with some conditions to ensure that the wages and emoluments and conditions of work for such personnel would not adversely affect American workers in similar occupations.

In filing its schedule, it added on a new condition that the 'employer has taken steps to recruit and train sufficient US workers in the speciality occupation' -- terms vague enough to enable the US immigration to deny entry and work permits, and thus effectively nullifying its 'commitments'.

But unless any country is willing to risk the final outcome at Marrakesh, the way the negotiations were ended on 15 December - with so many things left vague, but done in good faith -- the US could get away with its sharp tactics, one participant said.

Akao at his briefing was visibly angry over western media reports, sourced to the US, which he termed "unfair", about the outcome of the meetings at senior official level on Sunday and Monday of the Quad countries (US, Japan, Canada and the EC). He specifically referred to a report in the International Herald Tribune, quoting US officials, as saying that Japan had not made its "offers".

Akao said that on 15 December, the Quad countries had exchanged their final offers and everyone thought that what was on the table from the US side was also its final offer. The EC and Canada which in earlier offers had put several conditions had withdrawn the conditions and put clean offers on the table. Japan had attached no conditions to its offers and the final offers were put in on 15 December.

"As far as we were concerned, the negotiations were over and everything was final. This was also the understanding of the European Community and Japan."

The United States, he noted, submitted its schedule of offers to the GATT only on 14 January and this list showed that the US had gone back on its offers. They made their December offers on non-ferrous metals, electronic products and some others conditional upon trading partners doing more.

"We told them that what was on the table on 14 December was final and you cannot go back," Akao said. But the US demanded new major concessions from Japan on wood products, copper, white spirits, leather footwear and some chemicals (bromides). But the US was not willing to make any reciprocal concessions for these. Japan for example had sought 25 percent cut on duties on all trucks.

In two rounds of Quad meetings (in January and again 13-14 February), Akao said, the US was told that their requests on these five product areas amounted to reopening the negotiations and if the US was serious it should come back with some offers of concessions of its own. But the US was not ready to offer anything more and said that if Japan did not yield, the US would withdraw its December offers of tariff cuts on consumer electronics.

In the Quad negotiations since the Tokyo July summit, the EC had not been willing to offer any concessions on consumer electronics, but had agreed to make cuts only on industrials. But the US offers on the table had included consumer electronics (including telephone equipment, and television and video cameras) and these had been withdrawn now, and this would affect not only Japan but some of the Asean countries too. Japan would be carefully looking at the situation, and reviewing the lists supplied to it only on Wednesday, and would withdraw some concessions of its own, "but taking care we do not injure some innocent third parties and withdrawing concessions only in areas where the US is the principal supplier", Akao said.

Akao also said that if the US took trade restrictive actions over their bilateral disputes, Japan would come to the GATT for settlement of the dispute, indicating that Japan which in the past had been loath to take such a course would be changing its policy now.

Akao expressed satisfaction however that the problem over non-ferrous metals had been more or less resolved -- after Canada and Australia, besides Japan, had pressed the US over its attempts to go back on the tariff cuts in non-ferrous metals.

As for wood products, where the US is accusing Japan of not agreeing to zero tariffs, Akao explained that this was a politically sensitive issue in Japan. Both Canada and the United States maintained restrictions on export of logs, and the restrictions were so stipulated as only to hit Japan. There could be no zero-tariff cuts in wood products when export bans on logs were maintained, Akao said.

The Quad countries at their latest meeting had agreed to exchange their schedules for mutual scrutiny and file their schedules with the GATT, as required, together. This would mean a delay beyond the 15 February deadline, which had already been missed.

"We are looking at the schedules that have been provided to us only yesterday and scrutinising them. The US has withdrawn or modified its offers, taking back what was on the table, in products where Japan was the principal supplier. If it is serious, we will have counter measures and single out products where the US is the principal or sole supplier to take back concessions of our own."