8:53 AM Feb 18, 1994


Geneva 17 Feb (Chakravarthi Raghavan) -- The two-day review of US trade policies at the GATT Council this week, during its TPRM exercise, turned into what was described by an observer as a debate full of 'fireworks' -- with tributes to the US for its leadership in the multilateral GATT system and for successful conclusion of the Uruguay Round accompanied by sharp, though diplomatic, criticisms of the current thrust towards managed trade and unilateral approaches.

The debate found delegates generally paying less attention to the secretariat's report, and focusing more on the US bilateral efforts to open up markets for its exports by threatening unilateral trade sanctions to close current access to its own market, and to the latest US-Japan trade disputes and US threat to impose sanctions against Japan.

The secretariat, as many policy-makers and analysts (trying to explain or explain away the US 'crowbar' approach to open markets and particularly bilateral moves against countries like Japan), had suggested that the high US federal deficit and the low US savings rates had created trade tensions and disputes between the US and its trading partners.

The implication is that if US measures to cut its deficits and macro-economic policy measures in its trading partners like Japan to increase imports and domestic demand succeed, the US will not be pursuing these methods to meet its problems and the world trading system will become normal.

But the US, which found no supporters or friends in the debate, left little doubt that this would not be so. The US delegate, Andrew Stoler, the deputy chief of the US trade mission in Geneva, countered the view that the US was simply seeking to lower its trade deficits, and said the US trade policy objective of opening up foreign markets to benefit global trade would continue, whether the US trade position was in deficit, in balance or surplus.

The GATT spokesman who briefed the press could not identify any delegate who spoke in favour of the US and its managed trade approach to open foreign markets or exercise of unilateral power.

One participant said the unanimous criticism from other GATT members seemed to have had little visible effect on the US, and the US efforts to present its actions and policies as in the interests of all the trading nations of the world did not convince anyone or remove their disquiet.

The overall effect cast doubts on the credibility of the many claims of the chief gain of the Uruguay Round agreement, namely that the rule-based system and the World Trade Organization and its Dispute Settlement Understanding would prevent the US use of the panoply of unilateral trade sanctions and measures.

The views in GATT secretariat report of US trade policy, echoed in statements of delegations about US contribution to successful conclusion of the Uruguay Round negotiations, was no more than a point to the chorus of counterpoints against US unilateralism to open foreign markets.

Almost every delegate who spoke, whether or not specifically identifying the US and the US-Japan trade conflicts, zoomed in against US assertion of right to take unilateral trade sanctions in pursuit of bilateralism in trade and attempts to manage trade through numerical targets and other mercantalist trade instruments.

US delegate and acting chief of the mission, Andrew Stoler, in two interventions attempted to present a picture of the US showing leadership to open up closed markets and expand international trade and exports for the benefit of all countries.

In defending the US efforts at opening foreign markets, Stoler said:

"The principal objective of US trade policy is to reap economic gains, for itself and its trade partners, which come from reduction and elimination of global barriers to trade...This objective would exist for US trade policy, whether the US aggregate trade position was in deficit, balance or surplus. The notion that US trade policy would somehow lose its focus on trade barrier reduction, particularly in the bilateral context, if only US aggregate bilateral and global trade accounts were in surplus is incorrect.....we should congratulate ourselves on the positive impact on the (GATT) system over the years of the US 'Section 301' statute. Probably no other single measure in any country's trade policy arsenal had more to do with the successful expansion of the multilateral rules-based system to new and important areas of trade. The system of WTO will owe much of its credibility to section 301. Likewise, section 301 will be capable of being operated within the parameters of the multilateral system where DSU-covered agreements are concerned. 'Unilateralism' in the sense it has been used in the past will likely disappear from the trade lexicon..."

But he seemed to convince no one, and his two interventions only appeared to make everyone wonder what the conclusion of the Uruguay Round negotiations and the hoopla about reinforcement of multilateralism and a new trade order was all about.

Over twenty interventions expressed serious concern over the US drift towards 'managed trade'.

As the delegate from Mexico, the US NAFTA partner, in his intervention put it "there is an apparent contradiction between the commitment to multilateralism through the Uruguay Round and the adherence to unilateralism through the tendency to towards managed trade".

Canada, the other NAFTA partner of the US, voiced its serious concern that any accord between the US and other trade partners could lead down to the path of managed trade.

In other interventions, Australia (an US ally in promoting the Asia-Pacific Economic Community idea) voiced its own concerns over the US moves towards managed trade by setting quantitative targets in bilateral trade and its implications for regional trade and the multilateral system.

Korea said that since GATT was multilateral, and the WTO even more so, there was no place under GATT or the WTO for unilateralism.

Poland said the US policies were not in line with the multilateral trading system and could adversely affect the new democratic governments looking to the major trading nations for model policies in trade.

Quoting the statement of Prime Minister Hosakawa on his (failed) talks with President Clinton, the Japanese delegate Mitoji Yabunaka, said: "Japan could not, did not and will not agree to set up numerical targets". Yabunaka, speaking as one involved in the US-Japan structural impediment talks, also tore into US macro-economic policies and their failure. He said while the Clinton administration's decision to tackle the difficult question of budget deficits was to be welcomed "the actual implementation, and not the plan, is the key to this whole question" since savings for investment is the key to the redressal of the US trade deficit. In 1990 Japan was reassured by the US that the deficit would be eliminated in 3-4 years. All that had happened was a worsening of the situation, not an improvement.

The EC said the US bilateral trade deficit with Japan unfortunately exposed the administration to the short-term vision of the Congress in relation to Japan. The US current account deficit left the US with no short-term choice but to attract capital investments from the rest of the world. The provisional breakdown of the US-Japan negotiations highlights through the threat of sanctions the doubtful nature of the results sought after. While the EC agreed on the need to reduce the existing and persistent trade surpluses of Japan, remedies sought would be worse than the disease.

Cuba raised the US unilateral trade sanctions against his country, which it said had been in place for over 30 years, and had affected normal development of trade relations between Cuba and the other contracting parties. Echoing this, the EC asked the US as to what it intended to do about this outdated embargo.

The increasing recourse of the US to anti-dumping and countervailing duty actions was viewed with concern by Canada, Korea, Japan, Hong Kong, the Asean, Hungary, Australia, India and Poland.

Underscoring the importance of the US in the multilateral trading system and the many positive elements in its trade and economic policies, GATT Council President Mounir Zahran said in conclusion: "...the very size of the economy and trading sector means that any weaknesses in its policies impact on all its trading partners. Partners thus look to rapid ratification by the US of the Uruguay Round agreements to consolidate a strengthened multilateral base for US trade policies...the importance attached by the Council to consistency and coherence in US trade policies and the need for the United States to adhere closely to multilaterally agreed positions, both now and in the implementation phase of the Uruguay Round."