SOUTH, NORTH CONTRASTS IN LIBERALISATION.

Apr 25, 1991

SOUTH, NORTH CONTRASTS IN LIBERALISATION.

GENEVA, APRIL 23 (CHAKRAVARTHI RAGHAVAN) – The GATT Council’s annual review of the developments in the International Trade and Trading System Tuesday brought out an overall picture of Third World countries continuing to pursue autonomous and unilateral trade liberalisation measures in sharp contrast to the trade policies and practices of Industrial Countries, particularly the majors.

That the U.S., EEC and Japan participated in the Council discussions only at second or third level of representation, as against most Third World participants at level of their Ambassadors and Chief GATT delegates, provided a commentary of its own.

The Council had before it an annual report of the GATT Director-General, Arthur Dunkel, which as one participant privately commented outside, was an exercise in highlighting the positive and glossing over or ignoring the negative.

According to a GATT spokesman, the three major themes that figured in the Council statements were the need to bring the Uruguay Round negotiations to a successful conclusion as soon as possible, the autonomous liberalisation process under way in the Third World and the efforts of former centrally planned economies of Europe to shift to the market system, and the threats to the multilateral trading system due to the emerging patterns of regionalism and regional trade blocs as well as recourse to unilateralism and threat of unilateral action (in the U.S.).

In his report, Dunkel had referred to what he termed "two types of developments" in regional integration and cooperation. But the way he classified the developments and the language used in comments left some doubt as to how the GATT head viewed them.

One type of development, he said, was the further evolution or extension of agreements already in place - including the EC 1992 programme, the European Economic Space and acceleration of closer ties between Australia and New Zealand.

The other involved initiatives for closer regional ties - like requests for association agreements with EC from Poland, Hungary and Czechoslovakia, Enterprise for America’s initiative, the APEC initiative and proposed East Asia economic grouping, the recently announced Asuncion agreement (in Latin America) and proposed U.S.-Canada-Mexico Free Trade Agreement.

Noting that these developments were often presented as "running counter" to the reinforcements and extension of the multilateral trading system, Dunkel said that "this was not the view taken by the drafters of the GATT of the arrangements to promote the closer integration of member-countries".

At the same time, he said, the Contracting Parties have been concerned with ensuring that the objective of reducing obstacles to trade between parties to such arrangements did not conflict with the objective of promoting freer trade with other countries.

The drafters of GATT he argued had laid down the necessary criteria for this purpose and provided for a review process aimed at ensuring that these criteria are met.

"An on-going process of global trade liberalisation, in which parties to such integration arrangements are also participating, evidently reduces the possibility of conflict, and indeed can help to ensure that the development of regional markets promotes emergence of wider global markets".

Dunkel did not explain what was so "evident" about reduction of possibilities of conflict or how regional markets functioning behind a barrier to outsiders promotes "global markets".

In commenting on the "regionalism" trend, Korea had said that if the emerging regional arrangements and liberalisation measures were to complement the multilateral trading system, it was even more necessary to bring to a quick conclusion the Uruguay Round.

The European Community spokesman however said that "regionalism is a fact of life and would have to co-exist with the multilateral trading system".

In his report, Dunkel had underscored the need to push ahead with the Uruguay Round negotiations and bring them to an early and successful conclusion in order to give a "confidence boost" to the world economy and the critical importance of "strict observance" of the standstill Commitment during the extended period of the negotiations have been stressed by GATT Director-General Arthur Dunkel.

Pushing ahead with the negotiations and bringing them to early and successful conclusion, he argued, was necessary in order to minimise the increase in business uncertainty caused by the failure to conclude the Round on schedule at Brussels and to preclude backsliding on what had been achieved to date.

This, he argued, would also give a "confidence boost" to a world economy, now in its third consecutive year of decelerating growth in output and trade.

The U.S. said a successful conclusion of the Round was not just a matter of undoing the damage done to business confidence, but one involving the viability of the GATT in the 21st century.

Dunkel claimed that "by and large" the observance of the standstill commitment had been good, especially during the past two years and this record should be continued and improved.

"Even in the best of times increase in protection can jeopardise trade negotiations. When, as now, economic growth has slowed down and important changes in exchange rates are taking place, not only are protectionist pressures likely to increase, but the potential for one protectionist action to trigger a series of retaliatory measures is especially high", Dunkel warned.

In his 26-page report, Dunkel has tried to focus on the positive aspects of the international trade scene, stressing in particular the unilateral trade liberalisation initiatives, reflecting "outward-looking trade policies" undertaken in 45 countries of which 30 are from the Third World and five from eastern Europe.

The measures undertaken include tariff reductions and bindings, elimination of QRs, abolition of import licensing restrictions and of number of items prohibited for imports, and removal of other non-tariff measures.

The measures in ICs include:

* Canada's termination of the Art. XIX safeguard measures against imports of footwear, which have been in place since 1977;

* The EC's elimination of, what is described in the report as "modest proportion" of the more than 2000 national import quotas, on imports from third countries and of some specific qrs maintained against imports from Hungary and Poland;

* French elimination of some QRs against Japanese imports;

* Japan’s market openings in form of reduction of tariff measures and termination of import quotas on a number of agricultural products (all held as GATT illegal, and thus not voluntary);

* Sweden's announcement that it would eliminate effective 1 August 1991 of all MFA restrictions on textiles and clothing imports and on footwear by 1993; the UK's "announcement" that it was "encouraging" its industries to bring to an end industry-to-industry voluntary export restraint arrangements.

As one GATT observer put it, the GATT secretariat appeared to have had to scrape the bottom of the barrel to include some liberalisation measures of the North to suggest an overall trend among all GATT participants, and not merely in the Third World where too the measures often are the result of conditionalities of the IMF and World Bank and arm-twisting by the U.S., etc.

On trade policy developments within the ambit of GATT, the report notes that dispute settlement under the Tokyo Round Subsidies Code "continues to be stymied" with five panel reports (all pending for. a long time) yet to be adopted with the losing side in each case blocking adoption. The review fails to mention that it is the majors who bring complaints and block adoption when they fail.

As regards anti-dumping actions, the report reports a decline in investigations and of outstanding ad measures. In the case of Canada the decline from 143 to 103 is due to the "sunset" clause reviews under its legislation. In the EC the number of outstanding duties or price undertakings maintained also declined from 170 to 151, in part due to decline in cases involving East Europeans.

(UNCTAD reports have brought out that for the same period covered in the GATT report Third World exports hit by investigations or measures is proportionately much higher).

The report also complains of the spread of anti-dumping legislation continuing in 1990, "with developing countries frequently adopting anti-dumping legislation as an element in reform package that include the phasing out of import licensing and quantitative restrictions".

It suggests that there is "an evident need" for great care in ensuring that such legislation gives due regard to the basic principles in use of GATT provisions and the Tokyo Round codes.

(Most Third World countries are signatories to these codes and have no obligations in respect of them.)

On the GATT dispute settlement question, the report suggests that the significant decline in 1990 of the number of panels set up and the frequent recourse to consultations shows that top priority attached to the Uruguay Round negotiations had created a temporary lull in the sustained pace of dispute settlement activity in GATT.

But after the failure of the Brussels meeting, this activity had increased and two panels had been established and two others requested in recent months.

While the mid-term accord for improved procedures had helped to solve some outstanding procedural problems, the report notes that two panels set up in 1985 and 1987, are yet to function (the parties not having agreed to names of panellists nor had withdrawn their complaints).

Also, since the beginning of the Uruguay Round of the 15 panel reports adopted, in eight cases the contracting parties to which the recommendations have been addressed had not yet responded or had postponed compliance or had not taken actions satisfactory to improved access by Austria and Sweden, many (Canada, EC and U.S.) modifications necessitated by the HS system and "in other cases" of new restrictions being added.

The report (in an annex) also brings out that over and above the MFA authorised restrictions, there are some 51 "export restraint-type" arrangements in force outside the MFA. Overall approximately 284 known discriminatory export restraint type arrangements involving GATT CPs were in force at the end of 1990 - 59 involving agricultural products, 51 involving textiles and clothing (outside of the MFA), 39 steel and steel products, 37 electronics products, 23 road motor vehicles, 21 footwear, 15 machine tools and 39 "others".

The report also notes that in U.S. "Super 301" for unilateral actions to open up foreign markets for U.S. goods and service exports had expired in 1990 and that no action was taken on the six "Super 301" investigations launched earlier under it and that no countries have so far been "notified" under the "Special 301" (over their inadequate intellectual property protection regimes).

The report however does not mention that the "watch list" under "Special 301" is being maintained to pressure countries to be "constructive" in the Uruguay Round negotiations.