Jun 21, 1989


GENEVA, JUNE 20 (BY CHAKRAVARTHI RAGHAVAN)- The special session of the GATT council Wednesday is expected by the GATT secretariat to mainly focus on recent U.S. announcements of actions under section 301 against Brazil, India, Japan and others.

On May 25 the U.S. designated Japan, Brazil and India as priority countries for "super 301 actions".

Separately, the U.S. placed eight third world countries (Brazil, India, Mexico, China, South Korea, Saudi Arabia, Taiwan and Thailand) on a so-called "priority watch list", under "special 301", for planned actions on intellectual property issues, and giving them five months to negotiate their way out of the list.

The GATT council is holding a special session on June 2-1, where there is to be a general review of the developments in the trading system.

This is to be followed by an ordinary session of the council whose 28 point agenda, perhaps the longest so far, includes the U.S. trade actions threatened against Brazil and India, and which these two have specifically inscribed on the agenda.

As of Tuesday, GATT sources had no information available on any specific requests the two might make, beyond raising the issue formally and reserving their GATT rights.

GATT secretariat believes that the major discussions will be at the special council session, and hopes that the strong expression of views by others and the isolation of the U.S. would be sufficient to persuade the target countries not to take any steps that would affect the Uruguay round or throw a spanner into the "business-as-usual" atmosphere in the GATT.

The Indian Commerce Minister, Dinesh Singh’s recently made a statement in Geneva questioning the usefulness of pursuing the multilateral negotiations in the Uruguay round, so long as the 301 issue and its bilateral process and recourse to unilateral action is not resolved.

This appears to have caused quite some stir in the GATT secretariat, the U.S., as well to the EEC and Japan. The last two, while opposed to U.S. 301, have a common approach with the U.S. on the new themes against the third world.

Meanwhile, in a draft report for the special session, the GATT secretariat has given a somewhat oblique and low-key warning about the dangers to the multilateral trading system and the Uruguay round by the U.S. super 301 and special 301 actions announced last month.

"International trade relations", the secretariat says, "are entering a phase in which the priority that governments attach to the successful conclusion of the Uruguay round and to the attainment of the objectives of the Punta del Este declaration will face its sternest tests."

The secretariat provides a semi-annual draft report to special sessions of the GATT council of developments in the trading system, and intended to provide a basis for the Council's review of developments in the trading system.

In the light of the comments, the draft reports are finalised and made public later.

This will be the last such report. Future reports will be based on the trade policy surveillance scheme and review mechanism set in place under the Uruguay round mid-term review accords.

The report is purported to cover the period September 1988 to February 1989, but in its overview portion takes note of the accords reached in the Uruguay round in April 1989.

But though the draft report is dated June 2, there is no mention of the U.S. actions under super 301 and special 301 announced in May, initiating a time-bound process of investigation, and bilateral negotiations under threat of unilateral trade measures, to win concessions.

In the overview section, the report notes that despite the progress in the Uruguay round (at the Montreal and Geneva meetings of the trade negotiations committee), there has been "a further increase in the uncertainties and tensions affecting trade policies" due partly to new trade restrictive measures and partly to pressures generated by bilateral negotiations and prospective future developments in policies of contracting parties.

On what it calls the broad thrust and direction of trade policies, the report refers to "a growing tendency" on the part of "some governments" to apply or invoke restrictive trade measures to deal with trade practices which the governments consider "unfair but which at the present time "may not be recognised as such in GATT, or which are not, at the present time, covered by multilateral disciplines".

For the immediate future, the overview adds, the national trade policies that could have the biggest impact on the multilateral trading system and on developments in the Uruguay round are those that might be decided upon under section 301 of the U.S. trade act.

Some of these, the report notes, may essentially involve demands for opening of bilateral negotiations with priority countries on issues that are also the subject of multilateral negotiations.

Others, however, relating to matters covered by existing bilateral agreements, might involve short deadlines for elimination of offending measures and, if this is not forthcoming, for retaliatory action.

Elsewhere in the report, the secretariat refers to the U.S. actions against Brazil over the latter's refusal to yield to U.S. demands on patent protection for U.S. pharmaceuticals.

Acting under 9.301 of its trade and tariff act, on a complaint initiated by U.S. pharmaceutical companies, the U.S. last year put in place 100 percent tariffs on about 40 million dollars worth of imports from Brazil.

Brazil brought the issue up as a violation of its GATT rights, and the GATT Council referred it to adjudication in February, but the U.S. is still to agree on the terms of reference of the panel, seeking to avoid a GATT determination of the legality of U.S. law vis-a-vis GATT obligations.

This is also on the agenda of the ordinary session of the GATT Council.

In the entire dispute and discussions in the ' GATT and outside, while the U.S. sought to portray its actions as "retaliation" and against "piracy" of property of U.S. enterprises, Brazil has repeatedly pointed out that it is the victim of unilateral U.S. discriminatory tariffs imposed to gain concessions not available in GATT.

Curiously, the GATT secretariat report refers to the U.S. actions at one place as "retaliatory tariffs", while in another place it is described as "unilateral trade restrictions..." in retaliation for Brazil's alleged failure to provide adequate patent protection for U.S. exports of pharmaceutical products.

This leaves the overall impression that the issue is really the "unilateral" character of the U.S. actions, and not trade actions taken to secure concessions in areas not covered by GATT.

Listing some of the causes for uncertainties and tensions, the report lists in this regard:

* The trend towards broader and more extended use of anti-dumping and countervailing measures,

* Tightening rules of origin to enforce stricter local content requirements,

* Continuation of all existing export restraint arrangements and addition of new ones,

* Bilateral negotiations on a broad range of "sensitive" issues,

* Unilateral "retaliatory" measures against Brazil and the EEC over their failure to resolve disputes bilaterally.

The report notes that in steel the efforts to maintain existing orderly marketing arrangements. Continue to mark trade policy, despite the considerable upturn in steel demand in OECD countries.

Arrangements for limiting access to the U.S. and EEC markets also continue. There are now some 52 export restraint arrangements in operation, of which 35 affect exports to the U.S. and 15 to the EEC or one of its member-countries.

In electronics, the EEC has introduced new rules of origin for semi-conductors, as a result of which only those chips where the process of "diffusion" (or imprinting micro-circuit patterns on paper-thin silicon wafers) has taken place in the EEC will qualify as of community origin.

In mid-February, the report notes, the Japanese industry and the EEC were close to arriving at an understanding over minimum prices on exports of Japanese memory chips to the community.

While not as wide-ranging as the U.S.-Japan cartel agreement, the Japan-EEC deal would set floor prices for 256k and one-megabit dynamic random access memory devices.

In the area of quantitative restrictions (QRS) and other non-tariff measures, in a considerable number of cases where there has been a change from previous policy, there has been a tightening in levels of QRS or of new restrictions on a selective basis, and of several measures to restrict exports.

There have also been a number of changes involving reductions, liberalisation or phasing-out of restrictions. These were in Argentina, Brazil, Ghana, India, Malawi, Morocco, and South Korea. Japan allowed imports of processed cheese and abolished import quotas on Malaysian pineapples, while the EEC abolished some 68 national quotas on Japanese exports.

Anti-dumping issues continue to generate controversy, due to the controversial new legislation in the U.S. and European community tightening and extending existing rules to assembly operations.

Referring to some of the recent actions, the report adds: "overshadowing the whole subject was the concern that there has a palpable shift in certain countries from simple combating of manifest dumping to a more protective use of anti-dumping legislation as an instrument of industrial policy".

Among other matters referred to are the brazil-U.S. and Argentina-U.S. disputes over the U.S. subsidisation of vegetable oil exports.