U.S. 301 ACTIONS JEOPARDISE GATT AND URUGUAY ROUND.

Jun 22, 1989

U.S. 301 ACTIONS JEOPARDISE GATT AND URUGUAY ROUND.

GENEVA, JUNE 21 (BY CHAKRAVARTHI RAGHAVAN)— The U.S. actions initiated under section 301 of its trade law violate GATT and the Punta del Este standstill commitments, have wasted away goodwill created by the April accord and have now placed in jeopardy the Uruguay round and the GATT system.

This warning was given in the special session of the GATT Council Wednesday by Brazil, India and Japan - the three targets of U.S. initiated "super 301" actions under its 1988 omnibus trade and competitiveness act. -

The Council was meeting in special session for its half-yearly review of developments in the international trading system - the last such review and meeting under present format.

Brazil and India in making references to U.S. unilateralism and section 301 threats and actions made clear that the substantive issues involved in the U.S. naming them and starting investigations would be dealt with by them in the ordinary meeting of the council that is to follow the special session.

The speeches of the two delegations left the impression on some observers that the two countries are still in the process of assessing their options and course of action, and their responses to the U.S. will take some weeks to unfold.

Until their responses are determined in their capitals, over the next few weeks, they are expected to reserve their positions in the negotiating groups, and this inevitably would slow down the entire process, some GATT delegations suggest.

Brazilian delegate, Amb. Rubens Ricupero, in a hard-hitting intervention said that by its actions the U.S. had now placed the Uruguay round and the GATT in jeopardy.

If the Council, at the special session, did not collectively take a firm commitment to renounce once and for all the menace posed to the system by unilateral retaliations, "we would be endangering its very existence in the years to come", he said.

The Indian delegate, Amb. Bal Krishan Zutshi, who has just taken over as India’s permanent representative to GATT, in his intervention, said that the Council should send a "clear message to the administrative and legislative authorities of the U.S. that the implementation of section 301 will emasculate the multilateral trading system and bring the process for preserving and strengthening it to a halt".

At a meeting of the informal third world group in GATT Tuesday evening, a very large number of delegations came out in support of Brazil and India and critically against U.S. and its threats. One delegate said that most of them intended to address the general issue in the special session, and the specific issues in the latest U.S. actions in the ordinary session of the Council.

Opening the discussions in the special session, Ricupero cited extensively from western media comments, all scathing in their criticism of the U.S. actions, and said this showed that

Brazil’s perception of the threat posed to the multilateral system and the Uruguay round was a universally shared opinion.

The "underlying threats" to the world trading environment and the Uruguay round, which the secretariat had seen as "prospective future developments" in its draft report, had now become very real because of the application of the U.S. trade law and its super 301.

"Irrespective of the final and irreparable damage to the Uruguay round that may still be the net result of the escalation of section 301, its mere invocation has already wasted and ruined the precious capital of goodwill accumulated by the efforts of Arthur Dunkel and all those who strove to make a success of the April (TNC) meeting", he said.

"The basic incompatibility of section 301 with the round and the GATT itself lies not in its goals of opening and promoting trade liberalisation but in the ever present threat of ultimate and unilateral retaliation which is inseparable from its proceedings".

By its own admission, in its "fact-sheet" to the media, the U.S. trade representative (USTR) had conceded that the U.S. actions could be "GATT-inconsistent", and could give rise to decisions that were incompatible with GATT, regardless of the degree of discretion in taking action afforded to the U.S. president under the law.

The advocates of super 301, Rubens reminded the Council, considered its "teeth" to be this possibility of threatening other parties with unilateral retaliations outside the GATT machinery.

"There would be only one way, and a simple way at that, to put definitely to rest all the concerns expressed by so many countries about the destructive potential of super 301. It would be enough for the U.S. government to make a clear and firm commitment that it would not resort to the imposition of trade sanctions unless authorised by GATT".

The U.S. rejection of such a commitment during the Montreal negotiations on the dispute settlement issue showed that "the U.S. insists on retaining its unilateral retaliatory power".

The U.S. unilateral measures against Brazil last October showed that the threat posed by section 301 was "not hypothetical but very real".

How could the traditional give-and-take of multilateral negotiations be reconciled with a process of duress under which one country would be pressured to exchange trade concessions not for other concessions but to avoid punishment, and to give something not to gain some additional advantage but to protect its present "status quo" in terms of access to the market, Ricupero asked?

By listing under super 301 trade practices already being negotiated in the Uruguay round, the U.S. had undoubtedly reinforced its negotiating position in clear violation of the standstill commitment.

If these were not enough to demonstrate how seriously the Uruguay round had been put in jeopardy, the special 301 made things more forceful and candid.

According to the USTR fact-sheet, no foreign country currently met the U.S. standards for adequate and effective intellectual property protection, and thus all countries were potential targets.

An unhappy few had been put on the "priority watch list", and whose status was to reviewed on November 1, among other things on the basis of their "constructive participation in the multilateral intellectual property negotiations".

In the absence of what was meant by "constructive", this would simply mean "conformity with the U.S. proposals".

"If that is so and no outcome whatever will be deemed satisfactory unless it entirely adheres to the American proposal, why then bother to go into lengthy and complicated negotiations".

Sharply criticising the U.S. for its "self-righteousness" about using 301 to open up markets for trade, Ricupero pointed out that the proportion of U.S. imports affected by restrictions had risen between 1980 and 1988 from 12 percent to 23 percent.

While reserving the details of his comments on specific threats against Brazil, Ricupero noted that one of the matters (about import restrictions) related to those notified to GATT, scrutinised by its balance-of-payments committee and okayed by the GATT Council.

Referring to the ineffectiveness of the special council reviews so far, and its replacement on trial by the new trade policy review mechanism (TPRM), Ricupero said that "a major test of the seriousness and credibility of the mechanism will be to ensure the trade policies of the largest trading partners will be thoroughly examined. Failure to do so will put the new mechanism into jeopardy from the very beginning".

One of the critical tests of the new mechanism would be in its examination of U.S. trade policies, and it was to be hoped that in reviewing the U.S. report, the GATT council would be "more objective and less hypocritical than the declaration recently made by OECD ministers, who rhetorically ‘condemned unilateralism’ but in reality condoned this dangerous practice by not unequivocally placing where it should the responsibility for the disruptive forces that threaten the round and the multilateral system".

The Indian delegate, Amb. Bal Krishan Zutshi, in his intervention, said that the Council should send a "clear message to the administrative and legislative authorities of the U.S. that the implementation of section 301 will emasculate the multilateral trading system and bring the process for preserving and strengthening it to a halt".

Zutshi said that the section 301 in U.S. law was already a source of concern when it was introduced 15 years ago. But the changes in the U.S. omnibus trade and competitiveness act had transformed the provision into "an even more aggressive instrument".

Recalling the warnings against section 301 use and retaliation, given at the last meeting of the special Council session, the Indian delegate said: "despite the warnings of the threat to the GATT system ... the U.S. authorities have moved to implement the super and special 301 provisions".

Investigations had been commenced against three contracting parties under super 301, and 21 others were being threatened under special 301.

With the growing number of CPS facing 301 actions, "the threat to the multilateral system deepens", he said.

Judged by the precedents, it was not merely a threat, but "strong possibility of eventual action being discriminatory and without prior GATT authorisation", which would be a serious violation of rights of contracting parties.

At Punta del Este an ambitious round of multilateral trade negotiations was launched, embracing not only traditional subjects but venturing into new areas.

But with the multilateral process in progress, one of the participants had decided to secure its aims bilaterally, not by persuasion or negotiation but "through use of economic sanctions".

"This involves a serious departure from well established and recognised norms of international conduct whereby economic agreements are expected to be reached not by dictation of terms by one of the participants, but by recognition of mutuality of benefits.

"An agreement secured under duress cannot last. This is the first principle we have to bear in mind when sovereign countries deal with each other. Moreover, bilateral pressures can only serve to undermine the multilateral process".

"It is ironic", Zutshi added, "that the U.S. authorities are supposedly acting under the mistaken belief that super and special 301 are tools for being used "to create an ever expanding multilateral trading system based on clear and enforceable rules".

"In this context, it has become imperative for U.S. to send a clear message from this special session of the GATT council to the administrative and legislative authorities of USA that the implementation of 301 provisions will emasculate the multilateral trading system and bring the process for preserving and strengthening it to a halt".