Jul 5, 1989

BRAZIL, INDIA CAST MORE DOUBTS ON URUGUAY ROUND'S FUTURE.

GENEVA, JULY 3 (BY CHAKRAVARTHI RAGHAVAN) Brazil and India cast further doubts Monday in the GATT on the future of the Uruguay Round negotiations, citing the U.S. threats and actions initiated against them under "super 301" and "special 301" of the U.S. trade and competitiveness act of 1988.

Both called for a halt to further U.S. actions and reversal of the present U.S. course, warning that otherwise the Uruguay rounds processes would be disrupted and jeopardised.

Both however stopped short of saying they would not negotiate or participate actively in the negotiations until this was done, though this implication was left in the air.

The Brazilian and Indian warnings came in separate statements at meetings of the Uruguay round negotiating group on trade-related intellectual property rights (TRIPS) and at the surveillance body which oversees the implementation of the Punta del Este standstill commitments.

The U.S. response came in the surveillance body, and merely repeated what its delegate had said at the special and ordinary sessions of the GATT council in June.

The issue is to remain on the agenda of the surveillance body for what the EEC called "special surveillance" and further discussions at future meetings.

The U.S. on may 25 initiated, under the 1988 U.S. omnibus trade and competitiveness act, a process of coercive negotiations against a number of countries for changes in their domestic laws and regulations that prevent U.S. enterprises market entry for trade and/or investment in goods and services.

Acting under the so-called "super 301" provisions of its law, the U.S. designated Brazil, India and Japan as "priority" countries in listed priority areas and started investigations against them in June, and has sought bilateral consultations to eliminate their practices which the U.S. considers "unreasonable" or "unjustifiable" (which under the U.S. law could apply even to practices legal in GATT).

Acting separately, under "special 301" provisions over intellectual property issues, U.S. listed 25 countries, with eight of them on a priority watch list and 17 others on a watch list.

Those on the priority watch list are: Brazil, India, South Korea, Mexico, China, Saudi Arabia, Taiwan and Thailand, who have to negotiate their way out of the list by November 1, among other things through their "constructive participation" in the TRIPS negotiations.

Those on the watch list, against whom actions could be initiated if they do not behave in the multilateral negotiations and/or provide satisfaction in bilateral discussions, include Argentina, Chile, Egypt, Greece, Indonesia, Pakistan, Venezuela, Turkey and Philippines.

In the surveillance body, Brazil and India complained both about the "super 301" and "special 301" actions as violations of the Punta del Este mandate, while Japan target of the "super 301" actions also complained of the U.S. actions.

The complaints of the three, made under the "early warning" procedures, were supported by Chile, Uruguay, the EEC, Mexico, Malaysia (for the Asian), the Nordics, Australia and Canada.

The U.S. ambassador merely repeated his statements in the special council, but the EEC, strongly supporting Brazil, India and Japan about the violation of the standstill, said the issue should be kept on the agenda of the surveillance body and they should revert to it later.

In the TRIPS group, besides Brazil and India, China, Egypt, Chile and Mexico also spoke critically of the U.S. actions under special 301. China (which is trying to negotiate "resumption" of its status as a GATT contracting party, and has generally been keeping a low profile), reportedly used some strong language and said the U.S. threat was "unacceptable".

But the U.S. did not even reply in the TRIPS group, which then went on to discuss the principles and norms of GATT and other international instruments that could be applied to any agreement, and the EEC proposals on enforcement.

Observers of the GATT scene noted that, while the raising of the issue and the warnings of uncertainties over the round may serve some purpose, without specific actions by the countries concerned, either in blocking or slowing down the negotiations or taking other actions of their own, the U.S. might get the impression that it could get away with its actions.

This is particularly so since the whole strategy of the U.S. 301 instrument is not so much to "retaliate" but use it as a threat to get its way, by raising the possible costs for its opponents.

In this, it may have probably already gained something, as seen from the silence in the TRIPS group of a number of countries who are on the priority watch list or the watch list, but presumably hope that by their silence they would be able to negotiate their way out of the list.

In the TRIPS group, Amb. Bal Krishan Zutshi of India said the U.S. actions under special 301 and super 301 threatened "to wreck the whole Uruguay round".

Under special 301, he complained, the U.S. had, under threat of initiation of formal coercive proceedings, sought progress bilaterally before November 1, on issues before the negotiating group. While multilateral negotiations were in progress, the U.S. had reserved unto itself the right to resort to unilateral retaliation if the outcome of the negotiations did not meet its expectations.

"There is thus a great-deal of uncertainty about the relevance and utility of these MTNS," Zutshi said.

The U.S. actions were a breach of the Punta del Este standstill commitment. By initiating actions under s. 301, the U.S. was attempting to seek, "a negotiating advantage".

"Unless the U.S. renounces its unilateral approach and removes the threat of retaliation under s. 301 of the its trade act, giving a firm indication of its willingness to abide by its GATT commitments, the Uruguay round negotiations cannot make any worthwhile progress," Zutshi declared.

"We shall keep a close watch on any further unilateral manoeuvres by the U.S., and in case we find it persisting in its present course, we shall have to reassess our position in relation to these negotiations and decide upon their relevance," he added.

The Brazilian delegate, Tovar de Silva Nunes, underscored the "pernicious effects" of the U.S. actions, and its undermining of the April TNC decisions on TRIPS which had been based on the assumption that all participants were working towards the goal of maintenance and reinforcement of the multilateral trading system.

This confidence had now been put to a "difficult trial", and its implications were not fully clear to Brazil and had posed a series of difficulties in its effort to work towards a positive result in the negotiations.

Some implications of the U.S. initiatives were already evident and had produced their adverse effects. But there were some other effects of "severe potential damage" to the whole round of negotiations, though their features were not yet foreseeable.

Brazil was hence very concerned about the direction of the negotiations if such "arbitrary and unilateral initiatives" were not halted.

The U.S. government's own documents on special 301, circulated on may 25, showed that the special 301 provisions were not only incompatible with the MTNS but put the talks into jeopardy.

The wording in these documents about the use of special 301 and listing of priority countries "to trigger an accelerated six month investigations" only confirmed that special 301 was to be used as "an instrument of pressure" against some participants, following "arbitrary and discriminatory judgements by the U.S.".

Special 301 was a flagrant contradiction of the U.S. commitment not to take trade measures to improve its negotiating position, and a round of MTNS could not take place under threats of unilateral and arbitrary actions which haunted the negotiating process.

Citing the USTR's own remarks that the countries on "priority watch list" under special 301 had not "got off easy", that the U.S. expected "concrete results and positive negotiations" before November 1, and that any country on the priority watch list failing to do what the U.S. believed was necessary would be immediately designated as a "priority" country for s. 301 investigations, with any deadline that the U.S. might again set, the Brazilian delegate asked:

"Does that mean that participants in this negotiating group are expected to modify their positions and put aside their legitimate interests and concerns in order to conform to U.S. wishes? What right would one single participant have to judge what a "constructive participation' in MTNS should be?"

The special 301 provisions and actions were not a menace merely for a few participants. The U.S. had so far singled 25 countries whose practices deserved special attention, had put 17 of them on a watch list and eight others on a priority watch list. But it had also concluded that at present no foreign country met U.S. standards for IPR protection as set in the U.S. proposals in the Uruguay round.

The USTR had thus determined that all countries were potential targets for priority designation. Also, if the U.S. proposals were to be the only "good basis" for negotiations, why should the TRIPS group at all proceed with negotiations?

Referring to the April TNC decisions, and Brazil's views on them (enunciated at the last meeting), Silva Nunes said the negotiations would have to take account not only of the need to establish a balance between rights and obligations of IPR owners and control of restrictive business practices, but also to ensure continuous access to modern technology which was indispensable for development.

"These legitimate concerns" should receive trustful consideration from all participants, and Brazil "would not favour running any risk of having our development objectives dodged by unilateral actions of unfair negotiators".

The Brazilian concerns over special 301 related to "a tangible reality", and would be sufficient to demonstrate how the TRIPS negotiations were being jeopardised by the U.S. actions, whose potential effects were "an even greater problem".

The main question for Brazil was where these negotiations were leading, and how could Brazil negotiate without the assurance that participants would honour the commitments made at the outset of the round?

Fortunately, the Brazilian delegate said, discriminatory and arbitrary actions like those of the U.S. had not been the rule, and it would be "very much unfair" for negotiations to be disrupted because of faulty behaviour of one participant.

"But if we are to have a sound continuation of the negotiations, we believe it is fundamental that those initiatives be halted at once. This would constitute a minimum guarantee that we are negotiating in good faith and in accordance with rules we have agreed to."