U.S. ASSAILED OVER STANDSTILL VIOLATIONS.

Oct 15, 1987

U.S. ASSAILED OVER STANDSTILL VIOLATIONS.

GENEVA OCTOBER 13 (IFDA/CHAKRAVARTHI RAGHAVAN) – The United States was charged Tuesday at the Meeting of the Uruguay Round Surveillance Body with actions violative of the standstill commitments undertaken by it at Punta del Este in September 1986.

GATT sources said that the separate meeting of the Group of Negotiations on Goods (GNG) Monday had been a relatively non-controversial event.

The GNG Meeting, they said, had heard formal reports of progress in various negotiating groups, and set the calendar of meetings for these groups till the end of the year, when the initial phase of the negotiations are to be concluded.

The complaints before the Surveillance Body came from Japan and Australia, through formal notifications, and from Philippines under the so-called "early warning" procedure of a possible violation that should be headed off.

The Surveillance Body monitors the implementation of the standstill commitment, and looks into complaints of violations.

Under the standstill, Contracting Parties have committed themselves:

--Not to take any trade restrictive or distorting measure inconsistent with GATT or instruments negotiated within the framework of GATT or under its auspices.

--Not to take any trade restrictive or distorting measures in the legitimate exercise of GATT rights that would go beyond that which is necessary to remedy specific situations, and

--Not to take any trade measures in such a manner as to improve its negotiating positions.

The Surveillance body is more a political body to ensure implementation of the political commitments to standstill undertaken by Contracting Parties at Punta del Este. It has no power of redress in cases of violations, aggrieved CPS have to seek redress through normal GATT procedures of raising disputes and having them adjudicated.

Of the seven formal notifications of violations filed before the Surveillance Body so far, five are against the United States. Three complaints against the U.S. came up before the Surveillance Body at its last meeting, and two were brought up today.

Of the complaints against the U.S. considered at the last meeting, in one case, the U.S. superfund levy, a GATT panel ruled against the U.S. The other case about levy of a so-called customs user fee is pending before a GATT panel.

The first formal complaints aired Tuesday was by Japan over the 100 percent duty imposed on certain Japanese products in retaliation for Japan’s purported failure to live up to its side of the agreement on semiconductors.

The second complaint was by Australia about the U.S. export enhancement programme, and increased funding for it announced on July 30, 1987, to enable U.S. agricultural exports to be subsidised.

A third complaint not formally notified or on the agenda, was by Philippines over the campaign in the U.S. by the U.S. Soyabean Association against "tropical" oils like coconut oil and palm oil.

The U.S. Soyabean Growers Association has been carrying out a media campaign advising the public against use of coconut and palm oils on the ground that they are "saturated" fats, and thus a greater health hazard.

Pending U.S. legislation would have all food products labelled to clearly identify the tropical oils used in their production.

On the U.S. maintenance of 100 percent tariffs on certain Japanese products for a total value of 300 million dollars, the Japanese delegate, S. Hayashi, complained that the unilateral and discriminatory tariff rates at prohibitive levels was an infringement of GATT provisions, particularly articles one and two, and thus inconsistent with the Punta del Este standstill commitment.

The U.S. Delegate, Charles Blum however justified the U.S. duties as necessary to sustain the 1986 semiconductor agreement between the U.S. and Japan.

In other comments, Hong Kong, Australia and the EEC underlined that the original 1986 agreement on semiconductors was "suspect within GATT", and was the subject of a dispute being adjudicated by a GATT panel. The consistency of U.S. levy of tariffs could not be divorced from the panel investigation.

Hong Kong said the result of the U.S. Japanese agreement was to divide the world market in semiconductors among the two major producers.

On the U.S. subsidised exports of agricultural products, Australian Delegate Alan Oxley agreed that the U.S. Export Enhancement Programme (EEP) had been in force before the Uruguay Round was launched.

Previously a discretionary programme, it was now being operated in the context of specific expenditure targets of one billion dollars over the U.S. financial years 1986-88, and an additional 500 million dollars at the discretion of the U.S. Secretary of Agriculture.

At the end of August this year over 1.1 billion of the original 1.5 billion had already been expended.

The EEP had been used to increase U.S. exports of wheat, wheat flour and barley. But exports of eight other commodities had also been assisted – rice, frozen poultry, barley malt, semolina, dairy cattle, eggs, mixed poultry feed, and vegetable oils.

The increased funding, the Australian Delegate contended, was a violation of the standstill commitment, intended to enhance the U.S. negotiating position in the Uruguay Round, and represented "a clear intention to escalate and extend the use of export subsidies on agricultural commodities and products".

U.S. Delegate Blum however contended that this was not a new measure, and thus not a violation of the standstill.

No country, Blum said, was more passionately in favour of changes and reforms in the world agricultural markets, than the U.S.

The programme has been set up to place U.S. producers on the same footing as those from other countries enjoying similar support.

Australia too, Blum added, was engaged in measures to support its farmers.

A number of countries spoke in support of Australia – Canada, Argentina, Thailand, New Zealand, and Pakistan.

New Zealand charged that the U.S. and the EEC were involved in "straightforward bidding up of subsidies and adopting ‘beggar my neighbour’ policies".

Delfino Bonda, who raised the campaign of the U.S. Soyabean Association against imports of coconut and palm oil, complained the campaign had already displaced 273 million dollars worth of Philippine exports. Some 17 million Philippines depended on the coconut industry, and the campaign would damage considerable the economic recovery programme of President Aquino.

The complaint of the Philippines was supported by Malaysia.

The GNG Meeting had been set originally, at the instance of the EEC, to undertake a mid-term review of the progress in the initial phase of the negotiations to conclude by December 1987.

However, participants said no such review took place.

By common consent as it were, everyone decided to await the outcome of the U.S. pending legislation for a new trade bill, and authority for the U.S. Administration to conduct the Uruguay Round negotiations.

The U.S. Senate and the House of Representatives have adopted separate bills, and these are now in the process of reconciliation.

Both versions contain several protectionist provisions violative of GATT and the standstill commitments.

President Reagan has threatened to veto any such provision, and GATT negotiators here have been encouraging the U.S. Administration’s opposition to the protectionist provisions in the pending legislation.

However, several GATT participants here say that even if the more obnoxious provisions get knocked out in the House-Senate Conference process, some with discretionary powers might still emerge, and these would have serious negative impact on the Uruguay Round itself.

But with the legislation in the Conference stage, and the Administration campaigning and lobbying against it, most GATT participants seem not too anxious to assail the Administration here at this stage.

At the GNG, Mexico raised the issue of the indebted countries, and in effect suggested that without a solution to the debt problem, the outcome of the URUGUAY Round would have little beneficial impact for the heavily indebted countries.

A number of third world countries also complained of lack of adequate progress in the negotiations on tropical products, which the Ministers at Punta del Este had recognised as of importance to a large number of third world countries and had called for "special attention" to these negotiations, including the timing of the negotiations and possible advance implementation of the results of such negotiations.