Dec 2, 1986


GENEVA, NOVEMBER 28 (IFDA), BY CHAKRAVARTHI RAGHAVAN -- Michael Smith, the Deputy U.S. Trade Representative, and hiss boss Clayton Yeutter, were recently described by the New York Times as the "Reagan Administration' s version of the bad-cop, good-cop routine".

In such a police routines a suspect is often first beaten up or otherwise threatened by the so-called bad-cop who retires from the scene temporarily, whereupon the good-cop appears on the scene, treats the suspect with sympathy and persuades him to make confessions before the "bad-cop" returns and carries out his threats.

Michael Smith, who was in Geneva, this week for the annual session of the GATT Contracting Parties, which ended on November 26, apparently put on one of his "bad-cop" shows at a private working lunch of key delegates.

They were reported to have been meeting over lunch to discuss and find a formula acceptable to all for an effective surveillance mechanism to oversee the standstill commitment of the Uruguay round.

According to some of the participants, smith did not participate in the discussions but at the end told the other delegates that he had some bad news and good news for them.

"The bad news", smith is reported to have said, "is that the U.S. Administration will soon be breaching the standstill commitment undertaken at Punta del Este.

"And the good news is that many of you will also be doing this", and so they should not create any surveillance mechanism which too much powers.

"Let U.S. make the GATT Director-General and the Secretariat the surveillance mechanism, and let the Director-General send U.S. a letter when we violate, and we won' t mind it" Smith is reported to have added.

Dunkel is reported to have then remarked hat was precisely because the U.S. would not bother about such a letter that an effective surveillance mechanism had to be created.

The entire exchange having come at the end of the working lunch, when participants were about to break up, the subject could not be pursued further, participants later reported.

Earlier, on Thursday, at the annual session of the GATT Contracting Parties, smith had been the odd mad out in taking the view that the standstill commitment was "a political undertaking ... independent of the liberalisation negotiations of the Uruguay round".

The U.S., smith had said, would not accept a surveillance mechanism under the control of the GNG, but would only accept an arrangement "overseen by, supervised by, and reporting to the TNC (Trade Negotiations Committee)" set up by the ministers at Punta del Este to carry out the Uruguay round negotiations.

Under the format of the Uruguay round, the GNG on the GATT side, and the group of negotiations on services (GNS) outside GATT framework, are both subordinate to the TNC and report to the TNC (the Trade Negotiations Committee.

The U.S. view of the nature of the standstill commitment has not been accepted by others, not even by some of the industrial countries who traditionally provide the U.S. with blind support in GATT.

Most third world countries also see the standstill and rollback commitments as their only gain from the Uruguay round.

Some of them say that despite all the subjects on the agenda, much of the Uruguay round negotiations would be among the major trading blocs, "and on new issues", with old traditional and perennials (including tropical products, etc.) likely to be shoved under the carpet once again.

In this view they felt that effective standstill and rollback, and concomitantly a comprehensive safeguards agreement, might be the only gain.

And if the standstill is not effective, and a time bound rollback programme cannot be quickly negotiated and agreed upon, the third world countries must be prepared to block the entire negotiating process.

As to the U.S. view that standstill is "political" commitment unrelated to the liberalisation negotiations, they note that the negotiations on trade in goods, in part one of the Punta del Este declaration, is a decision of the Contracting Parties meeting at Ministerial level.

The commitment to standstill and rollback is a part of this decision "to enter into multilateral trade negotiations on trade in goods within the framework and under the aegis of the general agreement, on tariffs and trade".

Section "C" of this part they note, starts by saying that "commencing immediately and continuing until the formal completion of the negotiations, each participant agrees to apply the following commitment".

Contrary to the contention of Smith at the session of the CPS, this wording makes clear that the commitment is political and legal, and far from being independent of the negotiations is a pre-condition.

The standstill, they note, involves three commitments of which two are clearly legal in terms of GATT.

These are the commitment:

--Not to take any trade restrictive or distorting measures inconsistent with GATT provisions or other instruments negotiated within or under its auspices, and

--Not to take trade restrictive or distortive measures, even in legitimate exercise of GATT rights, that would go beyond what is necessary to remedy specific situations.

Both these, third world participants say, are legal obligations under GATT, and the Ministerial decision at Punta del Este is thus a political reaffirmation of the legal commitment.

Only the third part of the standstill, "not to take any trade measures in such a manner as to improve its negotiating positions", could be said to be a political commitment, but one directly linked to the trade liberalisation negotiations of the Uruguay round.

Smith’s speech at the session of the CPS, and is remarks a day later at the working lunch, appear to have aroused concern not only among the third world countries, but also the industrial trading nations.

Some of them see this as part of "Mike Smith’s bad-cop act" and part of the effort to psychologically prepare the Uruguay round participants for protectionist legislation and actions that would come in 1987 out of a Congress controlled by democrats.

With President Reagan clearly crippled by the growing controversies over the sale of arms to Iran and use of those funds to illegally supply Nicaraguan contra rebels, the U.S. trade representative and his officials will find it perhaps even more difficult to buck the Congress or threaten vetoes.

Some like Canada seem to be prepared to support the U.S. position that the surveillance mechanism should report directly to the TNC, without the GNG being involved while others say that while the surveillance mechanism could directly report to the TNC, the GNG too must be keep in the picture.

But all of them agree that there is need for an effective surveillance mechanism.

Some EEC sources view the U.S. posture as essentially aimed at preventing an effective surveillance mechanism or discussions in the GNG which would put U.S. policies and actions under the spotlight of frequent multilateral scrutiny, preferring the more diffused and less frequent meetings and/or discussions in the TNC.

There are others who feel that there is also perhaps a U.S. effort to use any such review and appraisal of the implementation of the standstill commitment by the U.S. at the TNC forum to create a linkage between the pace of negotiations on goods and that on services, and secure trade-offs by using the danger of congressional protectionist actions and/or administrative responses to congressional pressures.

There are also some who envisage using the TNC forum and discussions on serious violations of standstill or lack of progress on commitment, to block any progress on the negotiations on services, which is legally distinct and separate from negotiations on goods, and thus play their own version of the "bad-cop, good-cop routine".