TWO NEGOTIATING GROUPS CARRY OVER INITIAL PHASE WORK.

Nov 25, 1987

TWO NEGOTIATING GROUPS CARRY OVER INITIAL PHASE WORK.

GENEVA NOVEMBER 20 (IFDA/CHAKRAVARTHI RAGHAVAN) – Two more Uruguay Round GATT Negotiating Groups, those on Natural Resource Products and on GATT Articles have ended this week their fourth cycle of meetings without completing their initial phase of work, and have agreed to carry them forward into the new year.

Under the negotiating plan agreed in February, each of the negotiating groups were to complete their initial phase of work by end of 1987, and each of them had been set a specific number of tasks to be completed in the initial phase.

The group on GATT Articles had been mandated to undertake a review of the GATT articles, provisions and disciplines, on the basis of requests from Contracting Parties (CPS), and on this basis determine "issues on which negotiations are appropriate".

The group on Natural Resource Products had to determine the issues relevant to the negotiating objective, elaborates the techniques and modalities for achieving the agreed objectives, and establishes "a common negotiating basis".

Neither group has been able to agree on issues to be negotiated and/or agree on modalities and the negotiating basis.

At the final meeting of the group on GATT articles this week, a chairman’s statement about agreed conclusions listed the various articles that had been reviewed by the group "with a view to determining issues on which negotiations are appropriate".

However, the chairman’s statement reportedly said, in vie of the large number of issues proposed by participants for review, and the considerable number of papers submitted and the differing views expressed, "the group recognises the need for further review of these matters as the negotiating process evolves".

The U.S. in its sumissions had said that any article or provision suggested should automatically come up for negotiations.

This was not accepted by others, nor the U.S. suggestion that the subsequent negotiating phase could begin without an agreement on issues to be negotiated, and these issues could be agreed upon during the negotiating process itself.

The US. Has been seeking within this group negotiation to change the GATT provisions in article XVIII relating to the restrictions that third world countries might impose on account of their balance of payments considerations.

A principal focus of the U.S. attack here is to change the current provisions giving third world countries, applying BOP restrictions, considerable autonomous decision-making power to determine their essential and non-essential imports and how they would restrict the latter.

Third world countries have not agreed to take up these articles for negotiations and change.

The agreed conclusions by the chairman however said that the group had agreed that CPS would have the right at a subsequent stage of negotiations to request review by the group of articles or disciplines which in the first instance had been taken up by them for consideration by other negotiating groups.

This appeared to cover the views of Australia and a number of others that while the issues of subsidies for agriculture, and connected provisions, would be taken up by them in the negotiating groups on agriculture and subsidies, if necessary they should be able to bring them before the GATT articles review group also.

The negotiating group also agreed that CPS could request review of additional articles, provisions or disciplines (which might not have been accepted for review and negotiations), but on the basis of clearly outlined reasons why they considered these provisions as needing negotiations.

The articles listed as having been taken up for review in the initial phase were identified as:

--Articles II (1) (B), relating to the schedule of tariff concessions on imports, article XII relating to general restrictions to safeguard balance of payments (BOP), article XIV relating to exceptions to the rule of non-discrimination, article XV relating to exchange arrangements of CPS, and article XVIII special provisions of governmental assistance to economic development and BOP restrictions applicable to third world countries;

--Article XVII relating to state trading enterprises;

--Article XXI relating to security exceptions (invoked by the U.S. for trade restrictions against Nicaragua, and during the Malvinas War by the EEC, Canada, Australia and New Zealand for sanctions against Argentina);

--Article XXIV relating to customs unions and free trade areas, article XXV (5) relating to grant of waiver from GATT obligations;

--Article XXVI (5) (C) enabling a colonial or metropolitan territory becoming a full CP by mere notification on ground of full autonomy for external economic relations (used recently to enable Hong Kong and Macao to become members);

--Article XXVIII relating to modification of schedules and parties with whom prior consultations and negotiations have to be held;

--Article XXXV or the non-application clause under which a CP could exclude another CP from GATT benefits in certain circumstances;

--The 1947 Protocol of provisional application of GATT and its "grandfather clause" which has enabled the U.S. to continue to act in some areas outside GATT through its pre-GATT laws.

In the group on natural resource products also, no agreement was reached either on a common negotiating basis or on the techniques and modalities to be adopted. The group agreed to carry forward this work into the new year.

At this week’s meeting of this group, Australia raised the issue of subsidies provided by governments in natural resources, and particularly coal.

Australia also sought elimination of all barriers to trade in these products over a ten year period, including by reducing all tariffs to zero and eliminating non-tariff barriers and banning production subsidies.

The Australia paper referred in this connection to the level of subsidy provided in Japan and West Germany for coal production.

In 1985, Australia said, the EEC member governments had provided 1.916 million ECU’s in aid to coal industry, with individual members providing a diverse range of other subsidies.

West Germany in 1987 was estimated by Australia to be spending 419 million dollars for coal production. There were also indirect subsidies and restrictions on German coal imports by the electricity generating and steel industries.

The electricity generating plants were forced to buy local coal in fixed amounts, and this involved a 5.5. billion subsidies, which were met by, increased rates by electricity consumers.

Total subsidy by Japan to its coal industry was estimated at 2.47 billion dollars.

The Australian paper and submissions also underlined the historically low commodity prices, and called for reduction of barriers to increase these prices.

A GATT Secretariat study for the group on aluminium and lead also spoke of the high tariff and non-tariff barriers affecting trade in these commodities.

But neither the Australian paper nor the GATT Secretariat studies have dealt with the oligopolist control over the trade in commodities and other natural resource products exercised by transnational corporations (TNCS).

The GATT’s background study on aluminium acknowledges that six TNCS (Alcoa, Alcan, Kaiser, Reynolds, Pechiney and Alusuisse) have a leading position in the industry, and are associated with new projects because of their trade links, proprietary technology, and ability to provide for large investments and rap economies of scale.

However, the GATT study notes, the structure of the industry has changed because of the number of independent companies integrating backwards and forwards, the desire of third world countries to control their resources, and increase in state ownership in the industry.

UNCTAD studies show that in the case of ores, minerals and metals the percentage marketed by TNCS range from 50-60 percent for phosphates, 75-80 percent for tin and 75 percent for crude petroleum, 85-90 percent for copper and 90-95 percent for iron ore and bauxite.