Apr 11, 1987
GATT'S CREAKING MACHINERY NEEDS IMPROVEMENT, BUT HOW?GENEVA APRIL 9 (IFDA/CHAKRAVARTHI RAGHAVAN) -- Uruguay Round negotiators appeared to agree this week that GATT's dispute settlement mechanisms, and the entire machinery of GATT, are losing credibility and need improvements, but had very differing perceptions of both causes and solutions. The discussions on these issues came up reportedly this week at the first meetings of the negotiating groups on dispute settlement and on the strengthening of the GATT system. The discussions in the dispute settlement group, according to participants, showed that almost everyone appeared to agree that GATT's dispute settlement machinery needs improvements and changes. While some lime the United States appeared to see the dispute settlement process as a kind of judicial and juridical one, others viewed it as essentially a mediatory and conciliatory process to promote settlement. But both sides appeared to agree that while procedures and mechanisms could be improved, ultimately success of the machinery of dispute settlement would depend on "adequate political will" of the Contracting Parties (CPS). Even here there appeared to be some nuances of differences, one participant said. Many suggested that "political will" was needed to accept and implement panel rulings, but the EEC spoke of need of political will "to accept compromise solutions". The EEC reportedly underlined its view that GATT did not provide for judicial rules and sovereign states could not be forced to accept decisions which they regard to be in breach of their balance of rights and obligations. GATT dispute settlement mechanisms should not be used to introduce new obligations. Nor could divergent interpretations (among members) of GATT rules and principles be bridged through panel rulings leading to new obligations. The U.S. stressed that an "effective" GATT mechanisms for dispute settlement was essential for the health of an expanding international trading system. While the mechanism had generally performed well, some spectacular failures had resulted in loss of credibility for the GATT. The most obvious drawbacks, in the U.S. view, were inadequate panel reports, and difficulties or blockages created by parties to a dispute. The primary aim should be to resolve disputes fairly and expeditiously. Japan reportedly noted that the "conciliation" and "adjudicatory" approaches were diametrically opposed, and need to be discussed in depth. But the U.S. reportedly saw no contradiction between the two, since elements of mediation and conciliation could be combined with a juridical approach to the dispute. Earlier, Canada reportedly underscored the need to improve the role of GATT in dispute settlement in order to maintain the credibility of the system. It was necessary to have "clear and enforceable" rules and disciplines, and effective monitoring of the implementation of the settlement. It was necessary to find ways to ensure due respect for the findings of panels and for adoption and implementation of their recommendations. India reportedly felt that clearer rules and principles would have to be sought through negotiations in other negotiating groups. The main thing was need for political will to ensure implementation. Brazil felt that the essential element was clear and effective application of existing GATT rules. Dispute settlement procedures were primarily for conciliation, and could not be used to create obligations not clearly established in the text of the general agreement. It should not also be used as a supra-national jurisdiction to prematurely internationalise conflicts. Mexico reportedly put forward some "non-exhaustive" elements for negotiations in the form of questions. These called for speeded up procedures for establishment of panels, designation of chairman and members, and elaboration of terms of reference - preliminaries that now sometimes take too much time. Mexico also reportedly raised the question of what could be done when a panel's ruling is blocked from adoption by a CP whose measures gave rise to the dispute, and where recommendations of the CPS (on a panel report) are not implemented. South Korea reportedly noted that present procedures provide as remedies, in cases where complaints are upheld by the panels, retaliation by the aggrieved party. But this was not meaningful for third world countries who had very limited retaliatory power vis-à-vis their major trading partners. There was hence need for renewed commitments to the principle of special and differential treatment for third world countries. A number of other third world countries also spoke in support of the South Korean view. But the EEC reportedly said that third world CPS had no retaliatory power, since they had not undertaken obligations, and had not made any "concessions" to their trading partners. The remedy lay in assuming greater obligations. India rejected this view that "nullification and impairment" of GATT rights could accrue to a Contracting Party only on the basis of a minimum level of obligations. This would really amount to third world contracting parties not having any "GATT rights". In the group on strengthening the GATT system, there was general agreement that the system needs strengthening, but wide divergences on the reasons for weakness and possible solutions. Australia had tabled a paper for more effective "surveillance" among other things, it called for more extensive review of trade policies of "all developed country CPS as well as more important developing country traders". It also wanted surveillance and notification procedures to extend to "industrial policy" and "other social and economic factors" affecting trade policy in countries. The third world countries generally complained of asymmetry in current GATT surveillance mechanisms and need to correct it. India reportedly noted that trade policies of third world countries were examined in the GATT's balance-of-payments (BOP) committee, but there was ho such mechanism for surveillance of policies of industrial countries. Also whole sectors now escaped surveillance - textiles and clothing, agriculture, bilateral cartels and cartel-like arrangements among countries, and "grey area" measures. The task was to end the asymmetry and not to enhance the surveillance of weaker partners. The U.S. dismissed complaints of asymmetry with the remark "asymmetry lay in the eye of the beholder". U.S. policies were subject to greater scrutiny at the semi-annual special sessions of the GATT Council, more than that of other countries, the U.S. delegate noted. The EEC on the other hand argued reportedly that the asymmetry was because third world countries used the BOP argument to claim exceptions from GATT rules. "Do away with exceptions and there will be no surveillance or asymmetry in surveillance", the EEC delegate reportedly said. India also reportedly questioned the Australian idea that "industrial policy" and wider policies in the area of "economic and social factors" should be subject to GATT surveillance. In this connection, the Indian delegate reportedly supported the EEC view that the major problems of the trading system arose in the monetary and financial sphere, and remedies should be sought there and not through GATT. The approach should not be to question national policies on the criterion or ideology of GATT, but see how contractual obligations were being met or otherwise, and whether policies of CPS were impeding fulfilment of obligations. Australia had also suggested more effective ministerial involvement in GATT's decision-making process, and suggested a Ministerial level "steering committee", relatively small but sufficiently representative on the model of the "consultative group of 18" (CG-18). The U.S. found the idea attractive, noting that Finance Ministers and Foreign Ministers met regularly, and there was no reason why Trade Ministers should not do so. But the idea did not find favour with Japan or the EEC, with the latter noting that the CG-18 was only a "consultative body" and not a decision-making one. India was also doubtful about frequent Ministerial meetings and involvement in decision-making. The 50's and 60's, purportedly the "golden period of GATT" did not have any Ministerial involvement, whereas the 1982 Ministerial meeting did not bring about greater effectiveness. Any effort to transpose the IMF models of interim committee or the G-10 intro GATT would undoubtedly result in creation of an equivalent G-24. GATT had so far functioned as a "democratic body" and this should be kept. Problems of the trading system were due to monetary and financial problems, and superficial or organisational changes would not be of any use. If a total view of the economic system was to be taken, the coming opportunity of UNCTAD-VII, where ministers would be participating, would be the best occasion. "Let U.S. make use of it and decide what we can do", the Indian delegate reportedly suggested.