Apr 1, 1992

DUNKEL'S "WINDOW OF OPPORTUNITY" CLOSES.

NEW YORK, MARCH 30 (CHAKRAVARTHI RAGHAVAN) The Uruguay Round of multilateral trade negotiations has missed another deadline and GATT negotiators are next week expected to prolong the negotiations.

While the extension will be seen by the public, and the business community as signalling "failure", to avoid embarrassment both to the GATT and its principal trading nations, a formula is likely to be worked out to claim progress in negotiations since mid-January while calling for the talks to be complete before summer.

But in practical terms, short of a miracle, it is extremely difficult to believe that any such new deadline could be met.

Any practical attempt to revive the negotiations would have to await the November elections in the U.S.

GATT Director-General Arthur Dunkel, in his capacity as chairman of the official level meetings of the Trade Negotiations Committee (TNC) is this week holding a series of consultations, with individual delegations and groups to find a formula to claim progress and continuance of the Round.

Last December, Dunkel presented a draft Final Act, incorporating draft agreements in all the areas covered by the Uruguay Round, based to a large extent on texts evolved in the negotiations, but with Dunkel filling in figures and proposals in key areas where no agreement had been possible.

Dunkel, though did not explicit say so, had initially hoped that the text would be accepted or rejected as a package, on a take-it-or-leave-it basis. But this was not possible when the European Community (EC) objected to his agricultural compromises.

Dunkel then proposed intense negotiations on the basis of his text in a four-track process: market access in goods, initial commitments in services, in "cleaning up" the texts for internal consistency and their legality and a fourth track for considering and making changes in the substantive portions by consensus.

Under the timetable proposed by Dunkel in mid-January, and accepted by the TNC, negotiations for market access in goods and for initial commitments in services were to have been concluded in March and countries were to have filed their "schedules" by 31 March.

However, the chairman of the negotiating group on market access, Germain Denis of Canada, and the Chairman of the Group of Negotiations on Services, Colombia's Felipe Jaramillo, are due to report formally to Dunkel that there has been no progress in these negotiations and the timetables for completing them cannot be met.

The market access negotiations have come to a standstill because of the deadlock over agriculture.

In services, while there had been some initial progress, most participants have clawed back, given the state of the stalemate in agriculture and other areas.

Also, the U.S. has now filed a list of areas where it will seek exemptions or derogations from the application of the most favoured nation (MFN) principle which other participants see as making the services agreement meaningless.

The areas where the U.S. is seeking derogation including maritime transport and civil aviation, basic telecommunication services and financial services.

While the U.S. is not prepared to provide MFN treatment on maritime transport, on other areas, it says it would provide reciprocal benefits depending on the extent to which its other trading partners would liberalise their service sectors these areas.

The U.S. stance has thus virtually negated a carefully crafted services agreement.

The EC since mid-January has been press for the fourth-track process for making substantive changes in Dunkel's agriculture text, but so far others have not been willing.

Since mid-January, there has been no formal move to convene the fourth track.

Dunkel's own publicly stated posture is that any changes through the fourth-track depends on ability of those seeking changes getting the consent of their partners.

The U.S. and EC have held a series of bilateral negotiations but failed to resolve their differences. The latest attempt was during Chancellor Helmet Kohl's visit to Washington earlier this month, when he put forward some suggestions for compromise but were not accepted by the U.S.

Under the Kohl formula, the EC would be ready to accept both budgetary cuts in export subsidies as well as by volume. In return the U.S. would be expected to accept voluntary restraints and "freeze" its current exports of cam gluten animal feed substitutes. This would enable the EC to rebalance its import tariffs on some products now entering duty-free.

Apart from the U.S., this would have been unacceptable to others including several members of the Cairns Group of agricultural exporting countries.

Dunkel himself visited Washington last week, where he met the U.S. Trade Representative Carla Hills and Deputy Trade Representative Julius Katz.

After the meeting, White House spokesman Marlin Fitzwater said President Bush was very concerned about the possible collapse of the GATT and would welcome "a political push from whatever source" to get it moving.

This was perhaps the clearest acknowledgement that the U.S., which is embroiled in the Presidential elections, would be unable to give such a political push and is looking to other sources - presumably Chancellor Kohl and perhaps the forthcoming G7 summit in Munich.

There is some reason to believe that while Dunkel himself wanted to announce a suspension of the negotiations till end of the year, the U.S. and EC were against it.

Any such announcement by Dunkel would have some domestic political consequences for both, and more so for President Bush in the run-up to the November presidential polls.

Meanwhile in Paris, ministers from the 24-nation Organisation for Economic Cooperation and Development (OECD) have ended a two-day meeting calling for the U.S. and EC to settle their agriculture disputes and work towards a swift and successful conclusion to GATT.

However, it is becoming increasingly clear that this is quite impossible given the political realities of the U.S. Presidential elections and political problems in countries like France.

Several of the other trading nations, including Japan, Canada, Brazil, Argentina, India, Australia, and the Southeast Asian nations expressed frustration that the U.S. and EC were not progressing in their bilateral talks, and that the interests of other countries were being given less importance than the two major trading powers.

European Community Agriculture Ministers are meeting this week to discuss reforming the EC's Common Agricultural Policy (CAP), but there is little expectation that they would find solutions.

To enable the EC to accept the agricultural package, it wants concessions from the U.S., and at this point, Washington cannot be seen as making any such concessions.