Oct 9, 1992


GENEVA, 7 OCTOBER (CHAKRAVARTHI RAGHAVAN) -- Since everyone underlines the importance of a successful conclusion of the Uruguay Round and since the outcome is more or less known, is there any study which indicates possible income-generating effects of the conclusion of the Round, the President of UNCTAD's Trade and Development Board, Gunduz Aktan asked an international group of experts here last week at an informal consultations with them on interdependence.

But Aktan got no answer from the experts.

The "Draft Final Act" (DFA) as its official title or the Dunkel Draft Text (DDT) as its critics call it, incorporating proposals to bridge the gap among parties, and enable the conclusion of the Round, and covering all the areas of negotiations in the Uruguay Round, were put on the table by the GATT Director-General Arthur Dunkel in December 1991.

Since then Dunkel and other GATT officials, as well as the trade policy establishments in countries have all been repeating the imperatives of a successful conclusion, and the billions of dollars trade liberalisation that would take place with beneficial effects for all participants.

The billions of dollars of benefits arc also bruited about in the financial press.

All countries, and groups of countries - whether at the OECD, IMF/World Bank meetings, Group of 77 or the recent summit of Non-Aligned countries - in all their documents call for carry and successful conclusion of the negotiations, with developing countries adding the worlds "balanced results".

Against this background, none of the experts at the UNCTAD consultations, ventured an answer to Akton's query as to the likely income-generating effects, though several of them in their presentations, and at their own meetings earlier in the week, convened by the UN's Committee on Development Planning and chaired by CDP member (Greek economist, former Minister and now opposition MP) Gerassimos Arsenis, had discussed the state of the world economy, increasing trade protectionism, emergence of regional trading blocks and the stalled Uruguay Round of trade negotiations.

The issue has become of some critical importance in the context of the attempts this weekend in Brussels of the U.S. and EC Ministers trying to cut a deal and resolve their differences, and push the Round to a conclusion this month, before the U.S. public go to the polls in the Presidential elections on 3 November.

If a deal is cut between the two, several Third World negotiators expect, attempts to renew the stalled negotiations in Geneva and attempts to conclude it quickly (as the U.S. and EC want), with developing countries and others having problems or seeking changes told to shut up.

The U.S. and EC Ministers are due to meet at Brussels this week-end and on the assumption that they would reach an understanding, the compromise is to be presented on 16 October to the EC's summit at Birmingham, originally called to deal with the Maastricht problem and the currency crisis.

The U.S. wants the EC to give way on the oilseeds dispute, while the EC wants an overall settlement including on the Uruguay Round and other issues.

Whether the U.S. and EC would in fact be able to agree and clinch a deal, despite many optimistic forecasts, seems still an open question.

On the U.S. side, President Bush and his negotiators are looking to get some positive results that could influence the voters of the mid-West, particularly states like Illinois where the Soya exports to the EC and the administration's inability to secure it have become a big issue.

If an agreement, on Uruguay Round and oil seeds dispute, comes just a few days before the 3 November polls it would place his Democratic opponent, Bill Clinton, in a difficult situation.

Without careful study, particularly if the "agreement" is applauded by business interests, Clinton would not be able to oppose it outright - in any event there will be gainers and losers, and both camps will try to persuade Clinton.

And, Bush election strategists probably figure that like the NAFTA, on balance Bush will benefit, more so when the fine print and its effects would not be known until everything is sewed up in Geneva.

This process, involving negotiations on market access, even agriculture and services, etc., could take a few weeks, given the best will in the world.

The EC for its part appears to be calculating that, facing a difficult election and one in which every day the chances of his being defeated are brightening, President Bush and his administration would be ready to compromise and reach a deal that could be presented to the domestic electorate as a gain for America.

In this view, given the uncertainties for Bush and anxiety to gain, the outcome could be the best that the EC could hope to get. And if Bush were to lose and Clinton is elected the EC would not still lose much: the consequences of repudiating an agreement could prove politically high for Clinton.

But both sides may be playing a poker or bridge game of bluff and counter-bluff, some negotiators here believe.

The U.S. is coming to Brussels with the NAFTA initiated on Wednesday at San Antonio by all three countries (U.S., Canada and Mexico), and thus increasing worries of industries and service enterprises in countries outside of potential problems to them, because of NAFTA's restrictive rules of origin favouring its three members. This could help persuade the EC that its own interests lie in securing an agreement now.

In an effort to tell the EC that two can play at the subsidy game, the U.S. has also increased subsidies for exports of its Soya and cottonseed oil.

The U.S. is also threatening to impose high tariffs on a billion dollar worth of EC exports to the U.S., as a retaliation for the EC's refusal to implement the GATT panel rulings and restore the EC market to U.S. Soya producers and exporters who have lost around there.

For President Bush, the only thing that could have some influence on the election is a solution to the oilseeds dispute with the EC, and a solution that will result in the U.S. being able to tell the Soya farmers that their access to the EC market would increase.

But an increase or promise of increased access for Soya producers can come only if the EC agrees to a settlement that will result in this.

Even a retaliation, while it would make Bush look macho, particularly in the context of the Clinton taunts over this, would not benefit the Soya producers of the U.S., only other competitors of EC products in the sectors hit by the U.S. retaliation. It will prove small solace to the Soya producers.

Sensing this, the EC is pushing up the ante, and is making any solutions to the oilseeds dispute in which U.S. Soya farmers can gain perhaps, contingent on an overall settlement of Uruguay Round differences including on agriculture, services, etc.

But while the two, with their vast array of experts and technical capacities, are making at every step quick calculations of benefits and losses to clinch deals, the developing countries are in no such position.

Even in developing countries, where there is sizeable opposition to the Dunkel Draft Text, and the governments are pushing for its acceptance, there seems to have been no clear assessment of the benefits or losses.

In these countries, the Finance Ministries have pushed through unilateral trade liberalisations and tariff cuts, at the behest of the IMF and World Bank, and these have already benefited the Industrialised world, their negotiators in the Uruguay Round are trying to get some "recognition" and benefits.

But the recognition will come, if at all, only if they "bind" the tariffs. While theoretically at some future point they could unbind or renegotiate the tariffs, as the U.S.-EC oil dispute shows it will be a very difficult and costly one.

In Agriculture, while there are some major gaps to be filled in bilateral and plurilateral negotiations, there is some evidence that among the developing countries, the Asians and Africans will lose in terms of foreign exchange impact (with some gains being more than offset by increased import costs of other agricultural commodities). The Latin American and Caribbean region would probably gain an average 100 million dollars a year, with even this gain confined to a few countries only.

Within the Cairns group, Australia, New Zealand, Argentina and Brazil have come out in favour of accepting the Dunkel text, and have said that their governments having considered the text have accepted it.

But even within Argentina and Brazil, conversations with some of their officials suggest, the positive assessment has been made mainly from the viewpoint of likely gains in agricultural exports.

Given that these two are major exporting countries of temperate zone products, and are looking to non-subsidised competition in third markets and increased access to the EC market, even in these two countries no assessment appears to have been made, for example, of the impact of the TRIPs agreement on their agriculture.

While much of the focus, and calculations of gains and losses of increased patent and trade mark protection, have focused on pharmaceutical and drugs, signatories to TRIPs are obligated to provide either patent protection (according to the norms laid down in the agreement) for plant life, or provide sui generis protection, meaning application of Plant Breeders Rights in the WIPO-administered Union for Protection of Plant varieties (UPOV).

The original UPOV conventions, which provided exemptions for Breeders (plant breeders in use of protected varieties for further breeding) and Farmers (enabling farmers the right to save seed from harvests for sowing the next crop have been severely restricted under the revised convention which most developing countries, not parties to the original convention, would have to accept.

Some of the experts at the UNCTAD consultations privately said later that at their own meeting, there had been some papers about the trade effects, but they were found to be based on assumptions, including some trade coefficients, that would be highly exaggerative, and that all one could say was that a failure would shake investor confidence while, hopefully, a successful conclusion would provide such a boost and spur growth and trade.

Though econometrists in the international institutions, particularly of the Fund/Bank, OECD and GATT frequently come out with some reassuring statements and projections (including expected growth in trade), no projections have been made and are in the public domain.

Part of the problem of no one being able to say, even within a reasonable approximation, some of the negotiators say, is because the DFA (or the DDT as its critics call it) can be completed and become an agreement ready for signature, only when the bilateral and plurilateral market access negotiations in goods and for initial commitments in services are completed and schedules are drawn up.

But even making allowances for this, much of the other parts of the text are clearly set out, even though one or other group of countries have been seeking changes. These include such areas as the "gradual integration" into the General Agreement of the trade in textiles and clothing, the "liberalisation" of agricultural trade and subjecting it to GATT rules and disciplines, the agreement on "Trade-related Intellectual Property Rights" (TRIPs), the basic framework for the services agreement, and the wide range of rules (anti-dumping, safeguards, trade-related investment questions, etc).

Much of the talk of the beneficial effects of the Round, via trade and development are based on classical and neo-classical theories of benefits of free trade.

But these theories are based on existence of perfect or near perfect markets. And even in the days of Ricardo, who used the example of benefits of exchange of Portuguese wines and sherries for British textiles, the Portuguese peasants may have been producing and making wines, but the bottling and transport and trade were in British hands.

Also, the neo-classical theories of benefits of trade liberalisation - and even of unilateral liberalisation - are based on the "fact" that post-war period for the industrialised world saw very large growth in trade and general welfare and prosperity - the so-called golden age - and the fact that in the same period there have been successive rounds of GATT negotiations, with reduction of tariffs and some relative certainty of trading opportunities through rules and disciplines.

However, the attempt at drawing a causal fink has been questioned by many, and there is a wealth of evidence to suggest that the GATT rounds of liberalisation accommodated the expansion of production in the industrialised countries due to the then practised Keynesian policies of government intervention and stimulation of the market and demand as well as technological changes and their easier spread and increases in productivity.

In any event, the major industrialised countries are approaching trade issues, no longer in terms of the free trade and free market and Ricardian theories, but in pure and simple neo-mercantilist terms of what benefits and gains it would bring to their countries and what losses.

Their inability within their own countries to set off the gains and losses - since they are spread across different sectors and the losing sector, and the capital and labour employed there, cannot appreciate that their losses is offset by gains for others - is at the root of their problems of reconciling differences and settling the Round.