Feb 14, 1990


GENEVA, FEBRUARY 12 (BY CHAKRAVARTHI RAGHAVAN)— The European Community is reportedly planning to present next week in the GATT, in the Uruguay Round negotiating group on the "Functioning of the GATT System" (FOGs), its ideas for institutionalising the GATT and its secretariat through an International Trade Organisation (ITO).

The proposed ITO to institutionalise and implement the Uruguay Round Agreements, while bearing a similar high-sounding name would be unlike that contemplated under the Havana Charter which was aborted when the U.S. refused to ratify it.

The new organisation would be a pale imitation of the Havana Charter and its ITO which had provisions relating to commodity trade and policy including market stabilisation and export earnings, provisions against restrictive business practices of private operators and obligations of countries to suppress such actions, and rights of countries to regulate investments and prescribe the conditions and terms on which it would be allowed to operate in a country.

If anything the proposals of the ICs in the areas of intellectual property, investments and services, go in the other direction, namely to restrict the rights of governments and enlarge the international space for their TNCs.

The EEC move would seek to get around the difficulties foreseen in incorporating into GATT, and make it binding on all the contracting parties, the agreements in the Uruguay Round in the new areas and themes: Trade in Services, Trade-related Intellectual Property Rights (TRIPs) and Trade-related Investment Measures (TRIMs).

It would also provide an institutional base for the GATT Secretariat and enable it to join hands with the IMF and the World Bank in being a trade policeman over the Third World.

The EEC ideas and plans have become known here after an informal meeting last week of the GATT Director-General Arthur Dunkel with some GATT delegates and the meeting last week at Neuchatel organised by the Swiss again of a selected few countries, where this issue of implementation of Uruguay Round results was reportedly discussed.

The GATT Secretariat's efforts to institutionalise itself, and join hands with the IMF and World Bank secretariats, received a setback last November when the report of the Director-General of GATT on his consultations with the chief executives of the Fund and the Bank came for sharp criticism, with India challenging the Secretariat’s position and underscoring its "functionary role".

Though Dunkel subsequently tried to clarify his report and provide some reassurance to Third World delegations by explaining away some of the implications in his original report, Third World CPs generally seemed somewhat reserved.

At that time the EEC had said that it would be presenting to the FOGs group its ideas on institutional issues.

Since then the EEC has been apparently sounding out some countries, and Dunkel in his informal consultations over a dinner would appear to have broached the issue.

In the EEC view incorporating possible agreements on Services, TRIPs and TRIMs into the GATT or GATT framework bristles with legal difficulties and problems.

There have been two suggestions in this regard: to use the provisions of Article XXV of the General Agreement (enabling Contracting Parties, acting jointly by a simple majority to take decisions to give effect to the provisions of the Agreement) to impose obligations of the new agreements on all CPs or to amend the General Agreement using the powers under Article XXX.

The EEC appears to have agreed with the view that neither is possible and would be open to challenge.

The powers under Article XXV could not be used to impose obligations on CPs in areas not covered by GATT - and none of the agreements contemplated in the three areas are now covered by GATT.

As for amendments to the GATT, they have to be accepted by the affirmative votes of two-thirds of the contracting parties and any amendment which would involve the rights enshrined in Article I - the right of non-discrimination and most-favoured-nation treatment would require the unanimous consent of all the contracting parties.

This is now seen as unlikely. In any event the amendments would be binding only on those CPs who accept them and not on others.

This is apart from the permissible limits of amendments under international law.

To get around these difficulties, the EEC is trying to suggest that a convention to incorporate and implement the results of the agreement should be adopted and signed, and that this should be done through the FOGs negotiations.

Some observers note the paradox of this suggestion.

If GATT could not be amended to give effect to the agreements, and if GATT CPs acting jointly cannot impose obligations not now covered by the General Agreement, could negotiations launched by the GATT CPs in one particular area do the same?

When the idea was broached by Dunkel over a dinner, and by the EC and the Swiss at the Neuchatel meeting, the U.S. itself was reportedly cool and non-committal.

The U.S. Congress refused to ratify the Havana Charter on the ground that it would take away and abridge the powers of the Congress in deciding on trade policy.

Would the Congress be prepared to do so now, particularly since the EEC makes clear that the new convention, which would make the General Agreement (so far a provisional treaty) into a definittive one and thus rank in U.S. domestic law with the U.S. Constitution.

The U.S. suggested that Congress could take a new look if the U.S. gained substantially its objectives in the Round.

Third World delegations viewed the whole idea as too premature and that unless the contents of the various agreements and obligations to be assumed became known it would not be possible to consider issues of international implementation, etc. They also raised the issue whether the U.S. would be prepared to ratify a treaty now which would override U.S. domestic law.