CHANGES IN FOGS TO OVERSEE THIRD WORLD

May 11, 1988

CHANGES IN FOGS TO OVERSEE THIRD WORLD

GENEVA MAY 9 (IFDA/CHAKRAVARTHI RAGHAVAN)— Third World contracting parties, increasingly dissatisfied with what they see as the partisan way the chairman of the GATT negotiating group on FOGS is directing discussions, are planning to put forward their own ideas for strengthened GATT surveillance, according to Third World sources.

Sources said that as a Jamaican initiative, supported by Brazil, Egypt, India, Mexico, Tanzania and others, the informal group in GATT of the Third World contracting parties has had discussions on this question, and a paper could be tabled for the next meeting of the FOGS group in the week of June 20.

One of the issues on the agenda of the Uruguay Round of GATT multilateral trade negotiations (MTNS) is the -question of improvements in the functioning of the GATT system (FOGS), and a negotiating group chaired by former U.S. assistant secretary of state, Julian Katz, is looking into these matters.

The Punta del Este declaration of the ministers gives a three point mandate in this area:

--To enhance the surveillance in -'he GATT to enable regular monitoring of trade policies and practices of CPS and their impact on the functioning of the multilateral trading system,

--To improve the overall effectiveness and decision-making of the GATT as an institution, including, inter alia, through the involvement of ministers, and

--To increase the contribution of the GATT to achieving greater coherence in global economic policy-making through strengthening its relationship with other international organisations responsible for monetary and financial affairs.

The FOGS group held a meeting last week.

The group had before it a "chairman's discussion paper's on 'trade policy review mechanism'. The paper is purportedly a 'third revision' drawn up by the chairman in the light of discussions in the group.

At the meeting Third World delegates reportedly expressed their surprise and disappointment that despite the repeated reiteration of their views, clearly and forcefully, on the mandate of the group in this area, successive revisions of the discussion paper by the chairman had ignored them and had not taken account of their views.

In this context, the Third World participants reportedly were critical of the chairman's suggestion that his 'discussion paper' should be converted into a 'negotiating text', and declined to go along with such a suggestion.

After the meeting, Third World participants said that it was now much more clear that the chairman and the leading industrial countries were trying to subvert the mandate.

The entire thrust of the ministerial declaration, they noted was the call for "enhanced surveillance of trade policies and practices of CPS to ensure better adherence to GATT rules and disciplines and for the strengthening of the multilateral trading system' based on GATT.

This mandate was being "sought to be undermined" by the proposals in the successive 'discussion papers' of the chairman, and the proposals being put forward by industrialised countries.

"There is a concerted effort to reduce this 'surveillance' concept to the level of a 'trade policy review', through which the industrialised countries could survey the entire range of 'economic and development policies and objectives" of Third World countries and "cover any aspects of policies bearing on trade'', one participant commented.

Third World sources said that apart from the chairman's "discussion papers", many proposals in the group, such as that of Canada, made it clear that the 'trade policy review' would be linked to 'strengthened institutional relationship" between GATT and the fund and the Bank.

Some of the proposals envisage visiting teams of representatives of two or three CPS, and IMF-GATT/Bank staff going to Third World countries and examining the entire range of policies.

The EEC and other industrial countries argue that even now IMF teams visiting Third World countries for article IV consultations regularly drop into Geneva for consultations with the GATT secretariat.

"Let us formalise it and send a joint team", the EEC reportedly has suggested.

The main aim of this would be to monitor the range of economic policies of Third World countries with ' in the framework of the philosophies propagated by the fund and the Bank.

Such a trade policy review mechanism, without a frame of reference or yardstick of GATT obligations, would have serious and for-reaching implications for Third World countries, the Malaysian delegate, Amb. Eng Hee Khor reportedly pointed out in the group.

A number of Third World countries at this and earlier meetings of the group have insisted that any trade policy review had to be in terms of GATT obligations, and in relation to the impact on the GATT trading system.

Third World countries with import restrictions on grounds of balance-of-payments are already subject in GATT to close surveillance.

It was the policy of the industrial countries, which by the size of their economies and trade have considerable weight and influence on the global economy and the trading system, that currently face no surveillance in respect of their trade practices.

At present, there is some unfocussed discussion of trade policies and measures at the twice a year 'special council' meetings. What is needed, Third World countries say, is a more focussed discussion, including on the plethora of 'grey area' measures that these countries apply.

While Third World countries have been pressing for 'enhanced surveillance' of the policies of the industrial countries in GATT (where currently there is no such surveillance), the chairman Katz has reportedly been taking the view of the U.S. and others in eschewing the very word 'surveillance'.

The chairman's papers have made clear that he wants a joint IMF-World Bank-GATT mechanism.

The EEC and others have made clear that they want 'a broad review' in terms of the 'broad philosophies' of the fund, Bank and the GATT.

Third World countries fear that rather than strengthening the multilateral trading system, as the ministers had mandated, the kind of 'review' that chairman Katz and industrial CPS want, would increase pressures on Third World countries not only to liberalise their trade regimes, but also their entire economies.

Third World countries have repeatedly pointed out that enhanced surveillance for a strengthened GATT system must focus on the vast array of GATT-inconsistent protectionist measures - grey area measures like voluntary export restraints, orderly marketing arrangements and the like.

In the light of the chairman's persistent disregard of their views, Third World countries have come to the conclusion that they would have to put forward their own views and submissions in a paper for the group.

The FOGS group would also appear at last week's meeting to have had discussions on the two other items in its mandate.

On the issue of improving "the overall effectiveness and decision-making of the GATT as an institution, Third World participants said that much of the attention has been directed to, ministerial involvement', and very little to improving effectiveness and decision-making.

On the issue of ministerial involvement, there appears within the group a general support that ministers could meet once in two or three years at the time of the annual meetings of GATT contracting parties.

The U.S. has been pushing for the idea of 'a small steering group' of ministers.

But this idea has run into opposition not only from Third World countries but also several of the industrial countries, including the EEC and the Nordics.

Despite this, the chairman of the FOGS appears to be persisting in his attempt to bring about a small steering group of ministers in some form or other.

In other negotiating groups when an idea has run into so much opposition it would have been quietly dropped, one Third World participant said.

In this group, with a fervour that could be understood in a delegate, Kat’s is pushing the U.S. idea and trying to get a decision in some form, the participant commented. .

On the issue of GATT’s contribution to 'greater coherence in global economic policy-making' through strengthened relationship of GATT with other international organisations responsible for monetary and financial matters, the EEC has been pushing for strengthened institutional relationship involving GATT, the fund and the World Bank.

The GATT articles provide for some cooperation and collaboration between GATT and IMF in respect of balance of payments consultations.

But the EEC wants to push cooperation amongst all three, and covering a wider range.

The World Bank, the EEC reportedly has been arguing, is not 'a mere international financial institution', but "a development agency".

And while there are now mechanisms for cooperation among the three secretariats, there was need for creating institutional relationships, in the EEC view.

Such an institutional relationship would enable discussion of development policies and objectives.

Some Third World countries asked whether the discussions would focus on ' development policies and objectives of the U.S., Canada and the EEC’, or only of Third World countries who had to seek funds from the World Bank?

'Enhanced institutional relationship' lead where would such on to other Third World countries asked, noting that all three institutions have decision-making and consultation mechanisms which were least transparent, and subject to the control and influence of a few at the tap.

Argentine reportedly noted that the inter-relationship issues were discussed in UNCTAD, and sought a statement from the representative of UNCTAD on this issue.

While the representative of the UNCTAD secretary-general outlined the UNCTAD mandate and consideration of the interdependence of issues and economies, the EEC reportedly said that what was sought to be done in the GATT was not focussing on 'inter-dependence', but 'inter-relationship'.

Third World countries note that at present GATT is a 'contractual instrument', where the rights and obligations of countries are clearly spelt out.

What the industrial countries now want through 'trade policy review', strengthened IMF-GATT-World Bank relations and the like is to have a prescriptive instrument through which they could have a greater say in Third World trade and economic policies and objectives.