Nov 10, 1987


GENEVA NOVEMBER 5 (IFDA/CHAKRAVARTHI RAGHAVAN) – The Uruguay Round negotiating group on the Functioning Of the GATT System (FOGS) has ended its third cycle of meetings, with no clear picture emerging about the way ahead, participants said.

There has been far too much attention on getting Ministers involved, and too little on how the creaking GATT System could be made more credible by improving its decision-making capacity and effectiveness, one third world delegate later told IFDA.

While other negotiating groups will have a fourth cycle of meetings before end of this year in the initial phase of the Uruguay Round Negotiations, the FOGS Group does not plan any more meetings this year.

The group is chaired by Julius Katz, Former U.S. Assistant Secretary of State, whose unorthodox ways have earned him the sobriquet of "GATT’s 96th Contracting Party". (GATT’s current membership is 95).

Katz has been functioning in a more activist style, injecting his own views and ideas in discussions, unlike chairmen of GATT bodies, and particularly of the Uruguay Round Bodies, who play a more neutral and less obtrusive role in what is regarded as negotiations among Contracting Parties (and not with chairmen or secretariat).

The negotiating objective in FOGS, as spelt out in the Punta del Este mandate, is to develop understandings and arrangements:

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

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

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

At earlier meetings a number of delegations had put forward some general ideas and suggestions, orally or in papers, including by Japan, Canada and Switzerland. Katz also put forward his own discussion paper for trade policy review mechanism.

Among other things the paper suggests review of trade policies of all CPS in a full cycle of 3-5 years, each CP reporting annually on its trade policies and particular economic circumstances, and in relation to GATT principles and objectives.

The paper envisages the review of each country to be done over 3-4 days by a small body, if possible by visits to capitals, and with the Secretariat preparing a paper and formulating questions to be put, and with the review body preparing a report and proposing conclusions to be discussed in the GATT Council or a Trade Policy Committee where all CPS could make statements and adopt the report.

Japan in its paper had suggested the enhanced surveillance should be by consultations amongst the important 30 or so Contracting Parties.

In the discussions on the Katz’ paper, Australia, Canada, New Zealand, Nordics, Switzerland, while agreeing that the review should cover all CPS, favoured greater emphasis or special in-depth reviews of the major traders whose policies have special impact on the world economy because of their share in world trade.

Japan said that if all policies of all CPS had to be reviewed in a 3-5 year cycle, they would be looking at 30 to 40 countries every year, and hardly any review. It should be confined to a reasonable number of countries of importance.

The EEC favoured uniform treatment for all CPS, and did not favour classification on the basis of importance. The U.S. wanted a mix of countries to be reviewed every year, so that all the majors (U.S., EEC and Japan) did not figure in the same year.

Several delegations rejected the idea of the review body visiting national capitals. Argentina said in this connection that such visits would resemble visits from other international organisations (like IMF/IBRD Missions).

There were also differences among members on whether there should be conclusions, with many participants underlining the objective of increased transparency of policies and not enforcement.

The U.S. favoured review by a small body of 3-5 persons of technical competence, like GATT panels, and with descriptive rather than prescriptive conclusions and the overall review by the Contracting Party sessions.

Brazil saw the Katz paper as premature and needing many clarifications. There was need to avoid duplication of work done by other GATT bodies and mechanisms. The proposal to review all CPS and visit capitals was not feasible. Brazil did not also favour review by any limited body, and said it should be a body open to all CPS, and with no conclusions.

India pointed out that the mandate’s call for "enhanced surveillance" implied taking note of existing surveillance activities. The Katz paper, India complained, had not taken note of earlier views in the group by several members about existing asymmetric surveillance in GATT and need to tackle it, and need to avoid duplication.

The objective of enhanced surveillance and regular monitoring and review was from the viewpoint of impact on the functioning of the multilateral trading system. Not all trade policies of all countries would have an impact on the system, but trade measures of some would have significant impact. The enhanced surveillance would necessarily have to be of these trades’s measures.

The mechanisms should be opening ended, and through the GATT Council, rather than the session of CPS which were formal occasions for statements for record, and with little or no discussion or debate.

When Katz said they did not need a surveillance mechanism, but only a trade policy mechanism, India reportedly retorted that this might be the view of the chairman, but the mandate was different and participants had other views.

India also raised the question of how the enhanced surveillance would be different from the BOP to which third world CPS are now subjects?

Yugoslavia agreed that duplication should be avoided.

On Ministerial involvement, Canada favoured the CG-18 model (consultative group of 18 which has no decision-making authority) or Ministerial meetings of CPS every 2 or 4 years.

Sweden was willing to go along with the CG-18 model, but felt other possibilities should also be considered. Japan favoured a CG-18 structure or a Ministerial steering group of limited membership.

Brazil pointed out that the negotiating objective was the improvement of overall effectiveness and decision-making, and ministerial involvement was envisaged as one of the possibilities. Too much attention was being paid to ministerial involvement, and too little to improving the decision-making capacities.

Other organisations had frequent ministerial involvement, but this had not increased their effectiveness, and there should be no illusions on this score. At given moments in GATT, Ministerial involvement had been useful, but the problem was how to achieve universality for this.

Korea, Philippines and a number of others said they would have problems with a body with limited membership.

"We have to recognise some CPS are dominant", Katz is reported to have responded and suggested a UN Security Council model – with some permanent members and others on a representational basis.

India was gads that the chairman recognised some CPS were more important and dominant, but felt this was relevant for the work of enhanced surveillance and review of trade policies. But India had serious doubts about following the Security Council model for ministerial involvement and meetings.

India also questioned the view that Ministerial involvement increased effectiveness, and wondered whether there was not a need to distinguish between trade policy deliberation and decision-making in the GATT legal framework. Would ministerial involvement improve GATT’s dispute settlement? India asked.

The U.S. agreed that Brazil and India had raised important points to be considered. It agreed that ministerial involvement in a large number of meetings would not help, and the idea of annual meetings of the Punta del Este type was simply mind-boggling. The U.S. favoured a small body for ministerial involvement – a core of 15 industrial and third world CPS, and others on rotating seat basis.

The EEC said it was not against ministerial involvement, but they need to look at the objective, namely improved decision-making. But too many ministerial meetings would become banal and merely end up with press releases. Ministers could perhaps meet once every two or three year at annual sessions of the CPS.

On the third objective of increasing GATT’s contribution to greater coherence in global economic policy making, Canada had suggested periodic joint meetings of GATT and IMF/IBRD development committee, GATT officials being involved in the IMF’s article IV consultations with member-countries and in negotiations preceding approval of standby arrangements.

A number of countries had serious doubts and questions and objections.

Argentina wondered what was meant by coherence in global policy making, and what was to be the direction or end objective?

India agreed with the need for clarification and further in-depth discussion of the issue, and cited GATT’s own report that problems of the trade system emanated from the problems of monetary and financial areas.

The EEC agreed that trade policy could not be made to pay for the errors of monetary and financial policies, and there was need for clear delineation of what could and could not be done through trade.

The EEC was also critical of IMF and World Bank and their interference in trade policy areas, and sarcastically noted the World Bank had already outlined what the results of the Uruguay Round negotiations should be.

"Our efforts here should not be negated by developments in monetary and financial environment, and it is the latter that have to be tackled", the EEC reportedly remarked.