Jan 17, 1987


GENEVA, JANUARY 15 (IFDA/CHAKRAVARTHI RAGHAVAN) – GATT negotiators are to resume next week their formal and informal consultations in their efforts to find compromises that would enable start of Multilateral Trade Negotiations (MTNS) under the Uruguay round.

The Uruguay round, launched through a Ministerial declaration at Punta del Este (Uruguay) in September 1986, has not gotten off the ground so far, due to some serious differences on the organisation of the MTNS, and a number of connected issues.

Specifically, GATT negotiators have to agree upon and put in place detailed negotiating plans on each of the 14 subjects included in the MTNS on goods.

They were mandated to do this by December 19, 1986, but failed because of disagreements between the U.S. on one side and major industrial and third world nations on the other, on a number of points relating to the negotiating plans and structures, as well as the issue of effective surveillance of the standstill and rollback commitments on protectionism.

In Trade Negotiations Committee (TNC), the overall body to carry out the Uruguay round is due to meet on January 28, and the Group of Negotiations in Goods (GNG), which has the responsibility for the GATT MTNS in goods, is to meet on January 22. GATT officials have said the aim is to get negotiations started in February.

However other participants are more reserved about new deadlines which, if not met, would further erode GATT credibility. They also note that since the talks were suspended in December new complications have arisen that may have an impact – the imminence of a U.S.-EEC trade war, and U.S. deprival of GSP benefits to several third world nations.

In the haste at Punta del Este to launch the Uruguay round, the major protagonists reached some "compromises", involving use of language that merely papered over some basic differences among some of the major protagonists.

But these differences have again come to the fore, blocking agreement on detailed negotiating plans and structures, as well as over the surveillance mechanism.

Though they appear to be merely procedural, the way they are resolved would determine the shape of the substantive negotiations, and there is a general feeling that it is necessary to resolve them without any more recourse to ambiguous language that would only complicate the substantive negotiations.

Central to an agreement on negotiating plans, structures, and surveillance mechanism is the role of the Group of Negotiations on Goods (GNG), which is mandated to supervise and coordinate the entire GATT MTNS in goods.

The U.S. is opposed to a central role for the GNG, while other industrial countries as well as third world nations are insisting on this.

In regard to detailed negotiating plans for each of the 14 subjects already listed for negotiations, the effort now is merely to agree in detail on the first phase, whit details of the subsequent phases of the negotiations to be filled in later.

The U.S. wants the formulation of details of these, or modifications in what will be agreed to now, to be left virtually to each of the negotiating groups, while others want the GNG to have a final say, and to determine the calendar of meetings.

The last will ensure that there is some kind of parallel progress in all areas, and not merely those in which the U.S. is interested – agriculture, intellectual property rights and investment issues.

While there is some agreement on negotiating plans on many of the subjects, even agreement on the first phase of negotiations in agriculture has been held up by serious difference between the EEC and the U.S., supported by some of the other temperate zone agricultural producers.

The U.S. wants to focus even in the first phase on the issue of reduction or elimination of export subsidies in agriculture, whereas the EEC insists on addressing all the aspects, including other types of agricultural domestic support (as in the U.S.) and on the various domestic policies that give rise to excessive surpluses and supplies on the world market, as provided in the Punta del Este declaration.

There are also some differences on the negotiating plans for textiles and clothing. The U.S. wants the first phase to be prolonged and devoted to study, while a number of third world countries like India contend that this issue has been sufficiently studied in GATT, and the focus should be on negotiations.

On the issue of structure of the negotiations, the GNG last October had decided against any "discrimination" on any of the negotiating subjects, and agreed to set up a separate negotiating group for each of the subjects, unless there was a consensus for combining two or more of them under one group.

The U.S. has been trying to go back on this, and in particular prevent a separate negotiating group for textiles and clothing, or alternatively to combine the chairmanship of the group with that of some others.

The idea appears to be to stall the negotiations on textiles and put it off till 1989, when it could be merged into negotiations for a new MFA-5.

However, India and some others are opposed to the U.S., and want implementation of the Punta del Este decision to negotiate the modalities for eventual integration of trade in this sector into GATT under strengthened GATT rules and disciplines.

There are also differences over the nature and role of the surveillance mechanism, and its relationship to the GNG and the TNC.

The U.S. wants the surveillance mechanism to report only to the TNC, and for the TNC to conduct a "political appraisal" of the implementation of the standstill and rollback commitments, and without the GNG being involved.

A number of industrial nations as well as third world nations are opposed to this, and seek a mechanism that would provide credible surveillance, and for the GNG to be involved so that progress in negotiations in the MTNS could be firmly tied to observance of the standstill.

This, they believe, is the only way for blocking a protectionist tide in the U.S.

Without a clear linkage between observance of standstill and the negotiations, the administration may not resist a democratic Congress and may reach compromises with an eye on the next elections, they fear.

When the talks in GATT were adjourned in December, some tentative compromises seemed near. Participants had then said some tentative language acceptable to all but the U.S. had been worked out, and that the U.S. seemed likely to accept some of these.

Since then, U.S. trade representative Clayton Yeutter, and his assistant, Charles Blum, have openly staked their positions – contrary to the understanding, when the GATT talks were suspended in December, not to air differences.

Some of the statements are seen by some as part of the administration tactics, to use the fear of congressional actions and secure more concessions from other trading partners, and to secure modifications in the Punta del Este decisions on which the U.S. is now having second thoughts.

In the published reports, Blum has said that the U.S. wants the surveillance of the implementation of standstill to be controlled by Trade Ministers in the TNC, since the issue would involve "hard political decisions".

Yeutter has also said that the U.S. wants a "mid-term" package out of the negotiations, with agreements on safeguards, counterfeit-code, lowering tariffs on tropical products, principles on trade in services, and on agricultural agreement.

The package chosen by Yeutter, participants note, is such that on all these the U.S. will be a gainer, and has little to lose.

On tropical products, for example, the U.S. has merely talked of lowering tariffs as part of the package, whereas non-tariff measures (including in the U.S.) are more significant barriers to third world trade.

Some GATT participants note that the U.S. has now sought to provide seemingly higher priority for safeguards agreement and tropical products, which it had been unwilling to do before, insisting that everything was part of a single package and undertaking.

This, they suggested, appeared to be part of a U.S. move to end its isolation and break up an emerging coalition between Europe and a large number of third world nations on a number of issues in the area of goods, and the broad understanding between the EEC to major third world nations like Brazil and India over services.

The question of finding chairmen for the various negotiating bodies has also to be decided before the negotiations could be finally got rolling.

Yeutter has said that the various negotiating groups should be chaired by "non-Geneva people" from capitals.

Other delegations have taken the view that what is important is not whether they are "Geneva" or "non-Geneva" people, but their individual qualification and expertise in trade policy and availability on a fairly continuing basis.

The U.S. also appears to favour senior GATT officials to chair some of the bodies. But others, including some industrial and third world nations, are averse to this, noting that the secretariat and its officials would be subject to U.S. or other pressures that would tilt the balance.

In this view, they want negotiating bodies, as well as the surveillance mechanism to be chaired by persons drawn from delegations, so that contracting parties would be in full control of every aspect of the MTNS.

The threat of a trade war between the U.S. and EEC, which has emerged since the GATT talks were suspended on December 20, could also overshadow the MTN efforts.

The U.S. has announced punitive duties of up to 200 percent on a number of imports from the EEC countries, to take effect from the end of January, unless an accord is reached by then in its dispute with the EEC over loss of access for U.S. agriculture to markets in Spain and Portugal where the EEC’s common agriculture policy and external tariffs now apply.

The EEC in turn has threatened its own retaliations if the U.S. duties come into effect.

U.S.-EEC talks on this are set for next week in Brussels and Washington, and while some accord seems likely, a breakdown is also on the cards.

Many third world nations privately say there is no sense in their hurrying up to put negotiating plans in place, if the whole process of negotiations is likely to be queered in any event by the U.S.-EEC trade war.

Another complications is the U.S. decision to revoke duty-free GSP benefits to some three billion dollars worth of imports from nine of ten third world nations, some of them with very large debt-servicing problems.

The individual schemes under the Generalised Scheme of Preferences (GSP) are generally viewed as autonomous actions of preference-giving industrial countries.

But its general outlines, like non-reciprocity and non-discrimination, are part of the UNCTAD accord, and implementation of the schemes has involved specific GATT decisions, namely grant of waivers to the preference-giving countries.

The U.S. actions, and the revised regulations relating to GSP, have been under provisions of its trade law which are not related to trade and go against the principles of GSP, non-discrimination and non-reciprocity vis-à-vis third world recipients, on the basis of which GATT waivers have been granted.

Some of the countries affected say that the U.S. action is violative of the spirit, if not the letter, of the Punta del Este declaration and its standstill commitments.

Under that the contracting parties agreed not to take any trade restrictive or distorting measure in the legitimate exercise of its GATT rights, "that would go beyond that which is necessary to remedy specific situations", and not to take "any trade measures in such a manner as to improve its negotiating positions".

The U.S. trade law, under which the U.S. has acted, vests discretionary authority in the administration, to be exercised on the basis of the extent to which the beneficiary country has taken actions to reduce trade distorting investment practices and policies, or reduce or eliminate barriers to trade in services.

These are issues for negotiations in the new round.

In this sense, the U.S. actions on GSP could be said to have been motivated by its efforts to improve its negotiating position in the Uruguay round, and thus violative of the spirit, if not the letter, of the standstill.

Even before the actual U.S. decision announced in January, and on the basis of the regulations promulgated and notified to GATT in June 1986, third world countries had raised this issue in the Trade and Development Committee of GATT.

These countries had said that U.S. regulations, in applying conditions to the grant of specific GSP benefits on the basis of reciprocal actions by beneficiaries, was inconsistent with the concept of non-reciprocity on which the international understanding on GSP was based, notably the relevant UNCTAD resolutions, the 1971 GATT waiver, and the 1979 enabling clause in GATT.

Also, the seeking by the U.S. of reciprocal acts in fields other than those related to trade in goods was "inconsistent with the litter and spirit of the Punta del Este declaration".