May 16, 1987

U.S. BACKING AWAY FROM "EARLY HARVEST" IN MTNS?

GENEVA, MAY 14 (IFDA/CHAKRAVARTHI RAGHAVAN) The United States appears to be backing away from its earlier thrust for an "early harvest" in the Uruguay Round of Multilateral Trade Negotiations (MTNS).

The Punta del Este declaration launching the Uruguay Round MTNS, provides in respect of the negotiations in goods that these should be treated as "parts of a single undertaking", but envisages agreements reached at an early stage being implemented on a provisional or a definitive basis by agreement prior to the formal conclusion of the negotiations.

The declaration also makes a specific reference to this in regard to negotiations for tropical products.

After Punta del Este, in efforts to draw up negotiating plan, the U.S. sought a so-called "fast track" approach in regard to some issues including "services" intellectual property and investment issues, agriculture.

The EEC however resisted any "fast track" to the agriculture negotiations, and insisted on the entire MTNS in goods being treated as a single undertaking, and the need for a global approach that would take into account the need for a balanced package.

After the negotiating plans were approved, and the initial phase of negotiations began, the U.S. Trade Representative Clayton Yeutter spoke of an "early harvest", and included in such a harvest - services, agriculture, investment and property issues.

There were also U.S. statement suggesting those tropical products and "safeguards" could be covered under an "early harvest".

The EEC however rejected such an approach.

At a press conference here Thursday, Yeutter was asked about the "early harvest" and what he envisaged in such a harvest.

Yeutter said it would be too early to say whether an early harvest was possible and if so what its contents could be.

An early harvest, he said, was unrealistic until the end of 1988 at the earliest in my judgement".

"It is possible", Yeutter said "that some elements (in negotiations) could be concluded before then. But in terms of pulling a self-balancing package of some magnitude, this can occur only half-way through the negotiations and that is still far away.

"It is too early to say whether it is feasible to have an early harvest and what its content should be. In our view we should press forward vigorously in all 15 negotiating groups and then form a judgement 6-l2 months down the road whether it is feasible".

The MTNS in goods themselves have only 14 subjects, and the 15th relating to negotiations on trade in services is a separate exercise, and a result of a separate decision of the Ministers meeting in their capacities as representatives of countries on the occasion of the Punta del Este GATT special session.

It is thus not a GATT decision, and the concept of implementation of agreements reached at an early stage in the MTNS does not apply to the services issue.

Yeutter's remarks Thursday showed that he was backing away from the "early harvest" - a concept he had put forward so that the administration could have something to show at the time of next year's presidential elections in the U.S.

His reference to the "self-balancing" package, using almost similar words used by the EEC Commissioner Willy De Clerc in rejecting the "early harvest" idea, suggested that there has been some kind of "understanding" at Paris between the U.S. and EEC.

But this may arouse concern among third world contracting parties, since it implies negating their efforts to get some quick results on tropical products, and rejecting any efforts for "quick-fixes" in the services negotiations or linking it to the MTNS in goods.

Yeutter also expressed satisfaction at the outcome in Paris over the agriculture trade issue, and said on such an important and politically sensitive issue, the Paris OECD Ministerial meeting had shown "an unanimity on basic objectives" though there may be no such unanimity on the modus operand, to achieve them or on how far one could go.

But the Paris OECD Ministerial communique had agreed on the need to respond to the crisis in agriculture, and the need to move production and trade policies towards a free and open system responsive to market signals.

This did not mean they would have an easy time in the Uruguay round negotiations on this issue, and these negotiations would be very difficult, Yeutter conceded.

But it was an encouraging step and would provide "an excellent momentum" for the Uruguay round and the June Venice summit of leading western nations.

The U.S. Trade Representative also cautioned against expecting quick and short-term solutions to the agriculture problems, and underscored the need to begin the process for medium to long-term solutions.

The U.S. Trade Representative also rejected charges that the U.S. was disregarding the standstill commitments.

"All countries must respect 'the spirit' of the standstill, even if we have arguments on individual actions", he declared.

Yeutter insisted that U.S. levy on imported petroleum and custom-user fees, as well as the agreement with Japan on semi-conductors and the retaliatory tariff measures against Japan for failure to live up to the agreement, were all in conformity with the standstill commitment.

The U.S. Administration was resisting protectionist pressures in Congress, and no country facing a situation that of the U.S., with its 170 billion dollar trade deficit, would have maintained an open trading system as the U.S. was doing.

Yeutter however conceded that the solutions to the trade deficit lay in macro-economic policy measures, but argued that even if removal of all "unfair trading practices" by other nations only resulted in reducing U.S. trade deficit by ten billion dollars (as some in the U.S. have pointed out in criticising the focus on trade issues as a solution), it would be a gain and a contribution to reducing the deficit.

Yeutter hoped that a "constructive" trade bill would emerge out of Congress. The House had already passed its version, and after the senate adopts its own version, there would be a Conference between the Senate and the House, and the Administration would make every effort to get an acceptable bill.

He expected this process to be completed by end of June.

The Administration, Yeutter said, was opposed to protectionist provisions, though it would welcome "tough" provisions strengthening its bargaining capacity and improving U.S. competitivity.

If the trade bill that emerged from the Conference process contained unacceptable protectionist measures, President Reagan would veto the bill, Yeutter said.

He however felt it was too early to say whether the veto would be sustained by Congress or would be over-ridden.