Jan 9, 1992

THE OPTIMISTS AND PESSIMISTS ON THE URUGUAY ROUND

GENEVA, 8 JANUARY (CHAKRAVARTHI RAGHAVAN) – GATT negotiators and officials returned this week to work, after the Xmas-New Year break, with some considerable uncertainties on whether and how the Uruguay Round of Multilateral Trade Negotiations can be wound up on the basis of the "Dunkel package".

GATT Director-General Arthur Dunkel, in his capacity as chairman of the official-level meetings of the Trade Negotiations Committee, put forward on December 20, under the title of "Draft Final Act", a package of draft agreements covering the various negotiating areas under the Punta del Este Declaration.

Though he refrained from describing it as a "take-it-or-leave-it-text", Dunkel had described the 441-page document as a "single package" providing "the best possible balance across the board of the long negotiating agenda" and addressing all areas of negotiations.

On 20 December the delegates had no opportunity to react - they got the text only at midnight - and Dunkel adjourned the TNC immediately after his speech, reconvening it for 13-14 January.

Dunkel has scheduled a "green room" consultations on Thursday afternoon presumably to discuss the further "process" for the consideration of the document.

Most of the negotiators of leading countries were due back at their desks only on Thursday, and those around could not make any comments noting the issues were being addressed in their capitals at high political levels and they were still awaiting instructions.

Australia has been the only country to publicly announce (after a cabinet meeting in Canberra) that it was ready to accept the Dunkel package, though one or two other privately have been saying here they too would accept it despite the many problems they face in this regard.

The U.S. lobbies have also been ganging up for changes in the package. These interests range from the pharmaceutical industry driven by its "greed" for "rentier incomes" from global monopoly product and process rights through retrospective changes in the current WIPO-administered international regime for patents to the various domestic industries that want to continue to enjoy the protection of managed trade regimes via the Multifibre Agreement or the use of arbitrary antidumping and countervailing actions, or use of unilateral S. 301 leverage in their dealings abroad. Perhaps some may counterbalance the others.

The USTR, Mrs. Carla Hills has been quoted in the press as saying that she would seek changes in the Dunkel package.

But the European Community has already made clear that the agricultural part of the Dunkel package is not acceptable and must be re-opened to put into the "Green Box" of non-actionable and permissible government support to domestic agricultural all the payments the EC is planning to provide to its farmers as part of its own reform package.

EC Agriculture Commissioner MacSharry has been quoted as saying that the Dunkel framework was not acceptable and it was for Dunkel to put forward a revised text to take care of the EC's views (on permissible domestic supports and payments to farmers).

According to the Agriculture Minister of one of the German Land (States), the costs to the EC budget (of direct payments to farmers decoupled from production under the Dunkel package) will be very high and cannot be met. The EC negotiators have been told any accord reached by them would have to be within the budget limits. Hence the EC insistence that all its direct payments to farmers which are tied to production under the reform programme should be in the "green box".

In his statement to the TNC on 20 December 1991, before adjourning it to 13 January (when he expected delegates to comment on the package) Dunkel had envisaged completion of the Final Act (through schedules of commitments) as needing continuance of negotiations in three major areas: the market access negotiations in various sectors of trade in goods, negotiations on specific commitments on internal support and export competition in agriculture and of negotiations on initial commitments on trade in services.

The Dunkel package in agriculture has put forward a framework, including modalities for reduction of support, and the percentages in value and volume under the three heads of domestic support, border protection and export subsidies, with each participant having to list and schedule its reduction commitments.

Given the various "escape clauses" and "loopholes" built into the Dunkel draft framework - in terms of support for disadvantaged regions, exchange rate variations as well as environment - the further enlargement of the "green box" category would make the outcome perhaps even thinner.

But it is difficult to see any part of the package being opened up and leaving others intact, though none of the developing countries have the leverage, and perhaps even more the willingness to engage in further long periods of negotiations and pressures.

Many of the Third World diplomats, who have seen the exercise and outcome in terms of damage limitation, have also been saying privately that while there was little of advantage for them in the package, any prolongation of the negotiations or reopening the package may not produce any benefits but result in losses and hence it would be to their advantage or at least less disadvantageous, to quickly wind up the round on the basis of the package.

But at least two of the draft accords, that for a Multilateral Trade Organisation and the one on "Elements of an Integrated Dispute Settlement System and Suspension of Concessions" is clearly outside the mandates given to the negotiators.

They were brought up towards the end of the pre-Brussels phase in the negotiating groups on Dispute Settlement and "Functioning of the GATT System" - an item on the agenda of the Uruguay round launched by a decision of the GATT CONTRACTING PARTIES at Punta del Este. By its very nature the CPs' decision was limited to issues relating to trade in goods covered by the General Agreement.

The U.S. (as much as the EC) has been pushing for a dispute settlement mechanism that would legitimise its S. 301 and enable "cross-retaliation" against goods exports of developing countries over their barriers to U.S. exports of "services" or failure to provide global monopoly rights to U.S. corporations for intellectual property rights, as well as a free hand for U.S. investors.

But the MTO was pushed by EC essentially to create an International Trade Organisation under a treaty that would help to discipline the U.S. as also to deal with the NICs. GATT officials saw in it a way of enhancing their own stature, enabling them to appear on the international economic scene on a par with the IMF and the World Bank in supervising and promoting economic policies in the developing world in the interests of the transnational system.

But the only conceivable way that issues relating to an MTO, and an integrated dispute settlement mechanism under it, could have been brought up is in terms of Part III of the Punta del Este Declaration and the Mid-Term Review accord.

Part III of the Declaration was adopted by Ministers, as representatives of governments, meeting on the occasion of a Special Session of the CPs (which launched the MTNs in goods).

In this part, the Declaration said: "When the results of the Multilateral Trade Negotiations in all areas have been established, Ministers meeting also on the occasion of a Special Session of CONTRACTING PARTIES shall decide regarding the international implementation of the respective results".

But the strategy of putting them as part of the "single package", and in thus forcing the participating countries to accept them as part of the other accords which are governed by the separate mandates for negotiations in goods and that in services, the Dunkel compromise text pre-empts a decision reserved by Ministers to themselves to be discussed and taken by them when the results of the MTNs "in all areas have been established".

But GATT officials shrug off such objections as "legal technicalities" and suggest the problem could be resolved by having a Special Session of the GATT Contracting Parties to approve the accords and establish results in all the areas and immediately, at the same place and time, have a Ministerial meeting to approve the MTO and the integrated dispute settlement elements and put them all in a single package that governments have to sign.

This approach to international law is not new to the GATT.

At the time of the conclusion of the Tokyo Round in 1979, the negotiations produced two draft accords on customs valuation - one put forward by the OECD countries and the other by the much larger number of developing countries.

The then GATT Director-General and chairman of the Tokyo Round TNC, Olivier Long, put all the drafts on the table and opened them up for signatures. At a press conference, following the closing meeting, he was challenged by a newsman as to how this was possible, given the terms of the Vienna Law of Treaties which would govern any inter-governmental negotiations and treaties.

Long and his legal advisors just shrugged their shoulders. However, good sense later prevailed and the OECD countries reached some compromise with the developing world lest GATT have two "codes", with contradictory legal rights and obligations.

And after the Uruguay Round negotiations began, and the EC was questioned on one of its proposals as being outside the mandate, the EC delegate, Amb. Tran Van-Thinh, noted that anything was possible in GATT among consenting adults.

What the GATT and its negotiators will do over the next few weeks is an imponderable at the moment though everyone seems agreed that the package, despite the bulky size of the document and its detailed rules, is very thin, whether viewed in terms of expectations and as a catalyst for boosting the world economy and particularly that of the Third World through trade and investment and production, or in terms of the time, energy and efforts expended on the negotiating process.

Germany's leading financial paper, Handelsbaat of Dusseldorf has estimated that some 20,000 man years have been expended over the five years of the Uruguay Round and the two preceding years of preparations for launching it - if account is taken of those engaged in this exercise in governments, international organisations and in private business and public interest groups.

But in a city of international organisations prone to make prognostications on the thinnest of facts, observers and participants can be easily divided into the optimists and the pessimists.

The optimists believe the package cannot be wrapped up and would need extensive negotiations over a longer-time zone and this would unravel the package, providing an opportunity for concluding accords without the major faults and problems of the Dunkel package and that the delay would produce an accord that would come at an upswing in the world economy and hence more easily implemented.

But the pessimists feel that the negotiators are so weary and tired of the very complex and unmanageable negotiations that they will just buy anything to end an embarrassment that the MTNs have become, and conclude an accord even though aware of all its defects and the fact that it would provide no boost to the world economy - neither to the crisis-ridden economies of the South nor those of the North facing recessionary conditions.

The pessimists see the defects in the present package and feel that in the developing world, as in the North, when its full implications in terms of benefits and privileges to the foreigners in various areas - ranging from plant breeders' rights to product import monopolies and the cream of banking and financial services - sink in, e intended economic underpinnings of the new transnational world order would carry with it the seeds for its overthrow due to social discontent and disorder would also be laid.