Jan 21, 1992

AFTER EC TALKS HERE URUGUAY ROUND END SEEN AS PROBLEMATIC.

GENEVA, JANUARY 20 (CHAKRAVARTHI RAGHAVAN) – Hopes of many Third World countries that the five-year agony of the Uruguay Round negotiations could be brought to a close by mid-April under the current Dunkel process appears to have receded after last week's consultations here between the EEC Commission officials and groups of Third World countries.

But many Third World negotiators seem to want an early conclusion of the Round merely because they are concerned that any prolongation and opening up of the package would be even more to their disadvantage.

The EC Commission's Chief Uruguay Round negotiator, Hugo Paemen was in Geneva last week and met with individual and groups of Third World countries to exchange views with them on the Dunkel package and the further process to conclude the Round.

Contrary to some earlier reports, a senior U.S. official team led by Julian Katz, was not in Geneva for Parallel consultations and is now likely to come only towards end of January. But U.S. Geneva negotiator, Rufus Yerxa has been reportedly conducting his own soundings.

At this point of time, clearly the two majors are involved in lining up support for their positions among the Third World Countries rather than in any bilateral talks.

And negotiators and trade policy officials from developing countries who might have been hoping to secure some "gains" in the market access negotiations in goods - to enable them to justify to their political masters the larger "concessions" they have made to the Industrial Countries in such areas as intellectual property, investments and services - also appear to have been disappointed.

The talks last week of leading Third World countries with U.S. and EC officials should have left little doubts in their minds that in the market access area too, the U.S. and EC are "demanders" and want Third World countries to provide them immediate and visible market access concessions in agricultural, industrial, and in textiles and clothing products as also in services to enable the two majors to get the package through their legislative processes.

As one Third World official put it, the U.S. and EC would wind down the MFA restrictions in Textiles and Clothing perhaps between 2000 and 2003, but for that they want Third World countries to reduce their tariff and non-tariff barriers in these products by 1997-1998.

GATT Director-General and Chairman of the official level Trade Negotiations Committee (TNC) put forward on 20 December the draft Final Act, which he described as a "global package" of draft agreements on the issues on the negotiating agenda of the Round.

At a meeting of the TNC on 13 January, Dunkel also won the endorsement of the TNC for his four-track process to conclude the Round by mid-April.

Paemen left the impression on several of the Third World delegates whom he had met that the EC Commission was yet to formulate its position on the Dunkel package and present it to the Council of Ministers, and perhaps is more relaxed and less inclined to dramatisation than its member-states.

Nevertheless, the EC Commission appears to feel that the Dunkel package, and particularly its agricultural package and proposals for cuts in domestic support and export subsidies, could not be "sold" by the Commission to its member-states without some substantive changes to ensure equivalent burdens on the U.S. and EC.

Dunkel's four-track approach involves pressing ahead with negotiations on market access in goods, negotiations on initial commitments in trade in services, work on cleaning up the Final Act for internal consistency and for legal language.

At a meeting of the market access group on January 17, a schedule for two rounds of bilateral and plurilateral negotiations for exchange of tariff and non-tariff concessions in market access have been set: from 27 January to 6 February and from 20-27 February.

Similar schedules are being worked out in respect of the negotiations for initial commitments in services.

Dunkel, in addition to the three tracks which had always been envisaged, also put forward a "fourth-track" of consideration at the TNC level of the substantive parts of the "global package" to see whether any chan could be effected in them by consensus, and in this regard offered to play the role of an "honest-broker".

While neither Dunkel nor his spokesman have publicly spelt out any details of the fourth-track process and time-table, delegations have been lift "with the impression that Dunkel does not see work in the fourth-tack being taken up immediately, but only after the market access and service negotiations have advanced well".

This is probably in the belief that if the market access negotiations in goods and services advance sufficiently, and countries are in a better position to know their "gains" and "losses", there would be some stakes for everyone to complete the negotiations and conclude the round, and they might also be in a better position to contemplate any changes of substance in the package in the fourth-track approach.

However, after the visit of Paemen here and his talks, key Third World negotiators now see difficulties in even pushing ahead with market access negotiations.

For one thing, Paemen himself would appear to have indicated to the Third World delegates whom he had met, that the EC Commission would find it difficult to negotiate on tariff and non-tariff market access issues without a clear idea of the agricultural package and the changes in it needed by the Commission.

The discussions here come even as some preliminary simulations of the effect of the Dunkel package and proposed cuts in domestic support and export subsidies, and in border protection, show that while it will have a positive effect on the foreign exchange earnings of the Latin American and Caribbean region, it will be negative for Africa and Asia and the Pacific.

While the simulations at aggregate regional levels would likely mask the gains and losses among individual countries, the cuts envisaged in the Dunkel package would indicate that Latin American region could have a gain of about 93.4 million dollars (in 1985-87 dollars, but higher in current dollars), while Africa would lose some 431.5 million dollars and Asia and the Pacific 216.7 million dollars.

In his discussions, Paemen would appear to have indicated that while the EC, like others, wants to bring the 5-year old negotiations to a successful conclusion by the mid-April deadline suggested by Dunkel, the considerable political difficulties faced by the EC and its member-states made it imperative that there should be some substantive changes in the agricultural package.

The EC had also difficulties with other parts of the package, including some of the rule-making areas like anti-dumping and subsidies as also in textiles and clothing.

But the agriculture issue has become very sensitive.

The 20 percent cut in domestic support from the base period 1986-1988 would mean that the EC would have to undertake some painful reduction of support to its farmers while the U.S. would in fact have to do nothing in this area.

Some of Paemen's interlocutors appear to have said that they would have no problems if the EC agreed with the U.S. and raised the level of cuts.

However a number of them also left no doubt that any effort to open up any part of the package would unravel the entire package and prevent any early conclusion of the Round.

However, some of the Third World delegates later privately said that without some U.S.-EC agreement to amend the agriculture package, but without opening up any other area, it was difficult to envisage the EC agreeing to accept the package over the next few weeks - the level of political debate having been raised too much.

And even if the Americans might be ready to do a deal, none is likely before the end of the New Hampshire primary elections in mid-February and thus no fourth-track approach is possible before.

In such a scenario, it is difficult to see the market access negotiations being taken up and completed ahead of the fourth-track and concluded in time to meet the various deadlines for a mid-April conclusion: filing of schedules in agriculture by 1 March and filing of tariff and other schedules of countries by 31 March.