Jan 23, 1991

GULF WAR SHADOWS OVER URUGUAY ROUND.

GENEVA, JANUARY 22 (BY CHAKRAVARTHI RAGHAVAN) – Efforts to renew the Uruguay Round negotiations appear to have been put on the backburner here in Geneva, and will probably remain there until the first week of February, according to negotiators.

Apart from other difficulties, the Gulf war has now become another factor, some sources said. For one thing, U.S. officials have been advised not to travel out of Washington for security and other reasons connected with the Gulf war. There are also the economic and political consequences of the war.

The sources said the difficulties of evolving an agreed platform for the renewal of the negotiating process have been further complicated by the Gulf war and the preoccupation of decision-makers in key capitals with its various facets, sources said.

On 15 January, in briefing the informal meeting of the Trade Negotiations Committee (TNC), the GATT Director-General Arthur Dunkel (who had been mandated in his personal capacity to hold consultations for achieving agreements in all areas of the negotiating programme) had expressed cautious optimism on evolving a "platform" for agriculture negotiations and on that basis restarting negotiations simultaneously on all subjects.

He had also spoken of the TNC being on call, while the GATT spokesman had envisaged Dunkel starting consultations from 17 January and negotiations resuming this week.

However some of these moves and expectations based on them appear to have hit some snags.

A clearer picture, observers said, could emerge after the planned meetings at Punta del Este between the EC Commissioner, Mr. Frans Andriessen and some of the Cairns Group members on January 25-26 and Andriessen's visits to Washington and Ottawa thereafter for talks, as also a two-stage meeting of the Latin American countries at Punta del Este from January 30.

The latter meeting under the auspices of UNCTAD/UNDP Technical Assistance Programme for the Round for the Latin American region was originally expected to be attended at level of ministers and planned as a two-stage meeting with a few Latins and U.S. and EC, followed by a wider meeting of Latin and Caribbean members of the SELA. It had also been expected to be attended by U.S. Trade Representative, Mrs. Carla Hills and Andriessen, and some of the Ministers from outside the region who had chaired the consultations at Brussels on particular subjects (though they had ceased to have any function after the collapse of the meeting there and would only be representing their countries).

Now the shape of the meeting and some of the raison d’être have changed. Objections from some (Peru, Jamaica and Venezuela) who were invited only for the second is resulting in invitations being issued to them for the first stage of the meeting.

While invitations were issued by UNCTAD, the meeting would really appear to have been the result of a move by the Uruguay Foreign Minister, Hector Gross-Espiell, who chairs the Ministerial sessions of the TNC.

It would appear that Andriessen will not attend the wider meetings (of some Latins, U.S. and EC). He could not in any event have been expected to attend the 25-26 meetings organised at his request by Uruguay, go to Washington and Ottawa and return to Punta del Este. Carla Hills is also not attending the meeting either.

Dunkel’s hopes of evolving a "platform" for the agricultural negotiations would appear to have been based on his consultations with the EC Commission that, while not tabling a new "offer" or seeking a fresh mandate from the EC Council of Ministers, the EC would be prepared to "negotiate" on agricultural reforms in three separate areas of domestic support, border protection and export subsidy.

The EC would also appear to have attempted to meet objections from others by saying that it would not only negotiate but would be prepared to enter into commitments on basis of any agreements reached - which substantively would mean little, since the EC had been "negotiating" since Punta del Este and Montreal and reaching an agreement would depend on its acceptance, but could provide the fig-leaf for the Cairns Group members to renew negotiations on all subjects as the EC has sought.

GATT sources had suggested last week that on this basis the "platform" for negotiations in agriculture, a revision or modification of the Hellstrom text at Brussels was being readied, but that some consultations would be needed on whether any "numbers" (extent of reductions, from what period, the extent of market access and "rebalancing" concepts, etc.) could be put into the text.

There were reports last week that the U.S. would be sending negotiators here to settle the "platform" for the negotiating such a text. However, the U.S. has not so far sent any negotiators here. It is not clear whether this is because of the Gulf crisis and discouragement of travel or other reasons.

Parallel to this, the U.S. had initiated moves for "bilateral" negotiations with some 21 countries (treating the EC as one) on their "initial" liberalisation commitments for trade in services, which would be part of the multilateral framework to be settled.

In November, the U.S. had almost overnight changed its position and had opposed unconditional MFN in any General Agreement on Trade in Services (GATS) and had also sought derogations for a number of service sectors. But finding itself isolated on this, in the final stages of the Brussels meeting the U.S. had said that it might agree to MFN, but only if it was satisfied about the level of initial liberalisation commitments from major trading partners, both in the Industrial and Third World countries. Though semantically different, it was in substance no more than a conditional MFN.

Pursuant to this, and lest it be again caught flat-footed if the EC suddenly came up with an agricultural compromise, the U.S. had sought the bilateral service negotiations.

However, few countries appear to have responded positively. The EC itself would appear to have suggested that any such bilateral consultations should be preceded by multilateral consultations to set the guidelines or modalities and had suggested a meeting this week. However, the U.S. has not so far accepted this.

While the negotiators are running up against the purported 1 March deadline by which the U.S. administration has to notify Congress about its intention to enter into agreements in order to avail of the "fast-track" procedures, it would appear to be not such an insurmountable obstacle.

In various scenarios for this, it has been suggested that the administration could just notify Congress in a skeleton form (as it did in relation to the negotiations with Canada) and would only need to send up detailed texts by 31 May.

Another has been that if the Gulf War ends quickly with President Bush completely on top, the administration could seek an extension of fast-track procedures and that a two-year extension would be available unless either House disapproves.

However, the EC is not keen on extending the negotiations, and face continued pressures over next two years on agriculture and other issues, but would rather wind up the negotiations with some "modest" agreements and a framework for continuing future negotiations in the shape of a multilateral trade organisation.

Looking beyond these tactical moves, observers said that the Gulf conflict and the way it is played out as well as the possible short- and medium-term effects on the world economy as well as those of individual countries, would have a great influence.

Much of the moves on the Round have been postulated on the pressures that the U.S. could apply against its major trading partners (EC and Japan) as well as joint U.S.-EC pressures on some of the major Third World economies over new themes like intellectual property rights, investment and services.

But it is difficult to envisage the U.S. trying to exercise these pressures, against EC or France and Germany within it, over agriculture or against Japan (without whose yielding on rice, there could be no agreement on agriculture), while it is in the U.S. interest to keep France in the coalition against Saddam Hussein or get funds from Germany and Japan to meet the costs of the war.

Nor is it easy to see in a situation like this, when some of the major Third World economies are facing a severe economic crunch, that they could yield to the U.S. or EC and other ICs on the major new themes or even jeopardising their future.

Any agreements over the next few weeks, involving "scaling down" of ambitions in agriculture (as envisaged by the EC, and could be supported by the U.S. in the wake of departure of Yeutter from the Agriculture Secretary's post) would have also to involve scaling down of ambitions by the ICs in the new areas, including providing the Third World considerable flexibility and exemption from new rules on Agriculture, Intellectual Property.