Mar 14, 1990

NEGATIVE TO INSTITUTIONALISING GATT AS THE ITO.

GENEVA, MARCH 12 (BY CHAKRAVARTHI RAGHAVAN) -- The Group of Seventy-seven has come out in opposition to the moves of some Industrialised Countries "to broaden the activities of GATT under the umbrella of an International Trade Organisation" through the Uruguay Round.

The Group's position on the moves was outlined in a statement at the second part of the 36th session of the Trade and Development Board, by the Chairman of the Group, Amb. Azikiwe of Nigeria.

The statement made clear that the proposed organisation should be "meaningful, comprehensive and responsive" to the development aspirations of the Third World.

It would also require "careful and detailed preparation under the bodies of the United Nations which have both the comprehensive mandate, the universal membership, experience and expertise to deal with such initiatives", the G77 declared thus making clear that GATT and the Uruguay Round are not the fora for this.

The idea of creating such an ITO through the Uruguay Round (to implement results in the new areas that could not otherwise be incorporated into the GATT) appears to have been discussed informally at some consultations of the GATT Director-General.

The EEC is reportedly behind this idea, and Italy which would be chairing the EEC Council of Ministers from July, recently espoused it in public, suggesting that this would be one way of masking the likely failure of the Round, due to be concluded at Brussels, to achieve substantial results.

The EEC is also trying to win Third World support by presenting it as a dispute settlement mechanism to outlaw the U.S. unilateralism in S. 301 of its Trade and Competitiveness Act. But Third World observers have noted that it would be a way of making GATT itself a super-301 by establishing cross-linkages between trade in goods and rights of foreigners in intellectual property, investment and services, and authorising such trade retaliation.

The G77 statement underscored the Third World concerns over the asymmetries and imbalances in the negotiations as also its worries that the support of the ICs to the countries of Eastern Europe could lead to further marginalisation of Third World countries.

In his statement, Azikiwe noted that in the 80’s the role of the Third World had become increasingly marginalised and their participation in international trade and finance had substantially decreased, while the gap between the Industrialised and Third World countries had widened.

While the 80’s proved to be a lost decade for development, some ground was regained at UNCTAD-VII. The start of the 90’s was also witnessing the coming together of an intense cluster of activities aimed at pushing forward multilateral cooperation: the General Assembly Special Session on International Economic Cooperation, the preparations for the International Development Strategy, the Second UN Conference on Least Developed Countries, the final phases of the Uruguay Round, and the forthcoming UNCTAD-VIII.

A turning point in international economic cooperation was the changes taking place in Eastern Europe and the emerging regional economic integration groupings in the Industrial Economies.

All this, in principle, should generate positive results in spite of uncertainties and the G77 was prepared to face the new challenges of the nineties despite the uncertainties. The Board session, with its focus on major trade issues of vital concern to the Group of 77 could be a first step in meeting the major challenges.

The world of international trade in the 1990’s was different from what it was in the 1960’s and 1970’s, and even early 1980’s. There were changes in trade of manufactures, particularly in high-technology products while new areas of trade in services sector had also been opened up.

Some aspects of the current economic situation, particularly the widening economic and technological gap between the Third World countries and the rest of the world and the growing tendency towards formation of trading blocs, were a source of concern.

There was a feeling that countries that did not form part of these regional accords ran the risk of having to deal with distortions in trade that could inhibit their own export efforts.

The process of globalisation required a trade system that facilitated the exchange of goods and services so that all countries could benefit from the scientific, technological and cultural contributions emerging in different regions of the world.

The current trends towards regionalism should be channelled in such a way as to strengthen such exchanges and trading blocks should contribute to the trade and development of the Third World.

The sweeping political and economic changes in the countries of Eastern Europe opened new challenges and opportunities for the 1990’s and the G77 wished to express their understanding and solidarity for the countries of Eastern Europe as they moved towards greater integration into the world economy. It was the G77's sincere hope that this process should open new opportunities for the exports of the Third World countries and for the world economy as a whole.

However, while welcoming the reawakening of international cooperation, demonstrated in the solidarity shown by the Industrialised Countries to the countries of Eastern Europe, the Third world countries were concerned "that this process could lead to further marginalisation of developing countries".

With less than nine months to go for the scheduled completion of the Round, the Board session was an opportune occasion to focus on the state of play in the multilateral negotiating process and other initiatives being mentioned, such as the proposal to establish the GATT as an ITO, Azikiwe said.

The Third World countries had committed themselves to participate in the Uruguay Round because of their belief that this major international endeavour would result in concrete results to them and that issues of concern to them, not adequately addressed by the previous Tokyo Round would receive priority attention.

Quoting from the February 26 statement of the informal group of Third World countries in GATT about the group's concern over the state of play in the negotiations and growing imbalances and asymmetries, the G77 spokesman said that unless corrective action was taken immediately and due attention was paid to the needs and conditions of the Third World countries including the LDCs among them, "a balanced outcome would be rendered just that much more difficult and the prospects of the Round being successfully and meaningfully concluded would be seriously jeopardised".

The corrective action "will have to stand scrutiny in the evaluation process foreseen in the Punta del Este mandate", he added in a reference to its requirement that to ensure effective application of differential and more favourable treatment, before the formal completion of the negotiations, the Group of Negotiations on goods shall conduct an evaluation of the results in terms of the objectives and general principles governing the negotiations and taking into account all issues of interest to the Third World Contracting Parties.

But even while the intensification of the imbalances and asymmetry was being increasingly recognised, there were indications that some ICs were actively considering the transformation of the GATT into an ITO, the G77 Chair said.

The motivation for this, he said, appeared to stem from the perceived difficulties in implementing the results of the negotiations on TRIPs, TRIMs and Services and "dictated by a desire to consolidate the gains in favour of owners of intellectual property, owners of capital and providers of services desirous of both exporting capital and know-how".

But the Punta del Este declaration clearly stipulated that the Ministers at their final meeting were to take decisions on the international implementation of the results and that decision should not be prejudged.

The new initiative for the ITO seemed clearly to be an effort to invoke the concept of the Havana Charter "in form but not in substance", the Nigerian delegate declared.

The Havana Charter, whose commercial policy chapter was put into operation in the form of GATT, had several provisions relating to commodity price stabilisation, restrictive business practices, economic development measures and macro-economic policies now pursued by UNCTAD but conspicuously absent in the new initiative.

Current indications showed that several aspects of the restrictive features pursued by corporate entities had been ruled out of court by the ICs who were the demanders in the negotiations in TRIPs and TRIMs and making efforts to create further rights for owners of intellectual property and capital.

"The entire thrust of the deliberations in the negotiating groups was to circumscribe the capacity of governments to impose countervailing disciplines and obligations to fulfil the developmental requirements of their societies".

The members of the Group would no doubt carefully consider the proposal to establish an ITO provided it was in line with the arrangements envisaged in the 1964 UN General Assembly resolution establishing UNCTAD and subsequent Conference resolutions.

"Such an organisation", the G77 spokesman added, "should be meaningful, comprehensive and responsive to the developmental aspirations of developing countries. Such proposals will require careful and detailed preparation under the bodies of the United Nations which have both the comprehensive mandate, the universal membership, experience and expertise to deal with such initiatives".

Speaking for the OECD group of countries, Amb. Jean-David Levitt of France said that fundamental changes were taking place in Eastern Europe and the OECD countries would support the process of economic reforms there.

"But this support shall not detract from their determination to contribute to cooperation for development of the Third World", the French delegate added.