NEED FOR TIMELY MULTILATERAL SCRUTINY OF BALANCE IN UR.

Mar 15, 1990

NEED FOR TIMELY MULTILATERAL SCRUTINY OF BALANCE IN UR.

GENEVA, MARCH 13 (BY CHAKRAVARTHI RAGHAVAN) -- The need for an overall balance in the Uruguay Round negotiations and for a multilateral assessment of this well before the closing of the Round has been underscored by the top trade policy official of the UN Conference on Trade and Development.

The UNCTAD Director of International Trade Programme, Mr. B. L. Das, was addressing the Sessional Committee of the Trade and Development Board which is considering issues of Protectionism and Structural Adjustment as also the developments in the Uruguay Round of Multilateral Trade Negotiations.

The Final Act of UNCTAD-VII, he noted, had agreed on the critical role of the Uruguay Round in the international trading system and that "a balanced outcome should, in the end, develop a more open, viable, and durable multilateral trading system and thereby contribute to promoting growth and development".

Given the manner, in which negotiations had evolved in various negotiating groups, this question of balance was one, which the Board might appropriately address with particular attention, Das said.

"Not only the credibility of the round but also the durability of its results depends on full implementation of the standstill and rollback commitments", Das told the Committee.

One of the purposes of the standstill, he recalled, was to prevent any country from imposing, or threatening to impose trade measures to improve its negotiating positions vis-à-vis other participants in the negotiations. The underlying logic was clearly that countries accepting agreements under this type of duress later be tempted to circumvent them in future.

"In other words, a durable result of the Round must not only have 'letter' but also 'spirit'", the UNCTAD official commented.

The question of balance, he said, arose as between the market access negotiations and those aimed at more normative issues. While recognising the importance of achieving increased disciplines over conduct of trade relations, "the credibility of the negotiations depends to a large extent on their maintenance of the momentum towards the liberalisation of world trade and improved access to markets, particularly for exports of developing countries".

In this context, action in particular sectors such as textiles and clothing and tropical products would seem a matter of priority.

Liberalisation would also have to be carried out to ensure a balance of interests among participating countries. In agriculture, there was need to improve market access and establish disciplines over those policy measures, notably subsidies, which distort the competitive environment in agricultural trade.

At the same time solutions in this area should take account of the problems faced by those Third World countries which were net food importers and of the special role of agriculture in the economies and societies of the Third World countries.

However, since the Uruguay Round was concentrating on negotiating new disciplines in international trade relations, the attainment of balance was an objective of utmost priority.

The process of strengthening the international trading system involved acceptance of increasingly stringent disciplines by all trading partners. However, this acceptance of disciplines could be viable only if it applied in such a way as not to be more onerous on countries than on others, given the differences in stages of economic development.

"Care should be taken", Das said, "that disciplines do not serve to inhibit developing countries from using trade policies as an inherent component of coherent development strategies. It would also be important to avoid loosening of disciplines over recourse to trade restrictive measures, while tightening them over other areas of trade policy. More stringent disciplines are especially required to consolidate and prevent any further erosion of the unconditional most/favoured/nation principle, while eliminating the possibility of resort to discriminatory trade measures".

The attainment of a balanced result, Das continued, became even more crucial and difficult in the new issues: Trips, Trims and Trade in Services.

In these areas the negotiations had acquired "an even more pronounced North-South character than that prevailing in the other areas of negotiations" due to the dramatic asymmetry in the situations of Industrialised and Third World countries with respect to much factors as their ownership of capital, technological and infrastructural development, size and competitiveness of their enterprises and their roles as "host" or "home" countries for TNCs.

"In these areas, the thrust of many proposals is to establish new disciplines to incorporate rights of property owners into the multilateral trading system", Das pointed out.

"If balance is to be attained, any agreement that would incorporate such elements should be met by corresponding obligations upon these property owners, as part of an overall multilateral solution. Similarly, the rights of property holders will have to be balanced by mechanisms which ensure that such property rights do not conflict with public policy, including development objectives".

It had been recognised in the negotiations on trade in services that the definition could include cross-border movement of factors of production essential to the provision of the service.

"In this case, balance would have to involve factors concerned: capital and labour".

"Liberalising flows of capital, while restricting flows of labour, would serve to reduce the returns of the latter factor and particularly penalise developing countries".

These were just a few examples of the challenges facing negotiators in arriving at balanced results and illustrated the fact that mutual acceptance of disciplines could only provide a balanced result when such disciplines took full account of the differences in levels of development and other asymmetrical situations among the parties concerned.

The inclusion of the differential and more favourable treatment concept as a guiding principle in the negotiations was designed to ensure that negotiations aimed at mutual advantage could succeed despite the asymmetry in the situation of the Industrialised and Third World countries.

Given the unprecedented scope and pace of the Uruguay Round with intensive activity in most groups, it had been difficult to arrive at the overall view of the balance in the evolution of negotiations.

Each and every participating government would have to conduct its own overall assessment of the balance of benefits that it would obtain from the Round before accepting its results.

"If the question of overall balance is not considered multilaterally well before the close of the Round, many countries may find it difficult to assess the final outcome and adhere to it at the end of the Round in December this year", Das added.

Earlier in introducing the secretariat reports on protectionism and structural adjustment Das noted that protectionism in the industrialised countries had not abated to any significant extent and tended to be strongest with regard to products of export interest to the Third World.

Managed trade was clearly gaining ground and incidence of voluntary export restraints (VERs) had dramatically increased in the 1980's, affecting most adversely the weaker trading partners and in particular the Third World countries.

Moreover, market access for goods had been denied because of alleged "unfair trade actions" in other areas, such as protection of intellectual property rights.

This practice, Das pointed out, was at variance with the Final Act of UNCTAD-VII where it was agreed that "observance of multilaterally agreed commitments with respect to trade in goods should not be made conditional on receiving concessions in other areas".

The entire question of market access and how to improve it was the central issue of the Uruguay Round. No doubt a serious effort was made in the negotiations to bring action in the field of tariffs and non-tariff measurers within the framework of internationally accepted rules and reduce substantially the ease with which countries could resort to restrictive measures that did not come within the purview of the GATT rules.

"It remains to be seen how far these negotiations will succeed in improving the access of developing countries to the markets of the industrialised countries. Though there has been liberalisation of some measures in 1989, there does not yet appear to be any cause for optimism ... a large number of non-tariff measures have been established or renewed since the Punta del Este declaration. Clearly much more determined effort is needed to right protectionism".

Emphasis on market access alone would prove one-sided and adequate, unless production structures of all countries evolved in a complementary fashion to accommodate a greater volume and variety of imports from trading partners.

Structural change and adjustment in the OECD countries were crucial determinants of global economic expansion and development, and had significant implications for the pace of economic progress in the Third World. Structural policies in ICs need to address adjustment problems in all economic sectors with equal determination. As a whole there was as yet little indication of a major shift in the agricultural policies of the ICs towards greater markets orientation in agriculture where, according to the OECD, in 1987 cost of support was about 286 billion dollars.

The constraints on trade due to market access barriers and slow structural adjustment in ICs had been generally compounded by constraints on supply side of the Third World countries who had to carefully consider need for improvements in their policies to make their products competitive in international markets.

Many of the Third World countries were actively pursuing policies towards this end and, in the context of their trade process, a large number of them had been reorienting their trade policies. Even those with severe debt servicing difficulties had liberalised their trade regime in recent years.

But it should also be borne in mind that it was the trade and other economic policies of the ICs, which crucially influenced the vagaries of the international trade.The leverage of policies of Third World countries to improve their trade performance was bound to remain weak unless those policies were supported by an effective multilateral trading system.