Mar 18, 1987


GENEVA MARCH 16 (IFDA/CHAKRAVARTHI RAGHAVAN) -- If the U.S. and EEC have their way in the Uruguay Round, a new GATT would emerge which would enable industrial countries to apply discriminatory restrictions on imports from the third world, while the third world would even be unable to restrain imports to safeguard its balance of payments or protect its sovereignty against assaults by TNCS.

Third world diplomats gave this assessment after the recent first round of meetings of the negotiating groups on review of GATT articles, MTN agreements and arrangements, and on safeguards.

The groups on GATT articles and on MTN agreements and arrangements, both chaired by John Weekes of Canada, met separately in the first week of march, while the group on safeguards, chaired by George Maciel of Brazil, met in the second week of March.

In the next two weeks, three other negotiating groups - those on subsidies and countervailing measures, trade-related intellectual property rights including trade in counterfeit goods, and trade-related investment measures - are due to meet.

In the group on review of GATT articles, the U.S. would appear to have called among other things for review and revision of the articles that enable third world countries to impose non-discriminatory restrictions on imports for balance-of-payments (BOP) considerations, and provide government assistance (to particular industries or regions) to economic development.

In the safeguards group, the EEC would appear to have made clear that it planned to pursue its concept of "selective safeguards or authorization for discriminatory protective actions against particular sources of imports.

The group has been mandated to negotiate "a comprehensive agreement on safeguards", seen as of particular importance to strengthening the GATT system and to progress in the MTNS.

The agreement, it has been mandated, should be based on basic principles of the general agreement, and include a number of listed elements.

The issue was deadlocked in the Tokyo round, and since then in discussions under the work programme, because of EEC efforts to side-step the basic GATT principle of non-discrimination.

When the safeguards group considered its programme of work, the EEC would appear to have suggested in effect that rather than focus on the "basic principles" and all the elements, the negotiators should take up two of the elements -temporary nature, and degressivity and structural adjustment - and try to reach agreement on that basis.

This reportedly provoked Hong Kong to note that an important element of the Uruguay Round is the negotiations to bring the trade in textiles and clothing, now governed by the special Multifibre Arrangement and in derogation of GATT and its non-discrimination clause, back to the GATT rules and disciplines.

Instead of this, the EEC suggestion would effectively convert GATT itself into an MFA arrangement applicable to all exports from the third world, Hong Kong is reported to have pointed out.

Though no one else reportedly supported the EEC view, some third world delegations said that the EEC view has some support from other Europeans, including the Nordics.

Apart from the "selective safeguards" thrust, the EEC would also appear to have suggested that the group's work should only focus on the relevant article XIX, and not to actions under other provisions or those not specifically covered by GATT (the so-called "grey area" measures).

At the first meeting of the group on GATT articles, the U.S. would appear to have suggested a wide-ranging general review and revision of the articles of GATT, and mentioned over a dozen articles.

Brazil, India and others however rejected this, underscoring that any such general review and revision would be possible only through a plenipotentiary conference, while the mandate of the Uruguay round was more limited.

While any CP could suggest a review of any particular article or provision, it would have to make a request, accompanied by a detailed justification of why it wants a revision.

The participants in the negotiations would then have to consider these requests, and on the basis of consensus would have to agree that revisions to a particular provision or discipline was needed. Only thereafter, and on the basis of specific proposals for amending any particular article, could any negotiations be undertaken.

After some discussions it has reportedly been agreed that interested CPS should put forward in writing their "requests" for review of specific articles, and provide an explanation or reason why this should be done.

In what was seen as a major thrust aimed at changing provisions safeguarding, however inadequately, third world development interests, the U.S. would appear to have argued for review and revision of articles XII, XV and XVIII of the agreement.

Article XII, now applying mainly to third world countries, enables them to impose general or specific non-discriminatory import restrictions in order to safeguard their external position and BOP.

Third world countries often use these provisions to require enterprises, including TNCS operating on their territory, to import inputs (raw materials or components) for production only insofar as no local substitute is available.

They also use these provisions to force TNCS to export products and earn foreign exchange, at least sufficient to meet import costs for inputs as well as for payment of dividends and other payments.

The U.S. has been trying to end these types of restrictions, cribbing the global strategies of TNCS for profit maximisation.

The EEC would appear to have agreed that there could be no general revision of the general agreement through the MTN, but suggested that along with the review of articles, there should also be a review of the 1947 protocol of provisional application of GATT.

In November 1947, after negotiating the general agreement (incorporating some of the tariff and non-tariff trade policy provisions covered in the Havana Charter), eight of the signatories decided to put GATT into force provisionally, pending its definitive entry on ratification.

This was because they wanted to put into force immediately some mutual tariff liberalisation they had negotiated, but which the U.S. would not implement without some of the trade-policy measures.

It was envisaged that ultimately GATT would be replaced by the Havana Charter, and its envisaged international treaty organisation. But the Havana Charter never came into effect since the U.S. Congress did not want to ratify it. The charter and the ITO were seen as a supra-national authority that would abridge congressional powers.

GATT too never came into force definitively. The U.S. did not want to ratify it for the same reasons as for Havana Charter, and none of the other signatories of GATT, except Haiti, did so either.

As a result, GATT continues to be a provisional treaty, 40 years after its signature.

A major benefit to the U.S. was that the protocol only bound the signatory governments to give effect to the provisions of GATT in part II - the various permissible and impermissible trade policy measures for protection - "to the fullest extent not inconsistent with existing legislation".

If GATT had come into force definitively, the U.S. would have been obliged to bring its domestic laws into line, and U.S. interests could have challenged laws contrary to GATT.

And since the only remedy in GATT is "retaliation", the U.S. has been able to use its large market power to disregard GATT provisions whenever it chose or force others, particularly the smaller trading nations, to fall in line with U.S. demands.

Apart from the U.S. and EEC proposals, Australia and others suggested that the provisions relating to customs unions and free trade are too should be reviewed.

The Leitweiler report in 1985 said the rules permitting customs unions and free trade areas had been "distorted and abused", since they permit departures from the MFN rule and have enabled preferential bilateral and other trading arrangements to the detriments of others.

South Korea, supported by a number of other countries, also wanted a review of the provisions in article XXVIII relating to modification of tariff schedules and other concessions.

At present, a country seeding to do so, holds consultations with its principal or major suppliers, reaches agreement with them by offering compensation, and ignore the small suppliers, from whom it might be a major export item.

In the group on MTN codes and agreements where negotiators have been asked to aim "to improve, clarify, or expand, as appropriate the agreements and arrangements negotiated under the Tokyo round, the U.S. and a few other industrial countries wanted the review of codes to be undertaken by signatories only.

Others, and specially third world countries, argued against it, stressing the wording of the Punta del Este declaration.

Some third world countries, themselves signatories to particular codes, also raised the question of parallel efforts within some of the codes and arrangements (where only signatories participate) to revise them, ignoring the Uruguay round processes for review and revision of the codes.

This, it was suggested, was contrary to the Punta del Este declaration and mandate in this area.

Very few third world countries are signatories to the Tokyo round codes and arrangements.

The entire purpose of undertaking review and revision of codes, it was underlined, was aimed at meeting the difficulties faced by the third world countries in joining the codes, and was intended to secure their wider adherence.

The government procurement code, which had only three third world adherents, was proceeding in a different direction, and immediately after Punta del Este its members had undertaken another major review and revision, excluding others from this process.

A number of third world countries are reported to have said that even when the Tokyo round codes were incorporated, there was a GATT CPS decision about maintaining the unity and integrity of the GATT.

But in actual working, the MTN codes and committees had already fragmented the general agreements.

Japan would appear to have suggested that the various codes and arrangements had "varying degrees of relationships" to GATT, and the government procurement code which was not based on any GATT provision, was one such.

India and several others argued that if the Japanese idea about degrees of relationship of codes to GATT were pursued, GATT would soon cease to be a multilateral trading system.

Also, they warned against efforts to develop similar codes, not based on any particular GATT provision or articles, and on issues extraneous to the general agreement, using the theory of "trade related issues".

This would threaten the integrity of the GATT system.

It was not only necessary to maintain the integrity of the system, but efforts must be taken to ensure that nothing in any code or arrangement abridged the rights and obligations of contracting parties who were not signatories to the codes.

Despite a specific affirmation of this by the GATT Contracting Parties, in some code arrangements, like that on subsidies, there had been efforts by some signatories (the U.S.) to abridge the rights of non-signatories under the general agreement, in order to force them to adhere to the code or accept higher obligations than provided for third world countries in the code.

The review and amendments and changes to existing codes would necessarily require agreement of the present signatories. But this need not preclude participation in the review process of the non-signatories, since any agreement would be by consensus.

Third world countries did not want to see a repetition of their experience in the Tokyo round, when some of the major trading partners had negotiated and reached agreements among themselves, and then presented it to others on a "take-it-or-leave-it" basis.

Negotiations for review and revision of codes should be conducted in a transparent manner, with the full participation of all Uruguay Round participants.