Apr 26, 1988


GENEVA APRIL 22 (IFDA/CHAKRAVARTHI RAGHAVAN)— The industrial countries appear to be approaching the tariff talks in the Uruguay round

Negotiations from the perspective of focussing mainly on tariffs in third world countries and securing drastic reductions in such tariffs-and 'binding' them in GATT.

The Uruguay round negotiating group on tariffs, still searching for a basis for tariff negotiations, did not reach any conclusions, and would meet again in second half of June.

When tariffs are bound in GATT, they cannot be raised by the country concerned without consultations with affected contracting parties to re-negotiate the bound tariffs, and usually by agreeing to 'compensation'.

Previous GATT rounds, concentrating mainly on industrial tariffs, have led to substantial reductions in the general level of tariff rates, and by 1987 the Tokyo round cuts had been implemented by all parties.

As a result, the post-Tokyo weighted average MFN rates in the EEC, Japan and the U.S., have fallen to 5.6, 5.5 and 4.8 percent respectively.

These three markets account respectively for 31, 21 and 36 percent respectively of all OECD imports from the third world countries.

Despite the low average tariffs in all the three markets non-fuel exports of the third world face a higher incidence of tariffs than those of industrial countries.

According to published UNCTAD data, tariffs above ten percent still account in the EEC, Japan and the U.S. respectively for 21.5, 17.1 and 16.0 percent of all tariff lines. In some EFTA countries it is even higher - 29.6 percent in Finland and 23 in Austria.

Most of these high tariffs are on products in the food and textile and clothing sectors - sectors of primary export interest to third world countries.

There are also problems of tariff escalation at every stage of processing.

The Punta del Este declaration has mandated negotiators "to reduce or, as appropriate, eliminate tariffs including the reduction or elimination of high tariffs and tariff escalation", and giving emphasis "to the expansion of the scope of tariff concessions among all participants".

Despite this fairly wide mandate, statements of industrial countries in the group would appear to suggest that they see the negotiations as aiming at taking action only or mainly of tariffs in the third world countries.

Tariffs in third world countries are used not only for protection but also for raising revenues, and are relatively high; few third world countries have 'bound' their tariffs.Only Chile has bound all its tariffs, and Mexico, as part of its accession negotiations, has cut all its tariffs by fifty percent and bound them in GATT.

GATT clearly envisages third world countries having to engage in protection of their industries and markets for a considerable time, given their stages of economic and social development.

This is apart from the special provisions enabling them to impose quantitative and other restrictions on imports to safeguard their balance of payments.

Industrial countries came around to cutting their tariffs in industrial products only after more than a century a high tariffs and protection for their industrialisation process.

And while the third world countries are still in the process of industrialisation, with some just on the bottom rung, the industrial countries want to use the Uruguay round to force cutbacks in third world tariffs.

Institutions controlled by them, like the world bank and the IMF, have also been advancing neo-classical economic theories (which are not applied by industrial countries) to vigorously advocate the need for third world countries to dismantle protection and reduce tariffs, to increase 'efficiency' and to bring domestic prices in line with international prices for better resource allocation.

All these tendencies have reportedly been reflected in the discussions in the tariff group which, in fact appear to be still engaged in the initial process of receiving proposals, updating data, and formulation of issues for negotiations.

It would then have to agree on a common negotiating basis before bilateral and plurilateral negotiations for tariff cuts could be undertaken.

At this week's meeting the U.S. would appear to have made clear that it was not prepared to consider any general tariff cutting formula for negotiations, but would only consider an approach based on 'requests' and 'offers'.

Switzerland has already proposed to the group the adoption of a general formula that would cut higher tariff rates by a greater percentage. In the Tokyo round, a Swiss formula for general tariff cuts was ultimately accepted.

This week, Austria is also reported to have put forward a general tariff cutting formula.

On the question of data, the industrial countries sought what they term 'a fast track' approach to require countries to provide the kind of data they would be called upon to do under the GATT’s proposed integrated data base (IDB), and other information considered necessary for the negotiations.

Throughout last year, when the tariff group began and when third world countries had sought to raise the data issue, the GATT secretariat and the industrial countries sought to brush it aside.

At that time, both the secretariat and the industrial countries were anxious to get sanction for their 'integrated data base' idea, which in fact would be duplicating data already available within the UN statistical office and UNCTAD data base.

They were pushing for the IDB, both to make GATT 'independent', and to get third world countries to provide data that they were not required to under the normal GATT provisions and decisions.

After considerable controversies, a compromise was reached last December at the annual session of the contracting parties an the IDB, with third world countries agreeing to provide only the data they were obliged to under GATT.

In case of tariffs, for example, they would be obliged to provide data only in respect of the tariffs they have agreed to bind, and not their unbound tariffs.

But having secured authority to build up a costly and duplicate data system of the IDB, the GATT secretariat and industrial countries would now appear to be trying to obtain these and other data (that third world countries have refused to provide for the IDB), through the tariff negotiating group, and do this at a faster pace than what has been agreed for the IDB.

For many third world countries still in the process of computerising such data, and converting their tariff lines from the CCCN to the Hs nomenclatures, even providing the data for the IDB is going to be time-consuming and hence the longer dateline agreed to by the contracting parties.

Brazil, India and other third world countries reportedly refused to agree in the tariff-negotiating group to the U.S. proposal for 'fast track' approach for all CPS to provide tariff-line information.

The chairman of the group was ultimately asked to hold further consultations on this issue._