EFFORTS TO BLUR TARIFF, AND LEGAL AND ILLEGAL NTMS?

May 5, 1987

EFFORTS TO BLUR TARIFF, AND LEGAL AND ILLEGAL NTMS?

GENEVE, APRIL 30 (IFDA/CHAKRAVARTHI RAGHAVAN) – The U.S., EEC and some other industrialised nations appear to be still trying to merge the separate negotiations in the Uruguay round on tariffs and non-tariff measures (NTMS) into one package of "comprehensive market access", according to third world participants.

There is also an effort, participants said, on the part of some of the industrialised nations to blur the distinctions between NTMS "inconsistent" with GATT rules, which are subject to the rollback commitments and eliminated without seeking any concessions, and NTMS "consistent" with GATT and whose removal or reduction could be negotiated.

These efforts, participants said, were apparent at this week’s second round of meetings of the negotiating groups on tariffs and on NTMS, both chaired by Lindsay Duthie of Australia.

Third world countries however would appear to have rejected the so-called integrated market access approach, emphasising the separateness of the negotiations on tariff and non-tariff issues.

They also reportedly underscored the clear distinctions between "GATT illegal measures" whose elimination is an obligation for which no price could be sought, and "GATT legal measures" whose reduction or elimination could be the subject of negotiations.

The Punta del Este declaration has listed tariff and non-tariff issues as separate subjects. In the weeks of wrangling, after Punta del Este, on the organisation of the negotiations for the MTNS, the U.S. had tried to push for one common group, but could not get its way. Only the same person was named as chairman for all the four groups – tariffs, NTMS, natural resource products, and textiles and clothing.

At this week’s meetings the U.S. and EEC and a few others apparently sought in effect to merge the negotiations by talking of "the intimate relationships" between tariff and non-tariff barriers, and the need for an overall approach.

The merger of the tariff and non-tariff negotiations, some third world participants pint out, would be detrimental to third world interests, since it would enable the industrialised states to trade off their removal of Quantitative Restrictions (QRS) and other NTMS for cuts by third world countries in their relatively high tariffs.

The Tokyo round tariff cuts have reduced to very low figures the tariffs on most of the industrial products exchanged between the industrialised nations, and what is left in the tariff area are the "high peaks" and issues on tariff escalation with every stage of processing.

In the non-tariff areas there have been an escalation of NTMS, particularly to so-called "grey area" measures. But there are also a number of other NTMS of long duration in place against imports from the third world, long on the GATT agenda. The illegal NTMS are the subject of rollback commitments.

The Punta del Este declaration makes clear that reduction or elimination of NTMS, including QRS, would be "without prejudice to any action to be taken in fulfilment of the rollback commitments".

In the tariff group, the chairman would appear to have posed the question whether negotiations should be on a tariff cutting formula or item-by-item on the basis of a request and offer basis? Could either deal effectively with the problems of tariff peaks and tariff escalation?

A number of countries (Sweden, Switzerland, Poland, Hong Kong, Czechoslovakia, Yugoslavia) would appear to have supported a general tariff cutting formula, and for increased "harmonisation" of tariffs by eliminating or reducing tariff peaks and tariff escalation.

The U.S. favoured the "request" and "offer" approach, and use of the across-the-board tariff cut formula for those who did not participate in the Tokyo round cuts (Australia, New Zealand and third world countries). The U.S. was also willing to negotiate on its tariff "peaks" in return for tariff bindings by other countries.

Japan would appear to have proposed the formal elimination of all tariffs on industrial products, excepting those of mining or forestry. Third world countries could contribute by "binding" tariffs on items corresponding to an agreed proportion of their total trade, say 50 percent.

Malaysia, speaking for the Asian countries, cited the incidence of tariff peaks on third world exports to make the point that the issue would need to be addressed.

While the average post-Tokyo round U.S. tariffs was 4.3 percent, tariffs on footwear was 12.6 percent, on leather products 10.6 percent, textiles 18.2 percent, and clothing 22.7 percent.

In the case of Japan, the average was 2.7 percent, but on footwear it was 16.5 percent, on leather and products 13.8, and on clothing 13.8 percent.

For the EEC, the average was 4.6 percent, but on footwear it was 20 percent, leather and leather products eight percent, and on clothing 13.3. percent.

Canada suggested that all countries should aim to "bind" all their tariffs. This would primarily involve actions by Australia, New Zealand and third world countries.

The EEC underscored the need for participation of all countries "capable of making contributions", and said it was unacceptable that EEC should pursue a programme of liberalisation while others capable of doing so made no contribution.

The EEC did not favour any action on tariffs below seven percent. Those who did not participate in the Tokyo round cuts should make a statement of their intent, and increase their level of bindings according to their ability.

The U.S. favoured looking at tariff and NTMS together, but a number of third world countries like India, Hong Kong and Yugoslavia, rejected any such linkage, pointing to the fact that the subjects have been listed separately in the Punta del Este declaration.

Switzerland proposed that in any consultations under article XXVIII for changes or modifications in tariff schedules, not only the "principal" supplier and those with "substantial interest" should be involved, but also "small suppliers" in specific circumstances.

The Swiss proposal has received the support of third world nations and smaller industrial countries.

In GATT practice "substantial" supplier status accrues only to those whose exports account for over ten percent of total imports of that product in a country. But Switzerland pointed out that modification of tariff schedules on a product would adversely affect the economy of the "small supplier", where the export concerned accounted for a significant share of the economy of the country. Such a country should also be consulted and compensated.

Switzerland has agreed to pursue the issue in the negotiating group relating to GATT articles, but has reserved its right to bring it back to the tariff group if needed.

At the meeting on NTMS, Malaysia suggested that NTMS in the areas of tropical products, natural resource products and agriculture should be dealt with in their respective groups, and those covered by MTN codes in the groups dealing MTN agreements and arrangements.

The EEC favoured limiting negotiations in the group to QRS; NTMS and others not covered in any other group. In addition to current descriptions of "black", "white" and "grey" NTMS, there was a fourth category of "colourless" measures not so far notified in GATT.

These "colourless" measures, the EEC reportedly argued, should be dealt with, and NTMS "where the hand of the government is present but not visible" should be looked at in the group.

Canada suggested that each participant should put forward by December 1, a "request" and "offer" list in respect of tariffs and NTMS, and negotiating done on that basis.

A number of countries were willing to go along with such an approach, but subject to some qualifications.

Brazil wanted the concept of special and differential treatment for third world countries to be included in the negotiating techniques and modalities. Hong Kong felt that there should be multilateral scrutiny of negotiations on "request" and "offer" basis.

Brazil insisted on the clear distinction being drawn between NTMS consistent with GATT to be dealt with in the NTM group, and others covered by rollback commitments to be dealt with in the Surveillance Body.

Mexico, Hong Kong, India and Yugoslavia were among those who supported this view.

Japan felt it would not be pragmatic to try to differentiate between "consistent" and "inconsistent" measures, and it would easier for each participant to proceed on the basis of the NTMS already in the GATT inventory.

The U.S. felt it would be futile to continue the controversy over legal and illegal NTMS and their justification, and was afraid such an approach would impede progress in the negotiations.

India however insisted that the group would have to come to grips with this problem and it could not be shelved. Elimination of NTMS inconsistent with GATT could not be "negotiated" for a "price", and must be dealt with in the Surveillance Body on the basis of phased programme for their elimination.

Hong Kong suggested a distinction should be drawn between QRS and other NTMS, and QRS given priority in the NTM group. Also, NTMS on textiles not covered by the Multifibre Arrangements should be addressed in the NTM group.

U.S., Canada and a few others favoured the creation of an integrated database on tariff and non-tariff measures and barriers. But several others did not accept this approach.

India underscored the separateness of the tariff and NTM negotiations, and said what was needed was an updating of the existing databases on these. Also, UNCTAD had done considerable work on NTMS, and its technical support could be sought by the NTM group in its negotiations.

South Korea felt an integrated database could be relevant for the negotiations on improvements in the functioning of GATT, but could hardly be expected to make any direct or indirect contribution for the Uruguay round, especially in view of the considerable time needed to create such an integrated database.

Participants said no decisions were taken on this, as well as on issue of UNCTAD technical support.

Also, they said in the tariff group, where the EEC had proposed "observer" status for customs co-operation council, the U.S. reportedly tried to link it up with such a status for IMF, World Bank and UNCTAD.

However the EEC, India and others said that the GNG had provided observer status for its meetings for the UN, UNCTAD, IMF and World Bank. But in the negotiations groups, they could not have "observers" floating in and floating out of meetings, and only those who could "contribute" to the negotiations, which were only among participants, should be invited. Also, it had to be deciding by each group on the basis of its own needs, and there should be no attempt to "link" invitations, as the U.S. was seeking to do.