May 23, 1989

WARNINGS AGAINST U.S. "SUPER 301" THREATS AND ACTIONS.

GENEVA, MAY 19 (BY CHAKRAVARTHI RAGHAVAN)— The U.S. has been warned that its impending moves against some key countries as targets for retaliatory actions under "super section 30l" of its trade and competitiveness act would have some negative effects on the trading system as well as on the Uruguay round itself.

The warning was reportedly given at this week's meeting of the Uruguay round surveillance body, chaired by the GATT deputy director-general, Madam G. Mathur.

In raising the issue in the surveillance body under the so-called "early warning system", a number of GATT participants would appear to have warned that if the threats are implemented, they would have negative impact on the trading system and the Uruguay round.

Those who spoke reportedly were Japan, Canada, the EEC, South Korea, Brazil and India.

The surveillance body oversees the observance of the standstill and rollback commitments undertaken by the GATT Contracting Parties at Punta del Este in September 1986 when launching the round.

Far from being able to play any decisive role in ensuring implementation of the commitments, the surveillance body has become a pro forma exercise where participants make their complaints or air their views, and the record of the meetings are merely forwarded to the trade negotiations committee, which so far has not acted on any of the complaints of violations.

Reflecting this situation, while flagging the issue, the countries who spoke reportedly did so in a fairly low key.

On may 1, the U.S. published its annual national trade estimates report, and this has singled out Japan, South Korea, Taiwan, the European Community, Brazil and India as countries with "unfair trading practices".

Under the "super section 301" of the U.S. trade and competitiveness act of 1988, the U.S. trade representative has to identify by May 30 the "priority practices" which harm U.S. exports and the "priority countries" with the most numerous and pervasive barriers.

Naming such countries and practices would trigger investigations and negotiations with the country concerned for elimination of such practices, and failing that imposition by the U.S. of unilateral trade restrictive measures.

The impending U.S. moves have roused widespread concerns in the countries concerned, and there have been statements in most of these capitals that they would move the GATT against any such U.S. actions.

In the past (before the 1988 revision of the law) when the U.S. has acted against some countries under its normal section 301 procedures (namely, on the complaint of private parties), and had notified the list of products of the country concerned which the U.S. would hit, the U.S. had resisted actions in the GATT arguing that GATT rights would be violated only when it actually took actions and not before.

But after the mid-term package accords, the reference of a dispute to a panel does not require the consent of the party against whom complaint is lodged nor can it be held up by withholding consensus. So the U.S. could be facing a new ball game.

There has been some talk that the representations (and pressures applied) in Washington by Japan, EEC, and other major U.S. trading partners is being weighed by the administration, and that one of the courses being weighed is merely to name the "priority practice" and not the "priority countries" and seek negotiations on them in the round.

It is not clear how this could be done, since the U.S. law appears to call for naming of both the priority practices and the priority countries for actions.

In any event, in either or both event, the countries would now have to negotiate under the threat of actions against them if they do not yield to the U.S. in the negotiations.

This itself is a violation of the standstill commitment, under which each CP has agreed to take any action that would improve its negotiating position.

But with the commitments being described as political, then only effective action could be to call a halt to the Uruguay round negotiating processes.

And with the U.S., making use of its import market power and aggressively pursuing some "neo-mercantilist" policies to promote its exports, it is not clear how far its targets could or would be able to act.

There are some moves for some collective actions or steps by the countries affected or targeted. This is still in the preliminary stages here.

The U.S. administration and its trade negotiators are privately telling countries that their naming the "target countries" would be because of the U.S. law, and that that the best way to deal with the problem is for the targeted countries to start negotiations with the U.S. so that both could find a way out that would satisfy the congress.

But given the fact that the U.S. administration and its then trade representative, Clayton Yeutter, had worked out with Congress in putting in these provisions, and the present USTR, Mrs Carla Hills threatening to use the "crowbar" to pry open markets, the explanations now being offered would however appear to be the "bad-cop-good-cop" approach to the trade negotiations, with the administration pretending to be the "good cop" and painting the Congress as the "bad cop".