May 30, 1989

"BUYING A MESS OF POTTAGE?"

GENEVA, MAY 29 (BY CHAKRAVARTHI RAGHAVAN)— The third world countries who have been put on the two U.S. hit lists last week in tactics intended to open up their economies now face some hard choices: facing and confronting the U.S. now or paying a higher price for confrontations later.

Third world observers here, and even some of the diplomats from the countries involved agree that in accepting the compromises over the Uruguay round in April, without making sure that the U.S. would be committed at least to a "cease-fire" on these bilateral actions and threats, the third world countries are in the position of the biblical saying about giving up their birthrights for a mess of pottage".

The credibility of policy-level officials of some of these countries back home, and of the GATT Director-General and his advisors (who persuaded the third world countries to compromise) are now seriously impaired, the observers say.

Most of the headlines on the U.S. actions last week have focussed on the naming of Japan, Brazil and India for so-called "super 301" actions for "unfair trade" practices.

Less attention has been paid to the hit list on intellectual property privileges sought by the U.S., the so-called special 301 actions.

The U.S. omnibus trade and competitiveness act that provided these two instruments of bilateral pressures, for neo-mercantilist economic aggrandisement, nowhere mention either "super 301" or "special 301".

Though the provisions are strewed over half a dozen separate sections, with a built-in time-table for triggering actions and in various stages. But for convenience sake everyone has been calling them respectively the "super 30l" and "special 301" provistons.

While the former perhaps has a longer time-table before the U.S. slaps trade restrictions on the three (Brazil, India, and Japan), the latter affecting about eight third world economies has a "faster track", and will have perhaps even more far reaching effects on the third world.

The "priority watch list" countries named under special 301 are: Brazil, India, South Korea, Mexico, China, Saudi Arabia, Taiwan and Thailand.

Of these, Taiwan and Saudi Arabia are not in the GATT or Uruguay round. China is in the round and seeking re-entry into GATT.

Waiting in the queue for being graduated into the list next year, and now on the "watch list" are Argentina, Chile, Egypt, Greece, Indonesia, Pakistan, Venezuela, Turkey and Philippines.

There is however a separate investigation against Argentina, under "normal" 301, started on a private petition started by U.S. pharmaceutical companies. The investigations in that case were started in September 1988, and initial bilateral consultations with Argentina government were held in December. The case is pending.

But whether initiated by private parties or self-initiated by the U.S. trade representative, the ultimate consequences are the same: negotiate and yield to the U.S. demands or be hit by 100 percent tariffs and other trade restrictions.

The use of these bilateral threats has been roundly criticised in international fora and there are commitments, including in the UNCTAD-VII final act of 1987, to abjure these.

But the U.S. has ignored them and merrily been going on.

The USTR Mrs Carla Hills, who is becoming known here as "crowbar Carla" (in her confirmation hearings she said she would use a crowbar to pry open foreign markets), has made clear that whether GATT holds these provisions legal or not, the U.S. would continue to use them to open up the economies of trading partners for U.S. transnationals to operate untrammelled by any host country requirements or policies and laws.

Under the "special 30l", the countries named have been given five months to "negotiate in good faith and show progress" in respect of the demands on intellectual property listed against each of them in the federal register.

This five month time coincides with the programme of work that has been evolved in the Uruguay round negotiating group on "trade-related intellectual property rights" (TRIPS).

The programme now involves addressing first the issues of "enforcement" of rights in national jurisdictions, then the issues o "provisions of adequate" standards and principles concerning the availability, scope and use of TRIPS".

Even the applicability of the principles of GATT or other international intellectual property instruments to TRIPS have been pushed to the background.

The third world countries have said that their concerns on "public policy objectives of their national systems of intellectual property protection, including developmental and technological objectives", concerns which the TRIPS group has been asked to take into consideration, should permeate all these discussions.

But if past experience is any guide, the secretariat and the chairman could be expected to steer the actual discussions and conclusions etc to progress in the directions sought by the U.S. and other industrial countries (who in this matter are united against the third world), without paying anything more than lip sympathy.

There is also talk in the corridors of GATT that the third world concerns and the demand for special and differential treatment could be met by giving exemptions to the least developed, and use it to split the third world countries in GATT even further.

In the case of India, the U.S. has demanded that it provide improved and adequate patent protection for all classes of inventions - which means for products and processes, including in pharmaceuticals, chemicals, food, etc., and without any exclusions, and including such new areas as biotechnology, semiconductors, etc.

Other areas where there is a demand on India have been elimination of discrimination against use of foreign trade marks, registration of service marks, effective protection of well-known trade marks, improved access and distribution of U.S. motion pictures (now subject to restrictions on sop considerations and imports canalised on basis of films selected on stated criteria for merit), improved enforcement against piracy (by giving priority to these cases in the countries overloaded judicial system), and "constructive participation" in the multilateral Uruguay round process.

The last is apparently a common demand on all the countries cited.

While the details of the demands made on Brazil and others (and listed in the federal register in Washington) are not immediately available here, some details are in the 1989 national trade estimate.

In the case of Brazil, patents are demanded for products and processes for chemicals, foodstuffs, and pharmaceuticals. Also sought are removal of the requirement (that Brazil is entitled under the original WIPO conventions of which it is a founding signatory) namely those patents have to be worked in the country.

In the case of Mexico the complaints involve lack of patent protection for some items, new applications for known inventions, compulsory licensing burdens, excessive business information requirements, trade marks subject to compulsory licenses, inadequate trade secret protection and enforcement, proprietary information disclosure requirements leading to inadequate protection, legal limits on royalty payments at foreign companies and inadequate copyright enforcement.

South Korea, in the national trade estimates, has been cited for inadequate patent, copyright, and trademark laws, and inadequate enforcement.

Technically perhaps, as the-GATT spokesman pointed out last week, no GATT obligation has been violated, and no GATT right of a country has been breached, and appropriate actions for dispute settlement would arise only when actual discriminatory tariffs or other restrictions are slapped (sometime next year),

In the view that no GATT right is immediately violated, as some of the remarks of the GATT officials before and after the April TNC meeting, and the U.S. actions suggest the emphasis would be to continue the negotiations and reach accords that would obviate the U.S. bilateral pressures and instruments.

But this is to ignore the enormous uncertainty and damage to trade and investments by these threats in all the countries on the hit list.

Third world countries could thus insist on initiating GATT dispute procedures and mechanisms which now have a certain automaticity and time frame to ensure reference of disputes to adjudication.

But even this may not help the third world countries involved: the issue of when GATT rights are violated, whether at the time of threat or when threats are executed would still arise.

All these dangers were well known at the time of the April TNC meeting.

But trade officials from capitals, anxious to avoid these uncertainties and "unilateral U.S. measures", and listening to the blandishments of the GATT officials, did not insist from the U.S. at least on a "cease-fire" on the super 301 and special 301 before agreeing to the compromises.

Now, their options are even less. The only way, and one that could force the U.S. to heed, perhaps would be the threat of wrecking the Uruguay round on which the U.S. and its enterprises have invested so much, and refuse to negotiate or allow negotiations and discussions to move further in any of the new themes until the U.S. withdraws its hit lists.

This requires probably more unity now than at the time of the April TNC meeting. But it is equally clear that the U.S. will pick competitive third world economies one by one, and those who do not want to pay a price now by resistance would have to pay a bigger price later for not resisting.