CONTRAST BETWEEN URUGUAY ROUND PROCESSES AND POLICIES.

Jun 18, 1987

CONTRAST BETWEEN URUGUAY ROUND PROCESSES AND POLICIES.

GENEVA JUNE 16 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The "clear contrast" between the negotiating processes now under way in the Uruguay Round and the increasing difficulties and tensions in conduct of trade policies, has been brought out in a GATT Secretariat note for the Special Session of the GATT Council Tuesday afternoon.

The note, covering developments in trade policies and related matters in the period October 1, 1986 to march 31, 1987, is intended to provide a basis for the half-yearly review of developments in the trading system.

The report notes that while initiating a new round of negotiations, GATT Contracting Parties (CPS) have continued to make use of existing GATT procedures and provisions for the conduct of their mutual relations.

Contrary to experience during earlier GATT negotiations, the number of cases brought to GATT under its dispute settlement procedures increased over this period.

"The use of these procedures could have been encouraged by the clear distinction made by Ministers in the Punta del Este declaration between the treatment to be accorded to measures which conformed with the GATT and those that did not".

Though the note dealt with "changes in status quo", and thus gave little credit to governments which successfully resisted protectionist pressures, "nevertheless, over this period there is a clear contrast between progression of work in GATT, particularly as it relates to the negotiating process under the Uruguay Round, and the difficulties and tensions that have marked the actual conduct of trade policies".

Among many trends in the period were the growing concerns over U.S. trade deficit and the protectionist moves generated in the Congress, as well as the preoccupation of policy makers with the state of bilateral trade balances, "even though in a multilateral trading system it was the global trade balance of each country that would seem to be of account".

There was also "increased sensitivity" during the period over "conditions of competition leading to use of selective measures of safe guards, an acceleration of trading disputes, particularly between major trading partners, and a growing interaction between trade policy and actions and developments in financial and exchange markets", the 129-page confidential note says in its overview.

On the issue of subsidies for exports, the note says that "the most acute problem" in this area is perhaps "the competitive export subsidization of temperate agricultural products, in particular of grains".

The pressure of subsidized competition on international markets was increased by a number of policies announced during the period, particularly in the grains and dairy sectors.

Among the developments are the continued operation of the EEC's system of export restitutions and the U.S. export enhancement programmes, and steps by Australia and Canada both of whom have been squeezed by competition for third markets.

"Canada has taken steps to subsidize its growers, while Australia, because of price developments, will probably have to support producer returns for the first time".

Other developments include the establishment by the U.S. of a new dairy export incentive programme, the EEC's pasta export restrictions and so called third country meat directive, and the EEC's proposed vegetable oils and fats stabilization mechanism.

The new measure, to be imposed on crushers of oilseeds, would apply equally to imported and domestic production, but "because the EEC imports 80 percent o its requirements, the brunt of the measure would be carried by exporters".

There has also been considerable use of anti-dumping and countervailing actions.

Ninety-nine countervailing measures and duties were in force. Also, there were a total of 555 anti-dumping duties and price undertakings in force, compared to 479 at the end of the previous six-month period.

There was thus an increase in the application of such measures compared to the previous period.

While a mere counting of numbers of such measures was not a sufficient indicator of trends, "the prima facie evidence does suggest ... that there has been an intensification of such actions, for whatever reason".

Details of such measures in the note shows that a very high proportion of such measures have been taken by the industrialised countries, both against each other and increasingly against third world countries.

The so called "grey-area" measures, the note brings out, have also continued to expand - with 116 measures listed for the period under review compared to 93 for the previous reporting period, and "these measures continue increasingly to be espoused by certain major entities as a means of solving trade problems".

The note points out that "the term 'grey-area' is strictly a misnomer, because many of the specific measures, such as orderly marketing arrangements (OMAS) or voluntary export restraints (VERS), contravene GATT provisions". It however uses the term because of lack of full information on such measures and their exact nature.

The note refers in particular to the U.S.-Japan agreement over semi-conductors as a "grey-area" measure that had received wide and close attention, both because of its provisions relating to third markets and those relating to U.S. access to Japanese market.

The note also refers to the U.S. actions against Japan for not fully implementing the arrangement and says "the action on semi-conductors seems to be the first occasion that retaliatory action of this and has been taken outside the GATT".

On the Multifibre Agreement (MFA-4), which came into force in September 1986, the report says: "although the Multifibre arrangement states that restraints should not normally be applied on exports from exporters regarded as least developed, the last six months has seen the notification of restraint agreements with Bangladesh, Haiti and Maldives, as well as with small non-MFA suppliers such as Costa Rica, Malta, Mauritius, and Trinidad and Tobago.

The report also lists a number of VERS, including among them : Japan and Taiwan's acceptance of restraints on exports of machine tools to U.S., continuation by Japan of restraints on automobile exports to Japan and U.S., acceptance of VERS in textiles by several non-MFA participants, the EC/Thailand agreement on Manioc, U.S.-Canada agreement on export of softwood to U.S.

Also, Canada and Japan were seeking VERS in footwear from certain suppliers, and Japanese companies were exercising restraints in shipments of integrated circuits to third markets.

However, West Germany and Switzerland have so far refused to agreed to VERS on machine tool exports to U.S., arguing it would violate GATT and standstill agreement under Uruguay Round.

As far as third world countries were concerned no clear trend could be discerned with respect to changes in trade policies, the notes, says.

"However, a few of them have been able to make further progress towards trade liberalization, while in a number of others that process seems to have slowed down or even reversed, presumably because of debt and other difficulties".