Jun 20, 1987


GENEVA JUNE 18 (IFDA/CHAKRAVARTHI RAGHAVAN)) -- The likely negative impact on the Uruguay round negotiations of violations of standstill commitments was underscored Thursday at the first meeting of the surveillance body, chaired by GATT Director-General Arthur Dunkel.

At a day-long meeting, the surveillance body is reported to have discussed six formal notifications of purported standstill violations, and also heard warnings over other planned trade restrictions as by the U.S. Congress in the trade bill, and by the EEC through its proposed oils and fats tax.

The surveillance body is mandated to oversee the observance of the standstill and rollback commitments undertaken by all Contracting Parties at Punta del Este, and examine complaints of the violation of the standstill.

It is not to take any decisions on these complaints, but is to award the record of its discussions to the trade negotiations committee (TNC) which is mandated to periodically evaluate the implementation of the commitments and assess its impact on the process of the multilateral trade negotiations.

The standstill commitment is in three parts and involves commitments not to take:

-- Any trade restrictive or distorting measures inconsistent with GATT provisions or instruments negotiated within GATT frame work or under its auspices,

-- Any trade restrictive or distorting measures in legitimate exercise of GATT rights that go beyond that necessary to remedy specific situations, and

-- Any trade measures in such a manner as to improve negotiating positions.

Under the procedures set for this, GATT CPS have to notify measures taken by others considered by them to be violative of the standstill, and these along with viewpoints or replies of the parties concerned are discussed by the surveillance body.

At its meeting Thursday, the surveillance body was seized of three notifications against the U.S. by the EEC, one against Indonesia by the EEC, and one against Brazil by both EEC and the U.S.

The complaints against the U.S. related to the tax on imported petroleum under the superfund act (on which a panel has now ruled against the U.S.), to the levy of a so called custom user fee of 0.22 percent on value of all imports (a case pending before a panel), and U.S. actions in removing from the scope of government procurements open to international bidding a particular type of specialised machine tools.

The complaint against Indonesia related to its export ban on some types of tropical wood (rattan and ramin), while that against Brazil related to its action in expanding the list of products for which import licensing had been temporarily suspended by Brazil for balance of payment reasons.

In explaining its notifications, EEC delegate Tran Van-Thinh, said "non-respect" of the political commitments for standstill could hurt the entire process of negotiations, and the community had put forward the notifications not so much to safeguard its own specific interests but to focus on the collective interests of all.

The surveillance body, the noted, was not a court or tribunal to give a ruling, but a body the record of whose discussions would go before the TNC for its political assessment whether or not the standstill was being observed.

"If others are not respecting the political commitment involved here, the community can block all or any part of the negotiations", Tran reportedly added.

On the U.S. superfund act levy, where a GATT panel has ruled against the U.S. and the GATT Council has accepted the recommendation, the community spokesman and other delegates called for speedy implementation of the recommendation that the levy should be brought into conformity with GATT.

On the custom user fee issue, Tran noted that it was before a panel, but he was nevertheless raising it in the political context of the standstill.

On the user fee, the EEC has complained that the ad valorem levy was out of proportion to the expenditure incurred in providing the service, and thus the U.S. was violating article II of GATT.

The U.S. has however taken the position, which it repeated thursday, that its action was entirely within its GATT rights, and was no violation of the standstill.

On the machine tool issue, where the U.S. has notified that the particular machine tool (FSC-34) would not be open to international bidding except by Canada, Tran contended it was a violation of the standstill.

The U.S. however argued that it was not a new measure, that the item had always been excluded, and that it was a step taken by the U.S. to protect its "national security interests" and permitted under the government procurement code.

The Indonesian ban on exports of rattan and ramin woods, the EEC contended, violated article XI of GATT which requires that no prohibition or restrictions (whether through quotas, import or export licences or other measures) other than duties, taxes or other charges is to be instituted or maintained by any CP on importation or exportation of any product.

The article provides that export prohibitions or restrictions could however be applied temporarily to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting Contracting Party.

The "general exceptions" provisions in article XX, excepts from GATT obligations any actions taken in pursuance of international commodity agreements, or to ensure essential quantities of essential raw materials for a domestic processing industry. But exercise of these general exception rights are subject to certain safeguards.

The EEC contended that the Indonesian actions could not be justified under article XI and its exceptions.

Indonesia said it was awaiting detailed comments from Jakarta on the notification, but characterised the action taken as a conservation measure to cope with destruction of tropical forests (an issue covered by the International Tropical Timber Agreement).

Also, the restrictions on exports and increased duties were aimed at rehabilitating tropical forests, and was also part of measures aimed at enhancing export revenues through diversification of domestic industry, in order to cope with the situation created by sharp cutbacks in earnings due to the fall in oil prices.

A number of third world delegations expressed concern that actions of this type by them were being challenged in the context of the standstill. They underscored in this connection their GATT rights for special and differential treatment to further their development.

But the U.S. and EEC viewed the standstill and rollback commitments as something over and above normal operation of GATT, and were not be prepared to accept the concept of special and differential treatment in the context of standstill.

The community was also not fully convinced that the Indonesian actions were in pursuance of conservation, and wanted more details on whether the products were not being used for domestic industry rather than exported.

On the complaint against Brazil, the Brazilian delegate noted that it was an action taken under its GATT rights to safeguard its balance of payments, and was subject to scrutiny in the GATT Bop Committee, and hence not susceptible of being discussed in the Surveillance Body.

This view has supported by a large number of third world countries, but again both the U.S. and EEC contended that even measures legitimately taken for Bop reasons could be discussed in the context of the standstill to see whether they went beyond those necessary to remedy specific situations.

The U.S. also raised the issue of Japanese quantitative restrictions on the imports of about 100 agricultural products and commodities, and sought consultations with Japan in terms of securing a rollback of what the U.S. contended were illegal QRS.

Japan however noted that the issue was already the subject of a panel dispute, in terms of whether Japan's actions did or did not violate GATT, and hence it was not timely to initiate rollback consultations with the U.S.

A number of other countries however expressed and interest in the issue, and wanted to be informed if and when consultations were held, since they also had an interest in the matter.

Japan also notified its intention to raise at the next meeting the U.S. imposition of retaliatory import tariffs of 100 percent on Japanese electronic products as a retaliation against purported Japanese failure to carry out its bilateral deal with the U.S. over semi-conductor exports and their pricing.

Chile raised the issue of the EEC proposals to levy a tax on fats and oils as a possible violation of standstill. The complaint was backed by among others the Asian and Argentina.

The EEC sought to justify its move as non-discriminatory to domestic and foreign producers, and thus not protectionist. However the EEC representative agreed to convey to Brussels the view in the surveillance body that such a tax would have a negative impact on the Uruguay round negotiations.

India and a number of other countries are reported to have raised the issue posed in the GATT Secretariat report to the special GATT Council Session on Tuesday, namely the wide gap between the professions of major trading nations about liberalisation and resisting protection in the context of the Uruguay round negotiating processes, and their actual conduct of trade policy as shown in the proliferating trade disputes and restrictions.