Jun 22, 1988

THIRD WORLD IDEAS ON IMPROVEMENT OF GATT SYSTEM.

GENEVA JUNE 20 (IFDA/CHAKRAVARTHI RAGHAVAN) -- Third world countries in GATT have jointly presented a paper outlining their ideas on measures to improve the Functioning Of the GATT System (FOGS).

FOGS is one of the 14 issues on the agenda of the Uruguay round GATT MTNS in Goods, and the third world ideas were presented Monday morning, by India on behalf of the informal group of third world Contracting Parties, at the negotiating group in FOGS.

The group is chaired by Julius Katz, a former U.S. State Department Official.

The paper presented by India described it as "a contribution" to the deliberations of the negotiating group and outlined "the general thrust" on the issue of enhanced surveillance, and was without prejudice to the specific positions which had been or might be expressed by individual third world countries in the group.

The ideas formulated in the third world paper have been the subject of informal consultations for several weeks among the third world CPS in GATT, and the paper drawn up by Amb. Anthony Hill of Jamaica (in the light of such consultations) was approved at a meeting of the group on friday evening.

After the meeting participants said that there had been a unanimous view that chairman Katz had been presenting a succession of "discussion papers", none of which had reflected the concerns of the third world CPS expressed in the group.

At the last meeting of the FOGS group in may, Katz had reportedly said that he would like to convert his informal discussion paper into a negotiating text.

But this had been opposed by third world participants.

But after Katzís suggestion, third world CPS would appear to have discussed and agreed among themselves on the need for them to present their own text, setting out officially on paper their views, "in order to provide a counter-balance to Katz".

The third world CPS in GATT have been divided before and after the launching of the Uruguay round, and this is the first group in which the third world countries have been able to come together and present a joint position.

According to some third world participants this is in no small measure due to chairman Katz and the manner in which he has been running the group, promoting the viewpoints of the U.S. and other industrialised countries and ignoring those of the third world.

In successive versions of his "discussion papers", Katz has reportedly eschewed the use of the word "surveillance" Ė in deference to the viewpoints of the major industrialised countries who do not want their bilateral "management of trade" through "grey area" measures to be the subject of any scrutiny.

Instead Katz has propagated the idea of a "trade policy review" mechanism (involving GATT, IMF and the World Bank) that would in effect subject the range of economic and development policies of the third world to intense scrutiny and review with a view to pressuring them to change such policies.

The third world paper underscores the negotiating objective of the mandate, namely that negotiations shall aim to "enhance the surveillance in the GATT" to enable regular monitoring of "trade policies and practices" of CPS and their "impact on the functioning of the multilateral system".

To further the objective of the mandate to develop "understandings and arrangements", it would be necessary to establish procedures for "enhanced surveillance", the paper said.

Enhancing surveillance, the paper pointed out, implied recognition that existing surveillance needed to be strengthened.

This required "a regular monitoring" of the trade policies and practices of the major trading countries who had "predominant impact on the multilateral trading system so as to ensure symmetry in surveillance in the GATT".

The "monitoring" was distinct from enforcement of GATT rights and obligations, and thus the "enhanced surveillance" would not serve as a basis for enforcement of specific GATT obligations or dispute settlement procedures and would not require any new obligations.

The review processes were not also intended to lead to conclusions or recommendations of binding nature or to establish the legal status of trade policies and practices.

"The process on the other hand should lead to improved adherence to the rules and disciplines of the GATT and this should serve to strengthen the multilateral trading system".

In the light of these objectives, the third world paper suggested that the "enhancement of surveillance" should concentrate on major trading countries who had a predominant impact on the multilateral trading system.

The principles with reference to which the monitoring should take place would "necessarily be those which are embodied in the general agreement".

"Moreover the monitoring will be confined to trade policies and practices and will not encompass general economic policy framework", the third world countries asserted.

Also, while monitoring the trade policies and practices of third world countries, the review should also focus "on their trade problems and prospects in the context of developments in the external environment and the functioning of the multilateral trading system".

"In doing so, the impact of developments in the financial and monetary environment on the trade of developing countries will need to be taken into account".

The criterion of "the impact on the functioning of the multilateral trading system" should be the determining factor in deciding the frequency and design of reviews for CSP.

While in principle all CPS would be subject to periodic reviews, "a longer time-frame" would have to be envisaged for third world CPS, and in particular the Least Developed Countries (LDCS).

In addition to a longer time frame, there should be a simplified reporting format for the LDCS.

It might also be "unproductive and burdensome" for CPS subject to consultations under the GATT balance-of-payments provision to be subject to a review within twenty-four mon such consultations, the third world paper said.

The third world paper also outlined the procedures and reporting formal for the review, in effect rejecting Katzís ideas.

Among other things, the Katz paper had called for the review to be done by representatives of three or four countries, visits by the team to the capitals of the countries to be reviewed, and for the report to be presented to the special review body or GATT Council.

It also envisaged the objective of the review to be an assessment of the trade policies and practices of each CP "in the light of its wider economic and developmental policies and objectives".

Discussions in the review body, it said, might cover "any aspects of policies bearing on trade" which could be considered relevant to an appreciation of the trading situation of the CP.

The documentation for the review body, Katz had envisaged, should include a full report by each CP, report by the GATT Secretariat on the basis of information provided by the CP and "discussions" between the Secretariat and/or a visiting team and officials of the CP concerned.

The Katz paper also envisaged other CPS providing to the Secretariat a list of "appropriate questions" that could be submitted to the CP being reviewed.

In effect rejecting these ideas, the third world paper said the "enhanced surveillance" should be done by the GATT Council in periodic and open-ended "special session".

The process of periodic review of trade policies and practices should be "self-contained in GATT", and it was not necessary "to extend this process of review through teams visiting capitals".

The trade policies and practices would be reviewed on the basis of "an agreed format" for the preparation of a factual background note by the Secretariat incorporating all relevant elements of the notifications to GATT.

The CP concerned, the third world paper added, would provide a separate report containing "a profile" of its trade policies and practices together with such background information "as it deems appropriate", such as on factors affecting trade policies and practices.

The final report of the review body should be published.

The third world paper said that the current practice of special sessions of the GATT council reviewing developments in the trading system should be incorporated in the procedures for enhanced surveillance.

In addition to country-specific "monitoring" of trade policies and practices, the procedures for enhanced surveillance should also provide "an overview of developments which have a major impact on the multilateral system".

"Such an overview would be assisted by a background report prepared by the GATT Secretariat along the lines of its current overview section of documentation prepared for the special GATT Council session", the paper said.

The third world paper also said that one of the important objectives of the special GATT Council session had been to serve as "an early warning" mechanism "about intended trade policies (...) the procedures for enhanced surveillance should seek to strengthen this role.