OPPOSITION TO SMALL MINISTERIAL CAUCUS IN GATT.

Jun 28, 1988

OPPOSITION TO SMALL MINISTERIAL CAUCUS IN GATT.

GENEVA, JUNE 24 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The idea of a small Ministerial steering group in GATT, meeting once or twice a year, and providing "guidance and orientation" for ongoing work in GATT has run into strong opposition and appears unlikely to be pursued.

This is an U.S. idea that the chairman of the Uruguay round negotiating group on the Functioning Of the GATT System (FOGS), Julian Katz, has been trying to promote in one of his informal discussion papers.

The FOGS group which met this week is reported to have discussed issues of increasing GATT’s contribution to greater coherence in global economic policy-making, improving effectiveness and decision-making of GATT through Ministerial involvement, and enhancing surveillance.

Participants said that, contrary to western media reports, there was strong opposition to the idea of a small steering group of Ministers, and the chairman did not pursue the idea.

Katz also reportedly clarified that his "informal discussion papers" were only intended to stimulate discussion, and it was not intended to be made the basis for negotiations.

Katz’s suggestion to this effect at the last meeting of the FOGS group had met with opposition from third world countries. In the light of his own further informal consultations, Katz reportedly offered this clarification.

At this week’s meeting, the third world countries presented a paper outlining some of their ideas on "surveillance".

The European Community reportedly indicated it would present a new paper on the FOGS issues to the next meeting. In the EEC view, it was necessary to prevent other organisations from taking a leadership in trade, and GATT should retain this leadership.

On the subject of increasing GATT’s contribution to greater coherence in global economic policy-making through strengthened relationship with other international organisations responsible for monetary and financial affairs, while industrial countries seemed to favour strengthened institutional and secretariat links amongst the GATT, IMF and the World Bank, third world countries were less enthusiastic.

Yugoslavia was against links that "strengthened conditionally", and suggested that IMF Executive Directors were not exactly very enthusiastic about strengthened links.

The U.S. however questioned this interpretation of recent discussions at the IMF.

For Brazil, the trade-finance link was very important. FOGS should focus on this, and not merely "institutional links". Enhanced coherence could not be achieved merely through institutional links.

Canada wanted strengthening of the relationships through joint meetings of Finance and Trade Ministers, and not merely through secretarial or institutional mechanisms.

India argued that it was unrealistic to think that GATT could make a greater contribution, since the incoherence in global economic policy making was due to factors beyond trade, namely monetary and financial policies.

Even the institutions concerned, like the IMF and the Bank, could not make policies in these areas.

The issue of inter-dependence had been on the UNCTAD agenda for decades without any result.

"If there is lack of political will how can secretariat efforts be successful", India reportedly asked.

The U.S. argued that it was not for the negotiators to question the wisdom of the Ministers in the mandate. The issues of protectionism, indebtedness and trade imbalances should be addressed in GATT.

However India pointed out that the debt phenomenon showed the limitations of trade liberalisation. The issue of links between trade and money and finance was not merely one related to debt servicing, but development finance too.

The U.S. however felt that there should be an emphasis on strengthening institutional links, and the group should not get bogged down on coherence in policy-making.

Egypt, Nigeria and Tanzania supported the Indian views on the limitations of contribution by GATT or trade.

Canada agreed that global economic policy making was not perfect, and political level contribution was important. But the secretariat too had a contribution to make.

India responded to the U.S. by arguing that the issue of coherence of economic policy-making had to be addressed.

To avoid incoherence, Contracting Parties should resolve not to seek solutions in the area of trade to problems that arose outside the trade field. Secondly, GATT could contribute to greater coherence through enhancing awareness of linkages between trade, money and finance.

Chile noted that in the beginning there had not even been an intention to create a separate negotiating group on FOGS. FOGS did not figure in part "D" of the Punta del Este declaration, which listed subjects for negotiations in the MTNS, but part "E", as a corollary to the negotiations in other groups.

Results had first to be achieved in other groups before FOGS could see how greater coherence could be achieved. FOGS group should await results of other groups "and not go off on a tangent".

Jamaica said the group must be careful about the institutional arrangements, particularly because of the budgetary implications.

On the issue of Ministerial involvement, Australia noted that wide support for regular Ministerial level meetings of the GATT Contracting Parties (CPS), but felt it was also necessary to create a smaller ministerial group to meet more frequently.

The need for such a Ministerial group, in the Australian view, had been shown by the fact that every six months Ministers were holding such meetings, though outside GATT. The issue really was how to "legitimise" such meetings, while ensuring a representational character covering the broad spectrum of views.

At the same time such a small Ministerial group should not erode the powers of the GATT or impinge on the Contracting Parties. Hence the smaller group should have no executive powers but only an advisory role. Discussions should focus on the issue of legitimacy, function and composition of such a group.

The Australian proposals received support from Hong Kong, U.S., Canada, Switzerland, Poland and Uruguay.

However, the EEC suggested the idea needed "further reflection".

In the view of the Community there should more frequent meetings of all Contracting Parties at Ministerial level, but the Community did not favour a smaller group.

India challenged the Australian argument that the need for a small group had been demonstrated by such meetings outside the GATT framework, and the only issue was of "legitimising" such meetings.

Referring in this connection to various smaller meetings of GATT members where trade issues were addressed – OECD Ministerial meetings, Western Economic Summits, and the Quadrilateral Meetings (amongst Canada, EEC, Japan and the U.S.) – India wondered whether it was the Australian argument that these meetings were "illegitimate".

While such meetings were not broadly representative, no one in GATT was committed by them.

Ministers would continue to meet as appropriate whenever and wherever they liked, and the issue of legitimacy was a non sequiteur, India said.

Whether or not a small group was created in GATT such meetings would continue elsewhere. But the effect inside GATT of such a small group would be to bring in an unrepresentative body into an institution, which had a democratic decision-making structure.

The analogy of other international organisations having a smaller body was also incorrect, since all such bodies like the Security Council at the UN, had specific executive powers that sometimes the general body lacked.

Canada suggested that countries with a major trade share would have to play a more central role in the GATT.

This view was sharply criticised by Nigeria and Chile.

Yugoslavia, Israel and Jamaica also expressed reservations on a smaller steering group.

The Nordic countries favoured the idea of a Ministerial level meeting of CPS every two years, but were cool to the idea of a smaller steering group. In the Nordic view, once the utility and need of such a small group was established, the question of legitimacy would resolve itself.

Brazil also was sceptical about a smaller Ministerial steering group, but supported the idea of Ministerial Sessions of GATT CPS every two or three years.

The FOGS group would also appear to have discussed a Nordic proposal for enhancing the role of the GATT Director-General and bringing it nearer to that of the IMF managing Director. The Nordics felt this would help enhance credibility of the GATT.

Third world countries however stressed that it was not the absence of an enhanced role for the GATT Director-General that was responsible for lack of credibility. It was the lack of political will and commitment, particularly of major trading nations, to the GATT rules and obligations that eroded credibility. Increasing the role of the Secretariat and the Director-General would not solve the problem.

Brazil felt that patterns and functions of other organisations could not be transposed to GATT. Jamaica noted that "the GATT Director-General has no concessions to offer".

The Nordic idea that the rule of consensus need not apply for administrative decisions and decisions on matters of lesser significance also ran into trouble from a number of quarters.

The Nordics suggested that for example in GATT requests for documentation and analytical studies should not be subject to a de facto veto through the consensus rule.

Japan however questioned how it would be possible to distinguish between administrative and substantive issues. Consensus, Japan argued, was the established practice and any departure from it would have a negative impact on GATT.

Jamaica felt that GATT should adhere to the consensus principle. The majority rule was only the second best.

Australia supported the general thrust of the Nordic paper, and felt that the Secretariat should be allowed sufficient freedom to prepare analytical studies. GATT should not be constrained by the rule of consensus.

Israel felt that consensus rule had been responsible for success of GATT and should not be changed.

As for secretariat studies, Israel said that there could be substantive reasons why there were objections and reservations. Israel referred in this connection to the opposition to studies sought on article XXVIII of GATT (relating to the modification of schedules), as also on the issue of subsidies and anti-dumping.

In both these cases the Community blocked Secretariat’s analytical studies.

India noted that despite their varied interests the Contracting Parties had been able to act together in a co-operative way because of the decision-making process based on consensus. Any departure from this would affect the efficiency of GATT. Any delegation objecting to a consensus did so for what it considered to be substantive reasons, and not for frivolous purposes. Only the concerned CP could decide whether the issue was substantive or procedural.

Whatever the size of the majority or the smallness of the minority, the positive benefits of consensus and its ability to carry everyone on board had to be appreciated. There should be no change even on procedural grounds to the consensus rule.