Jul 11, 1988


GENEVA JULY 7 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The industrialised countries appear to be ganging up in the Uruguay round GATT negotiations to secure changes in GATT provisions on restrictions for Balance-Of-Payments (BOP) reasons applicable to the third world countries according to participants in the negotiations.

The issue reportedly was brought up at last week’s meeting of the negotiating group on GATT articles.

GATT procedures and practices applicable to these negotiations mean that no article can be taken up for negotiating changes without a consensus.

The U.S. has been reportedly mounting considerable pressures in capitals to "persuade" third world countries to agree to negotiate changes. Third world negotiators here are concerned that if their capitals yield under pressure and give up their procedural rights, they would find more of their autonomy taken away.

The attempt to change the GATT provisions is part of an overall design involving negotiations on services, investment, intellectual property rights, and the so-called functioning of the GATT system.

In their comments in the negotiating group on the BOP provisions in article XVIII section (B), all the industrialised countries are reported the have argued in favour of taking up the article for review and incorporating changes.

GATT has two provisions relating to safeguards for Balance Of Payments (BOP) reasons. Both of them among other things enable the CP invoking them to impose import restrictions, including quantitative restrictions, which is generally prohibited by GATT.

The BOP provisions under article XII were there since inception, and invoked by industrial countries (but not since their currencies became convertible), and view the BOP situation as temporary and requiring temporary restrictions.

Third world countries had not been satisfied with this approach to their problems, and as a result GATT provisions in article XVIII to deal with government assistance to economic development was amended to incorporate some special provisions for third world countries.

In effect these recognise the structural rather than the temporary nature of BOP problems of third world countries, and also enable autonomous decisions by the invoking CP on the incidence of its import restrictions on different products or classes of products.

Such a decision is intended to enable the CP concerned to give priority for import of products which are "more essential" in the light of its policy of economic development.

Another provision in that section provides for surveillance and review of the BOP restrictions through consultations with the CP concerned within the BOP committee of GATT.

While intended to safeguard the interests of other CPS, it specifically provides that no CP "shall be required" to withdraw or modify restrictions on the ground that "a change in development policy" would render unnecessary to restrictions applied.

In recent years, the IMF and the World Bank, through their lending policies are trying to force third world countries to give up their own autonomous development policies and pursue IMF/Bank policies.

Within the Uruguay round negotiations, the U.S. and other industrial countries have launched a major effort to change the GATT provisions, so that parallel pressures in the interest of the industrial economies and their TNCS could be applied on third world countries via the general agreement.

In the discussions the EEC reportedly argued that it was not questioning the basic provisions on BOP, but that the restrictions imposed for BOP reasons should be temporary.

In the EEC view the operation of article XVIII section (B) had there been far from satisfactory.

It had been generally difficult to ensure the temporary nature of the restrictions, and many counties invoking or maintaining restrictions under the article have been reluctant to indicate a time schedule for their removal.

Since 1975, of the 112 consultations held with countries invoking or maintaining restrictions under these provisions, 75 consultations had been under "simplified procedures". The consultations had not also been systematic, and there had been wide divergences of interpretations.

Since 1975, there had been no country that had "disinvoked" the provisions of the article, nor had been any clarity as to restrictions maintained for BOP reasons and others for infant industry protection.

Canada supported the review since BOP restrictions had become more than a temporary one.

The U.S. said that it recognised the need for BOP restrictions, but these should be temporary. The U.S. seriously questioned whether the existing provisions enabled "the most effective adjustment" to the BOP situation.

BOP consultations should include procedures to encourage countries to take appropriate BOP adjustments.

Switzerland also supported the review, arguing that BOP clauses had been the most widely invoked one for maintaining quantitative restrictions. A temporary exception had become a quasi-permanent measures.

A number of third world countries intervened to oppose the review.

Argentina reportedly argued that any review of the BOP provisions must take into account the structural nature of the BOP problems of third world countries.

Egypt felt there should be no broad generalisations about invoking of the provisions. The operation and adequacy of the provisions should be seen in the light of experience and the economic situation of individual countries.

There could be no precise step-by-step parallelism between the BOP situation and the restrictions maintained by the third world, since experience had shown that any improvements for structural problems in the BOP situations had been temporary.

The remedy against too many "simplified consultations" lay in Contracting Parties calling for full consultations, and no changes in GATT provisions were needed.

Egypt also warned against attempts to use the consultations to go into the "appropriateness" of development policies and objectives pursued by third world countries. It was not the purpose of BOP consultations to recommend changes in policies of any country, Egypt reportedly contended.

India also underscored the structural nature of BOP problems of third world countries, and adjustments for structural problems required longer time frames. BOP restrictions could not be of a temporary nature in the case of third world countries.

The consultations under BOP had brought out that countries invoking the provisions had nevertheless unilaterally taken autonomous liberalisation of their trade regimes. The BOP provisions gave no carte blanche to countries invoking hem, and the provisions carefully balanced rights and obligations, and provisos to ensure that trade interest of others were not adversely affected.

There were also procedures for redress of adverse effects, and in the ultimate analysis any aggrieved CP could always invoke the GATT provisions for dispute settlement.

Brazil and Yugoslavia shared the Indian view and questioned the need for review of the provisions of the article.