Jul 25, 1988


GENEVA, JULY 21 (IFDA/CHAKRAVARTHI RAGHAVAN) -- A group of industrial and third world countries have underlined the "need to demonstrate progress" in the area of non-tariff measures, by developing "a clear framework" by the time of the Montreal Ministerial meeting for mid-term review of Uruguay round negotiations.

The group, known in GATT circles as the "de la paix" (the peace) group (Australia, Canada, Finland, Iceland, New Zealand, Norway, Sweden, Switzerland, Hungary, Colombia, Hong Kong, Pakistan, South Korea, Singapore and Uruguay) have made this point in a paper outlining some principles and approaches to negotiations in the area of Non-Tariff Measures (NTMS).

The paper was circulated this week at the meeting of the negotiating group on NTMS.

Negotiators in this area have been mandated "to reduce or eliminate Non-Tariff Measures (NTMS), including Quantitative Restrictions (QRS), without prejudice to any action to be taken in fulfilment of the rollback commitments"

The United States and some of its supporters want to register progress, and if possible reach interim agreements, at Montreal in some of the key areas of major interest to them – services, agriculture, intellectual property rights, investment, functioning of the GATT system, etc.

After the OECD Ministerial meeting in Paris in May, there has been an effort to get what is described as "framework" agreements at the Montreal meeting in the week of December five.

Apart from the inherent difficulties in the specific sectors of interest to them, the U.S. and its friends are also beginning to realise that very little progress has been made in the areas and sectors of interest to the third world countries, and without such progress, it would be difficult to get a balanced package acceptable to all at Montreal.

Hence the current drive now in various groups to show progress, at least cosmetic.

The 15-member group, is the hard core of the countries that came together before the Punta del Este meeting in 1986, when the U.S. efforts to launch a new round with new themes was being opposed by a group of 10 third world countries.

Under the negotiating plan, adopted in February 1987, in the area of NTMS it had been envisaged that by the end of 1987, a common understanding would be reached on appropriate techniques and procedures (bilateral requests and offers, subject to procedures to ensure transparency, and multilateral approaches) and on subjects to be dealt with multilaterally.

However the group failed to reach any such common understanding.

In February, the group decided that by June 30, participants should submit their proposals on the basis of which a common understanding could be reached.

Only now, the U.S. and the EEC have put forward request lists on NTMS that they feel should be tackled in negotiations in the group.

Both the U.S. and EEC have outlined what they consider to be NTMS prevalent in other countries.

These lists cover both industrial and third world countries, and suggest that these are best tackled through request/offer procedures of negotiations.

In addition, the EEC has said that a major subject for a multilateral approach at negotiations in the group should be to get third world countries to accede to the Tokyo round codes.

In their paper, the 15 countries have said that all participants should be prepared to participate in the process of notifying NTMS, and to respond to all requests for information on their specific NTMS. There should be no exclusions of NTMS, which could be notified to the negotiating group.

Notifications would be without prejudice as to whether participants would pursue negotiations in the negotiating group or in other groups.

Since under the rollback commitment, no GATT concessions could be requested for eliminating measures inconsistent with GATT or instruments negotiated under its auspices, other participants would not have to accept the elimination of these measures as constituting concessions, the 15-country paper said.

If in the course of negotiations, the GATT consistency or inconsistency of any particular measure is in dispute, any participant could ask the chairman of the negotiating group to inform other participants.

In order to ensure maximum results, and their applicationied on a MFN and non-discriminatory basis, there should be procedures to provide for full transparency to the process of negotiations.

There should be provision for immediate implementation or implementation within a fixed time frame of negotiated agreements for elimination or reduction of NTMS.

Also, there should be commitments to ensure that negotiated concessions for elimination or reduction of NTMS would be secured in GATT so that they may not be subsequently nullified or impaired.

As for third world countries, due account would be taken of their individual development, financial and trade needs, the paper says and suggests that this could be done through:

--Longer fixed time frames for implementation of agreements, and/or

--Credit being given to transformation of NTMS into quantified transparent forms (like tariffs) even where significant liberalisation might not immediately accompany such action.

In a brief discussion, it was suggested by other third world participants, that the special and differential treatment approach appeared to be limited to the "contributions" third world countries according to their levels of development, and not in terms of what benefits could be provided to them.

The working group on quantitative restrictions, set up under the 1982 work programme, had done some valuable work in identifying some sectors of export interest to third world countries (such as textiles, tropical products, agriculture, footwear, etc.), where priority attention for tackling NTMS could be directed.

Work in the negotiating group should focus on this too, it was suggested.

The paper suggests that in view of the wide range of NTMS, a single negotiating approach was unlikely to be satisfactory, and several approaches might be required.

To ensure broad participation and results, all notified measures should be scrutinised to see whether they are of a general character warranting a multilateral approach to establish general rules or some systematic or formula approach for their elimination or reduction.

The paper also recognises the scope for request/offer basis for negotiations as a supplement to the multilateral approach.

Administrative procedures relating to trade, it suggests, would be amenable to elaboration of commonly agreed and multilaterally applicable rules.

Similar would be the case in respect of generally applied measures 0f a volume or price-restricting character.

But product specific or ad hoc measures might be more amenable to request and offer procedures under conditions of transparency.

The paper has suggested that to facilitate work in the group, the secretariat should undertake the initial sorting of notifications, drawing upon the categories in the existing NTM inventory for this purpose.

According to participants, the negotiating group agreed to this aspect of work by the secretariat.

In its paper, the EEC has also suggested a multilateral approach to deal with customs and consular formalities and procedures and fees, dues and other charges levied on imports.

Such charges, often levied on accumulative basis, the EEC said, seemed in excess of what CPS had agreed to in appropriate forums. There was also need for greater transparency in this area.

The EEC said that the secretariat should be requested to carry out a study of this type of measures.

Though there was apparently general agreement within the group that the secretariat should undertake such a study, Australia would appear to have blocked it, linking it to agreement on a study that it has sought for so-called effective rates of subsidy.

The EEC and other countries reportedly were critical of Australia for the linkage it was seeking to establish.

Both the U.S. and EEC have also suggested that the group should tackle multilaterally, the pre-shipment inspection programmes of countries. Both consider the pre-shipment inspection to be a non-tariff barrier, and want the negotiating group to tackle it through multilateral approach.

A number of third world countries have arrangements with some consultancy firms, the largest of which is a Swiss enterprise, for pre-shipment inspection of their exports and imports.

These provide for:

--Compulsory inspection of all goods to be imported, and in some cases, exported,

--Physical inspection for quality and quantity at the site of production, warehousing and/or shipment, and

--Price inspection to determine whether FOB price and other elements of price charges in commercial transactions correspond generality to prices generally prevailing for exports from the supplying country to international markets.

According to the Swiss enterprise that runs this service, third world countries have been able to save billions of dollars annually, both through quality and quantity control of imports, as well as price inspection to ensure there is under-invoicing of exports and over-invoicing of imports.

The U.S. and EEC transnational corporations have found these inspections irksome, and have been pressuring their governments to get them removed, and the transaction value as claimed in the invoiced and shipping documents to be accepted as the basis for customs valuation, with the onus of proving fraud shifted to the shoulders of the importing country’s customs administrations.

In its paper, the U.S. has noted that in most cases governments have adopted these procedures and requirements in order to control flight of capital and to minimise customs fraud.

It has conceded "the full legitimacy of controlling capital flights and reducing fraud in the trading system".

However, it argues, that the pre-shipment requirements have created problems in the trading system, including delays in shipments, increased costs to exporters, and modifications of prices agreed to between buyer and seller.

In the U.S. view these pre-shipment inspection raised questions about a number of GATT obligations, and it should be addressed within the group and a multilateral agreement reached on solutions to minimise trade distortions caused by such programmes.