GATT COUNCIL PROMISES TO BE STORMY SESSION.

Sep 28, 1992

GATT COUNCIL PROMISES TO BE STORMY SESSION.

GENEVA, 24 SEPTEMBER (CHAKRAVARTHI RAGHAVAN) – A number of items, involving one or the other of the majors and their new and old disputes, figuring on the agenda of next week's meeting of the GATT Council, appear to reflect both the frustrations of the deadlocked Uruguay Round and the efforts to avoid a trade war.

The European Community's regime relating to oilseeds and related animal feeds is the subject of three separate agenda items.

At one stage, GATT officials had been talking that after the French Maastricht referendum vote and before the U.S. Presidential elections in November, there would be a "window of opportunity" for the U.S. and EC to end their dispute and enable the conclusion of the Uruguay Round. The outlines of a tentative accord, for some of the EC subsidies under the reformed CAP to be put into an "yellow box" - not challengeable for a period of ten years or so - reportedly had even been settled. The oilseeds dispute would have been settled in a manageable way in the overall context.

But like other earlier talks of GATT official of "window of opportunity", this too has been closed - the narrow French vote on the Maastricht, the crisis within the European Rate Mechanism of EC country currencies, and the general strains on the EC and the powers of the Commission and States appear to have closed the window if it had existed.

But the U.S. is clearly anxious to avoid a bruising trade war with Europe, which could hurt the U.S. too, and the arbitration panel request would have eased the pressure on administration to act before November elections.

The Community, which sought and obtained from the GATT Council in June authority to renegotiate, under the authority of the Council, its tariff schedules in this area but has not been able to complete them has itself brought the item on the agenda, presumably to seek an extension of the 60-day limit.

The United States, which had earlier sought the Council's authority to retaliate against the EC over its failure to implement the two panel rulings on this, has also inscribed an item and has announced that it would seek "arbitration" panel to determine the amount of damage caused to U.S. oilseeds exporters by the EC subsidies.

The EC is reportedly opposed to the "arbitration" request.

A first GATT panel had ruled that the subsidies - under which the EC oil processors were compensated for buying EC produced oilseeds, had impaired the value of the zero-tariff import concessions granted by the EC in the Tokyo Round. A second panel had found that the modifications in the oilseeds regime under the common agricultural policy instituted by the EC at the end of 1991 were still GATT illegal.

Unable to implement the ruling, the EC sought the renegotiations of the schedules. And in the renegotiations, has offered to bind the level of subsidy under its modified policy, provide tariff quotas (at the zero tariff) to protect existing access, and compensation in the form of tariff quota imports for some high-value added items including prime cuts of beef, some durum wheat and other items of interest to the U.S. and the others involved.

However, this does not meet the prime objective of U.S. Soya bean producers, a powerful lobby and more so in an election year, to get its share of the EC market where, the EC says, the U.S. producers have lost ground to more competitive imports from Brazil and Argentina among others.

The rounds of bilateral talks have not helped to resolve the issue.

The U.S. now wants an arbitration panel to assess the extent of the damage it has suffered, and either use it to extract more concessions from the EC or as a benchmark figure for its threat of retaliation.

The EC has promised to impose counter-retaliation if the U.S. goes ahead.

Argentina has also sought to raise the question of its rights. It has sought to get recognition for its as a "principal supplier" - which gives it negotiation or renegotiations rights. With the EC denying such a right, Argentina is seeking the establishment of a panel to obtain such recognition.

The notes and supplementary provisions to the Article XVIII make clear that the provision for participation in the renegotiations by principal supplying country is merely to ensure that it has an effective opportunity to protect its contractual right and not to widen or complicate the scope of renegotiations. As such, the CPs can determine that a country has a principal suppliers interest if it has "over a reasonable period of time" prior to the negotiations of modification of the schedules, a "larger share" in the market of the CP seeking to modify the schedule than a CP with which the concession was originally negotiated or would have had such a share in the absence of discriminatory quantitative restrictions.

The European Community is reportedly opposed both to the U.S. request for an "arbitration" on the value of the damage suffered by it as also to the Argentine demand.

The dispute settlement; procedures of GATT in place, after the 1989 mid-term accord in the Uruguay Round, provides for an automatic reference to a panel for adjudication of disputes between contracting parties arising out of the rights under the General Agreement, but would not appear to cover the U.S. application for "arbitration". There is some question even over the Argentine request, involving as it appears not the interpretation of the article or the previous panel ruling, but more or less a factual issue.

In any event, the automatic reference applies, not at the Council where the subject is broached, but only at the next Council whose dates are in November - after the U.S. elections.

Interestingly, if the Uruguay Round, and the agriculture part of it, had been concluded, the substantive U.S.-EC dispute would have been obviated. Also, an arbitration to determine the extent of damage and thus the retaliation to be authorised is also provided for.

Also in the area of agriculture, Australia is seeking to raise the issue of the U.S. recent announcement of subsidies for wheat export affecting some traditional Australian markets. But it is not clear whether and how Australia could raise a dispute. As GATT stands, its provisions against subsidisation does not apply to primary products, and the only issue about a country not subsidising so much as to result in its having "more than an equitable share of the world market share" has long been an unresolved problem. While the Uruguay Round will introduce some amount of discipline on agriculture export subsidies, but might still fail to clarify such questions.

The Latin American countries are also raising the question of the EC's new banana regime under its planned single market. Given the long standing practice, any claim of impairment of rights by the Latin Americans would come into play only after the regime is promulgated and comes into effect.

Also, on the agenda are the U.S.-Canadian disputes over implementation by each of the panel rulings against them over import, sale and distribution of alcoholic beverages.

The issue of the MERCOSUR agreement (involving Argentina, Brazil, Paraguay and Uruguay), and how this integration agreement is to be treated, raised by the United States (which is forming its own bilateral and plurilateral trade blocs, but is questioning others who do so) is also on the agenda.

Perhaps the only "non-controversial" point on the agenda - controversies having been settled in private consultations by the GATT Council Chairman - relates to the application of Taiwan to join GATT.

A working party to go into it is now to be established.

The application of Taiwan, to make clear the issue of Chinese sovereignty over "Taiwan", accepted by the UN and referred to in its terminology as "Taiwan Province of China", the item itself is worded as "Accession of Chinese Taipei".

The GATT Council Chairman is now expected to make a statement, informally negotiated, making clear the sequentiality in which the Council will deal, first with the outcome of the working party going into the question of the People's Republic of China "resuming" its status as GATT CP, and then the accession application of "Chinese Taipei" as a separate customs territory.

The very wording, and the other understandings, would appear to involve that as in the case of Hong Kong and Macao, only the trade representatives of "Taipei" will be involved in GATT, and the opening of the door to GATT and the consequent right to establish an office would not be used by Taipei's "Foreign Office" to establish a diplomatic mission here.

Even the automatic right of "Taipei" to take its place at the GATT Council as an observer, following reference of its accession application to a working party, would be at the next meeting of the Council, and at next week's meeting it will remain an "unseen" part in the proceedings.