Oct 6, 1988


GENEVA, OCTOBER 4 (IFDA/CHAKRAVARTHI RAGHAVAN)—Third world countries in GATT have reportedly made clear that while they favour strengthening the GATT multilateral system and surveillance, they could not agree to such surveillance straying beyond their GATT obligations to review wider macroeconomic and development policies.

They have also expressed themselves against what Brazil reportedly has described as "backdoor institutionalisation of GATT".

These viewpoints reportedly were voiced at last week's meeting of the Uruguay round negotiating group on the functioning of the GATT system (FOGS), chaired by Julius Katz of the United States.

The Punta del Este mandate in FOGS has called for:

--Enhanced surveillance in GATT of trade policies and practices of CPS and their impact on the functioning of the multilateral trading system,

--Improving overall effectiveness and decision-making in GATT as an institution including through involvement of ministers, and

--Increasing GATT’s contribution to greater coherence in global economic policy-making through strengthened relationship with other international organisations responsible for monetary and financial matters.

These three items are known in GATT parlance as first, second and third indents of the FOGS mandate.

Third world participants say that while there is a general consensus an the objectives spelt out in the three indents, there is no consensus, but rather some sharp differences, on a variety of proposals from the major industrial countries and the GATT secretariat through the informal "non-papers" of the chairman.

Third world diplomats have been privately complaining that substantive issues on the Uruguay round agenda of priority interest to the third world are being stalled, while issues of interest to the industrial countries and the secretariat are being pushed.

Even some industrialised countries say that that it is unlikely that Montreal would produce any early accords and agreement for advance implementation in the area of tropical products, nor any agreement for a negotiating basis on textiles.

Tropical products are the only area specifically identified for early accords and implementation in the Punta del Este mandate.

Another area, though indirectly mentioned, is the issue of a comprehensive safeguards agreement, where negotiations have run into the problem of "selectivity" or right to impose discriminatory protective actions that the EEC (and now Canada, U.S. and others) want to write into the GATT.

But in an effort to show that GATT and the Uruguay round processes are working, the U.S., EEC and the GATT secretariat appear to be pushing for agreements and early results in areas like FOGS where the industrial countries have little to give.

They are seeking early agreements in FOGS - to institutionalise GATT and enable it to play a role, in conjunction with the fund-bank institutions, in the trade policy area, and have more effective conditionally on third world countries.

The United States which killed post-war efforts to create a trade-policy institution through the Havana charter and its international trade Organisation, is now favouring institutionalising GATT, but without formalising gati and without undertaking for itself any of the obligations, such as compliance of domestic law with international treaty obligations.

In the FOGS group, the U.S. efforts to institutionalise GATT through a so-called trade policy review mechanism (TPRM) are being pushed by the secretariat and Katz.

Third world diplomats say that in an effort to expand its own empire, the secretariat has already sought budget appropriation for 750,000 Swiss-francs for 1989, on the basis that the Montreal ministerial meeting would approve the TPRM and agree to its early implementation, ahead of the conclusion of the Uruguay round.

At the FOGS group last week, Brazil reportedly raised the issue and expressed its reservations and objections to the movie, which it said, would prejudice the position of those opposed to the TPRM proposals in the chairman's non-papers, or their early implementation.

At last week's meeting, Katz reportedly noted the wide gaps on some of the crucial issues, and said the group had no negotiating proposals and needed such texts for its further work.

Earlier efforts of Katz to convert his informal papers into formal negotiating texts had been blocked by third world countries who complained that his texts did not reflect their positions and viewpoints.

The group is due to meet again on October 24, when it is expected to draw up a report for Montreal.

The U.S. and the secretariat appear to be pushing for early accords in the FOGS area at Montreal covering ministerial involvement in GATT, including through a small standing body, and the setting up of a so-called trade policy review mechanism (TPRM).

The proposals for a TPRM under the first indent would theoretically bring trade policies of the major industrial nations (U.S., EEC and Japan), as well as of some of the bigger third world economies under GATT surveillance every two or three years, and of the smaller trading nations at more infrequent intervals.

However, third world countries have underscored that their trade policies are already subject to surveillance in GATT under its balance-of-payments provisions, and that it is the policies of major trading partners which have wider impact on the entire trading system that should be subject to multilateral surveillance.

So far, the only concession to this view has been that policies of third world countries would not come up for review in the same year both for BOP and under TPRM. But this would only mean that policies of major third world economies would be subject to review twice in a three-year cycle.

Third world countries have been opposed to this, and Brazil reportedly put this again formally on record by saying that the surveillance should be only in terms of GATT obligations, and avoids duplication with the BOP review.

But Australia, which voiced the opposing viewpoint last week, reportedly said: "GATT obligations cannot be the sole reference point. It should be review of trade policies unfettered by links to GATT obligations. We want to enhance role of GATT in trade policy formulation and convert GATT into a trade policy institution".

Japan favoured a "review team", while the Nordics had suggested the idea of "discussants".

Most participants also favoured policies of core countries being reviewed once every four years, and that of others once in six years.

But third world countries opposed the idea of any GATT review team visiting their capitals or policies being examined through "discussants".

Any review, several of them reportedly made clear, should be done at Geneva, without any "GATT visitations" to capitals.

Third world participants also insisted that there was no way for the TPRM exercise going beyond review of trade policies and practices with reference to specific GATT obligations, and going into a country's macro-economic and development policies.

India reportedly noted in this regard that while third world participants favoured surveillance, they were apprehensive about a number of proposals and ideas, and the informal papers of the chairman had not reflected these concerns.

In the Indian view the surveillance mandated had not only to be country specific, but system specific overall surveillance as now undertaken through the special GATT council sessions, where there were cross-sectoral reviews.

While third world countries continued to talk about "surveillance", chairman Katz repeatedly sought to eschew the word, preferring "review" on the ground that "surveillance" was a pejorative expression.

However, third world participants underscored the language of the Punta del Este declaration.

In terms of strengthening GATT fund-bank relationships, Canada has suggested that the GATT director-general should be mandated (by the Montreal mid-term review meeting) to explore with heads of IMF and the inbred ways of enhancing cooperation, and report to another meeting of the TNC within a year.

This was supported by Japan, New Zealand and the U.S. But a number of others questioned its utility.

India reportedly pointed out that the ministers had recognised that developments in the areas of money and finance adversely affected trade, and had called for GATT contribution to global economic coherence by strengthening institutional links.

But the intention was not to enable the fund and bank to influence trade policy, but for GATT to influence policies of the fund and bank to supportive of trade.

The chairman agreed that there was no consensus on the Canadian idea.

As regards greater ministerial involvement, there was broad agreement that this could be done through ministerial meetings of GATT CPS every two or three year.

However, there was wide divergence on the idea of a smaller ministerial group, with only the U.S., Australia and Switzerland fully supporting the concept.

Even some of the industrial countries reportedly had reservations.

Canada felt that guidance should be sought (presumably from the Montreal meeting) on the value and concept of a small standing body, while Jamaica argued that the modalities and utility of a small group was yet to be worked out.

The EEC, in what it sought to present as a concession, said it could agree to a limited group, but with the EEC having "one seat (for the commission representative) and 14 chairs" (for its member-states).

Katz reportedly remarked that the EEC demand for "one seat and 14 chairs" did not correspond to the concept of a small group.

Among other participants, Chile, Hong Kong and Colombia, though with varying nuances, appeared willing to support a small group.

But Brazil remained sceptic, while Peru opposed introducing the UN Security Council' concepts into the GATT.

Egypt felt the idea needed further reflection, while Yugoslavia had reservations, noting that such a body would directly affect the character of GATT.

Uruguay did not agree with the ideas, while Israel had difficulties with it.

India reportedly noted that while ministers would meet informally on the basis of need, and could not be prevented from doing so, it was quite another matter to legitimise this within GATT. While a meeting outside GATT did not bind anyone, a meeting within GATT could force decisions on GATT.

Malaysia and Singapore supported this view.

Singapore also noted the widespread concerns and reservations about the small group and its usefulness, while Malaysia had "apprehensions" over a small group and Nigeria felt the idea was at least premature.

In his summing up at the end, Katz reportedly conceded the need for further reflection on the third indent and institutional links, and noted that the Canadian proposals on this behalf were premature.

On ministerial involvement, he noted that there was no disagreement, but that there were wide differences and reservations over a small group.

On the first indent, about surveillance, Katz noted the need to produce a single text.

India said that any such text should not ignore the widely expressed concerns of the third world countries.