NO CONSENSUS TO TACKLE GOVERNMENTAL TRIMS ALONE.

Oct 12, 1988

NO CONSENSUS TO TACKLE GOVERNMENTAL TRIMS ALONE.

GENEVA, OCTOBER 10 (IFDA/CHAKRAVARTHI RAGHAVAN)—Third world and industrial countries remain sharply divided in GATT on whether Uruguay round GATT negotiations an investment issues should cover only government measures or all measures distorting or restricting trade, whether originating in governmental or private actions.

Japan, U.S. and the EEC want to focus the negotiations only on government measures.

But a number of third world countries have made clear that any negotiations to develop new rules and disciplines in this area would have to apply to all measures, whether they originate in governmental actions or of enterprises.

This sharp south-north division was reportedly voiced at last week's meeting of the Uruguay round GATT negotiating group an trade-related investment measures (TRIMS), chaired by Tomohiko Kobayashi of Japan.

The Punta del Este mandates in this area stipulates that "following an examination of the operation of GATT articles related to the trade restrictive and distorting effects of investment measures, negotiations should elaborate, as appropriate, further provisions that may be necessary to avoid such adverse effects on trade".

The TRIMS issue was put on Uruguay round GATT agenda at the instance of the United States.

Japan’s Kobayashi was named as chairman of the negotiating group, offer Japan had advised a number of third world countries that it had no particular viewpoint or interest in the TRIMS issue, and had an open mind.

However, since then Japan has been in the forefront of the efforts to write new GATT rules to discipline governments and block them from imposing any types of conditions on foreign investors who might wish to invest in any country.

Privately Japanese delegates have been trying to soften the opposition of third world countries by telling them that Japan' s targets were the U.S. and EEC where Japanese investors are being increasingly subject to discriminatory requirements, and not the third world countries.

The EEC, and some of its member-states have increasingly taken action against Japanese investment and enterprises arguing that they were "screw-driver" plants - plants where importer components are put together for sale.

Some of these countries have impose a specific level of local components, ranging from 40 to 60 percent, for the products of such Japanese foreign productive enterprises to qualify for national treatment within the EEC.

Though the U.S. originally raised the TRIMS issue, and wanted freedom for its investors abroad, Japanese investments inside U.S. has also become an issue there.

The democratic candidate, Michael Dukakis has now come out against such Japanese investments and take-overs of U.S. industry.

And while U.S. labour has welcomed such investments as saving jobs, U.S. capital is now increasingly wary and ambivalent.

Japan has been telling some third world countries its efforts are directed against such measures of EEC and the U.S. that hit Japanese investments, and not those of third world countries for promoting development and that Japan could envisage special and differential treatment for the third world in respect of any new TRIMS disciplines in GATT.

However, third world countries have not been entirely taken in.

In the TRIMS group, the U.S., Japan, and the EEC have identified a number of so-called "investment measures" - regulatory measures or requirements governments stipulate in permitting foreign direct investments - and have contended that such measures distort to restrict trade and thus should be disciplined.

Third world countries have specified a number of practices and steps of transnational corporations (TNCS) that also have a distorting or restrictive effect on trade, and have said these too should be dealt with and addressed in the group.

At last week's meetings of the TRIMS group, these two viewpoints reportedly clashed.

Mexico, Argentina, India, Brazil, Egypt, Yugoslavia and Malaysia reportedly were among those who voiced the view that measures and actions of private enterprises and investors should also be addressed. They reportedly cited a number of practices and investment decisions of TNCS that distort or restrict trade.

The United States, supported by the EEC, however reportedly argued that at Punta del. Este there had been no consensus an the Uruguay round negotiations dealing with restrictive business practices (RBPS), and hence the investment and other practices of private investors could not be the subject of the negotiations.

Third world countries however reportedly took the position that there was no warrant for such a narrow and restricted interpretation of the TRIMS mandate.

The ministers in their declaration, the third world participants reportedly pointed out, had called for an examination of operation of GATT articles related to the trade restrictive and distorting effects of "investment measures".

There was no qualification that only "governmental" investment measures should be dealt with.

The U.S. and EEC reportedly argued that the entire nature of GATT would be changed if actions of private parties and enterprises were to be dealt with.

This view was however reportedly rejected by third world participants.

India reportedly noted that even now GATT did not merely deal with trade policy actions of governments but also of private entrepreneurs.

Article VI of GATT on "dumping" of goods in trade, dealt with actions taken by individual enterprises in the export of goods, and authorised governments to deal with such "dumping" through levy of "anti-dumping" and "countervailing" duties.

There was thus no ground for the belief that GATT was intended to deal with only actions originating in governmental actions.

One of the objectives of the Punta del Este declaration stipulated that negotiations "shall aim" to increase "the responsiveness" of the GATT system to the evolving international economic environment, and take account of changes in trade patterns and prospects.

Citing a number of measures and practices of TNCS in undertaking FDI, and the restrictions imposed on their subsidiaries and licensees, third world countries asked how such measures could be considered to be less restrictive or distortive of trade than governmental measures.

The EEC reportedly argued that while such measures did affect trade, the GATT and the Uruguay round were not the forum to deal with them.

Third world countries however did not accept this view.

Chairman Kobayashi would appear to have suggested, in his attempts at summing-up, that there was a consensus in the group to deal with government investment measures restricting or distorting trade, but no consensus on private measures.

Brazil, India and other third world countries would however appear to have said that there was no consensus to deal with investment measures of governments alone.

Kobayashi is reported to have said that the issue whether investment measures of private parties should also be considered could be discussed informally further at the next meeting of the group in November.

The implication was that the other issue of dealing with government measures could be considered as having a consensus.

Third world participants reportedly did not agree.

Some of them said this was a clever Kobayashi ploy that would have enabled him, as chairman, to report to ministers at Montreal about the agreement to deal with governmental investment measures and get the go-ahead for further negotiations, while the third world demand that investment decisions and measures of private parties should also be considered would have been blocked for lack of consensus at Montreal.