Oct 21, 1988
WARNING AGAINST COMPLACENCY, BILATERALISM, AND FRAGMENTATION.GENEVA, OCTOBER 19 (IFDA/CHAKRAVARTHI RAGHAVAN)—While the major trading nations patted themselves on the back, while blaming others, for resisting protection and maintaining free trade, third world countries complained Wednesday of growing bilateralism, coercive export restraints imposed on weaker partners, and a general erosion of the multilateral trading system. Brazil, according to same observers presents, made a forceful statement in this matter reflecting the serious concerns and worries of many third world delegations. These sharp and contrasting assessments of major trading nations and others emerged at Wednesday’s special session of the GATT council - a half-yearly occasion when the council takes an overview of developments in the trading system. The review was based on a draft report prepared by the secretariat and circulated to members. In an oral report, the GATT director-general reportedly noted that there were now ten GATT panels at work, the highest number in GATT’s 41-year- history. A major trend in the work of the panels was the increasing number of multiple parties to a dispute - more than one contracting party seeking and agitating the same issue before a panel or panels. Among the major issues focussed in the review by delegations were the U.S. trade law, the EEC single market, and proliferation of grey area measures. While the U.S. claimed that its recently enacted omnibus trade legislation was within GATT norms and intended as a trade liberalisation measure, a number of delegates, including those from the community, Japan, Hong Kong and Nordics, preferred to wait and see how the legislation is implemented by the administration. Several delegations however welcomed the inability of the congress to override the president's veto of the-textile bill. In other remarks the U.S. acknowledged that since 1935 it had been pursuing a strategy of opening up markets for U.S. exports. This strategy had three components: better macroeconomic coordination, which was already helping reduce U.S. trade deficit, expansion of trade through international trade agreements as in the Uruguay round and the U.S.-Canadian free trade agreement, and ending unfair trade practices of partners through bilateral Leisure, negotiations and dispute settlement, and use of U.S. legislation. Through this three-pronged drive, the administration had been able to defend the multilateral system in Washington (before congress, the U.S. deputy GATT representative, Frederick mantgainery, reportedly told the council members, but warning them to expect further protectionist pressures from the congress. The EEC delegate, Tran Van-Thinh, dealt with another area of concern to many countries - the single European market by 1992 and its consequences to outsiders. Tran reportedly acknowledged these concerns, some within and more outside, but estimated the, "costs" to the community of not having such a market as in the range of 250 billion U.S. dollars, while a single market would enable the community to attain anannual 5-7 percent growth rate. As for concerns of those outside, Tran said the community would proceed in line with its bilateral and international (GATT)' obligations. But the community would go its own way and take its own path in areas where the Uruguay round did not lead to multilateral rules elsewhere. This was interpreted to be a reference to the EEC drive for new multilateral framework on services and other new themes in the round. Tran also noted that the principle of reciprocity did exist in GATT and could be used by the community where currently there were no GATT obligations. The U.S., Japan, Australia and Hong Kong were among these who expressed concern over the single market trends. In this regard Australia reportedly drew attention to the commission’s proposals for use of reciprocity principle for community-wide banking activities. Australia also reportedly raised the question of possible consolidation of existing quantitative restrictions in the community in the form of global community quotas. In other comments, Japan referred to the EEC single market and U.S.-Canada free trade pact, and raised the issue of bilateralism and regionalism and its dangers. While welcoming regional integration schemes for same positive aspects, Japan felt such schemes had an inherent tendency towards differentiated treatment between members and non-members. Such integration schemes, Amb. Hatano of Japan reportedly argued, should be open to the outside world. Otherwise it would be detrimental to the functioning of the trading system. Brazil’s Amb. Rubens Ricupero, cautioned against the air of complacency evident in recent appraisals of the world economic and financial situation and in of many of the speeches at the council. Part of this insouciance, he said, stemmed from the fact that the anticipated recession after the 1987 October stock market crash had not taken place, and the growth in industrial countries had stabilised at above the three percent level. But this cautious relief needed to be qualified: even the modest recovery in the industrialised countries was in danger because of the persistence of pervasive facts and negative trends in the world economy as a whole. The adjustment process for correction of the huge trade imbalances among main industrialised countries, the major reason for tile financial disequilibria and instability in exchange rates and equity markets, was slow. Reversing the imbalances at a faster pace, through improved macro-economic coordination, was hence very urgent. Another negative factor was the lack-of progress in bringing about a lasting solution to the debt crisis, now in its seventh year. Third world's outstanding debt had now reached 1.217 trillion dollars, equal to 40 percent of third world GDP, while the 20 percent fall in terms of trade between -1982-87 had offset the real adjustment that indebted countries had achieved after great sacrifice. There was a declining trend of new financial flows from commercial banks - an essential element of the debt strategy. There was also the erosion of the multilateral trading system due to the increasing resort to unilateralism and bilateralism, prevailing in the attitudes and actions of major trading partners. There was also a tendency, which fostered fears of fragmentation of the system into "closed economic blocs". The fear, Ricupero acknowledged, however stemmed from "suspected intentions" rather than concrete decisions. Seen from this perspective, the world trading scenario should give cause for concern. Though the picture was being sought to be painted more positively, giving the impression that despite same minor bumps the world economy was travelling along a smooth road, "the destabilising influences are still far too prominent to allow for complacency or undue optimism". While some macro-economic indicators provided evidence of strong performance, "other more disturbing signals point unequivocally in the direction of increased protectionism and a widening range of trade distorting measures undermining the fragile stability of the trading system." In a reference to the U.S. actions against Brazil over its pharmaceuticals policy, the Brazilian delegate said that while his country had been taking trade liberalisation measures, it was "the victim of discriminatory and restrictive actions that had severely damaged Brazil's trade interests and consequently limited the options for redressing a difficult economic situation". In other comments at the council, a number of participants referred to the growing level of so-called voluntary export restraints and the widening sectors of the world trade being encompassed. Brazil, Australia, Czechoslovakia and Chile were among those who expressed concern over the proliferation of such export restraints, which were voluntary only in name. The exporting countries were faced with the choice of either accepting or being hit by formal quotas. Australia noted in this connection that recently it had been forced to accept such a restraint and restrict exports of beef this year to the U.S.