Oct 24, 1990

SOME PROGRESS IN MINOR AREAS OF URUGUAY ROUND TALKS.

GENEVA, OCTOBER 22 (BY CHAKRAVARTHI RAGHAVAN)--- There has been some progress in minor areas of negotiations in the Uruguay Round talks, but with continuing and growing differences in major areas, Third World sources reported Monday.

While the differences in Agriculture has been the main focus of media attention, particularly over the inability of the EEC member-states to agree on an "offer" to table in the negotiations, there are also serious differences on a range of other issues, Third World sources said.

These include intellectual property issues where some Third World countries like Brazil and India have made clear that any eventual agreement on standards and principles would have to be lodged outside GATT (India has suggested the WIPO), or investments where there are some basic differences of approach, on subsidies and anti-dumping rules, safeguards, textiles and clothing.

In reporting some minor progress Monday, GATT sources said that negotiators have reached agreements on revisions to three Tokyo Round codes and that though these are technical, they would be of benefit to the trading community.

The three codes on which understanding has reportedly been reached, but subject to a final package of accords at Brussels, are those covering technical barriers to trade, importing licensing procedures and customs valuation.

The changes in the code on technical barriers to trade (standards), GATT sources said, have incorporated some important changes including a more precise definition of what would be considered barriers to trade and what would be legitimate, covers processes and products (an area relevant to agriculture), reinforces obligations of local government and non-governmental entities in this.

The revisions to the licensing code in effect strengthens the disciplines on governments using a licensing system, both to increase transparency and reduce discretion.

GATT sources said that India, which has raised the issue of similar disciplines and transparency on export licensing and has been seeking a working party to go into this, had put a reserve.

The export licensing issue that India has sought to raise relates to extensive use of this by the leading industrialised countries to refuse export licenses for a variety of goods.

While originally, the ICs used to exercise it in limited areas on grounds of "national security" and in the East-West context, the latter term has now been expanded to sub-serve neo-mercantilist purposes and to cover any kind of exports of technology and goods so to prevent future rise of competition in Third World countries.

In the customs valuation code, the changes introduced would in effect enable customs administrations, where they doubt the accuracy of declared value for, to seek further information and documentation from the importer.

In the discussions on safeguards in a drafting group, the issue of selectivity is continuing to plague the negotiators.

India and other Third World countries are insisting on non-discrimination and removing any wording to support application of selective safeguards, sought by the EEC.

The U.S. would appear to have suggested the introduction of the concept of "consensual selectivity" (introduction of selective safeguards with the consent of the exporting country).

But this was opposed by Hong Kong which noted that the weaker trading partner was always at a disadvantage, while India said that it was too late to consider such ideas either.

In the services negotiations, the chairmen of various working groups on sectoral issues have reported to the Group of Negotiations on Services (GNS) on the status of their work.

An ad hoc working group of the GNS as a whole is due to consider all these reports and how to proceed further.

The sectoral working groups have been generally considering whether the issues in the particular service sectors have any special elements needing elaborations or exceptions from the general multilateral framework and its disciplines.

The reports show that the U.S. and EEC, which have been the main protagonists of liberalisation of trade in services, are now seeking to protect their domestic markets in all areas where they fear competitivity from each other, and even more from the Third World, while pushing for liberalisation in areas where they are at a competitive advantage.

In some sectors there has been no agreement. These include those on audio-visual services, construction and labour mobility. In audio-visual the EEC wants annotations or exceptions to protect culture while the U.S. and Japan are opposed.

The issue of protection of "culture" is also one figuring as an exception in the general framework. A number of Third World countries, who support cultural exception, have been insisting that the issue of cultural protection is more general and not relative only to audio-visual services to be dealt with in an annex.

In a few others, the U.S. and EEC want annexes that would provide for derogation from the obligations of the general framework, including the most-favoured-nation principle, and exclude some sectors and subsectors where they have better rights under reciprocal treaties or where they face competition on their domestic markets.

While the general framework draft itself envisages derogation from the multilateral framework in respect of sectors and subsectors where there are other international agreements (like the UNCTAD liner code or agreements under the International civil Aviation Conventions) the U.S. is seeking to extend this to areas covered by its bilateral commerce and navigation treaties.

In respect of financial services, where a small group of industrialised countries held meetings among themselves, inviting a few Third World countries, and have put forward a draft text for an annex, a number of leading Third World countries including Brazil, Chile, Cuba, Egypt, India and Yugoslavia have refused to agree to the draft being used as a basis for further work

In the negotiating group on the Functioning of the GATT System (FOGs), the United States has sought to reintroduce its idea of a small oligarchic management group to run the GATT.

GATT which functions on basis of consensus (except where the General Agreement requires voting) has now an intergovernmental machinery in the shape of the GATT Council (where every CP is a member with equal rights) which exercises all the powers of the Contracting Parties at their annual sessions.

Such a management group of 18, as the U.S. has envisaged in a paper tabled by it, would provide a permanent seat on the board for the U.S., EEC, Japan and Canada, and for 14 other seats to be filled by other countries on a rotational basis.

Replacing the current purely advisory "consultative group of 18", the new management board sought by the U.S. would meet at ministerial level, and in between the Ministerial sessions of the Contracting Parties every two years, would exercise all the authority and generally run the new GATT.

One of the functions envisaged by the U.S. would be to "resolve issues referred to it by the GATT Council or taken up by the Board on its own initiative".

The U.S. idea however ran into trouble at Monday's meeting of the FOGs group where it was opposed by a number of Third World countries including Brazil and India.

Third World countries as weaker trading partners, India reportedly said, favoured a rule-based trading system as the best protection for themselves, but the idea of a small "management board" was contrary to the concept of a legal system where every Contracting Party had a right to voice its views and be heard. A management structures like that of financial institutions could not be applied to the GATT, which were based on contractual relations.

The EEC's original reservations over the U.S. idea has apparently been overcome by the proposal that the EEC as such would be on the Board and represented by the Commission, even though in terms of the legal situation each of its member-states are the Contracting Parties.

In the discussions the EEC would appear to have suggested that all these were tied up to its idea of a Multilateral Trade Organisation (MTO) and could be considered in that context.

The EC has suggested that the Brussels Ministerial meeting should agree in principle to the idea of an MTO and leave it to be considered and settled later.

While the U.S. reportedly wanted the management board idea to be referred to the Brussels Ministerial meeting, India and others said that there was no prospect of the idea being accepted, and that the agenda of Ministers at Brussels should not be overloaded like this.

Also, the U.S. idea had been considered by the Ministers at Montreal mid-term review and they had not only not accepted it but had not even agreed to its further consideration, "thus wiping it of the agenda" of the multilateral trade negotiations.