Oct 25, 1988


GENEVA, OCTOBER 21 (IFDA/CHAKRAVARTHI RAGHAVAN)—The GATT council this week has recommended the appropriation of 750,000 Swiss francs in the 1989 budget for a trade policy review mechanism, in anticipation of decisions by traje ministers at Montreal to set up such a mechanism and operate it from next year.

This controversial proposal, being pushed by the United States as well as the GATT secretariat, for early agreement at the ministerial mid-term review meeting of the Uruguay round trade

Negotiations committee in Montreal, is in the context of the mandate and negotiating plan on the "functioning of the GATT system" and for enhancing surveillance within GATT.

While the mandate in this area is a corollary to agreements on other substantive items on the Uruguay round agenda for greater discipline and observance of GATT obligations, the idea of a trade policy review mechanism, to visit capitals and examine policies of countries in a wider context than their obligations in GATT, is being pushed by the U.S. and some of its industrial country allies, who wish to control autonomous economic policies of third world countries.

The GATT secretariat has also been pushing for such a mechanism that would enhance its own role and put it on par with IMF and World Bank in capacity to influence economic policies of countries.

When the subject came up before the council this week, during its consideration of the budget for 1989 to be recommended to the annual session of the GATT contracting parties, several countries, including Brazil, Jamaica, India, and Malaysia, reportedly expressed their reservations.

Brazil said that the proposed appropriation "unduly and unnecessarily" anticipated the decisions, which may or may not be taken by ministers of countries participating in the Uruguay round.

It was not appropriate, through a budgetary device, "to pressure or constrain ministers - neither on the decision in favour or against the TPRM, nor the characterise or dimensions that such a possible mechanism may eventually assume", Brazil reportedly said.

In stating its reservations, Brazil however said that it would stand in the way of a consensus, but would not join one either, on the understanding that the budget provision would neither prejudge the issue nor Brazil's position on it.

In recommending the appropriations, the council said that the amounts would remain frozen until such time that it was to be used.

Some third world participants later explained that those objecting to the TPR mechanism and the proposed appropriation had decided not to black a consensus, since it could have meant holding up approval of the GATT budget itself, and of another decision related to it, namely how to deal with the problem of arrears.

Some 50 contracting parties out of the 95 are reportedly in arrears, some of them for several years.

The total arrears amounts to about 31 million, of which ten million is awed by the United States.

The GATT proposed budget for 1989 is a little over 64 million Swiss francs.

The plan approved and recommended by the council provides for assessment of those with very small trade shares, 0.03 percent or less, at 0.03 percent of the budget (rather than the current 0.12 percent), and enabling such CPS to clear up their arrears, for 1987 or earlier, by yearly instalments equal to the new scale of assessments.

The current minimum of 0.12 percent was fixed same 20 years ago. Since then a number of least developed countries and others with very small world trade shares have joined the GATT, and more are being encouraged to join. But for all of them the current scale of assessment is too onerous.

The recommendations also provide that those CPS whose assessments is above the minimum 0.12 percent, arrears for 1987 and before should be cleared up through "tailor-made schemes", to be recommended by the GATT director-general to the budget committee, which would then review them and make suitable recommendations.

But for the future, there are to be built-in, and escalating, range of penalties for non-payment of contributions.

None of the UN system agencies have such penalties. Only the International Telecommunications Union and the Universal Postal Union charge a three percent interest for first six months an contributions hot received by January 1, and six percent a year thereafter.

In the proposals recommended for adoption by GATT CPS, after January 1989, those in arrears of one full year's assessed contribution outstanding at the end of the GATT’s financial year (December 31), documentations would not be posted to delegations in Geneva (who would have to collect it from GATT premises). Also, their representatives would not be nominated to preside over GATT bodies.

After more than a year's arrears but less than two, besides these two penalties, new membership and participation in the budget committee would be reserved to those CPS who have not more than one year's outstanding dues.

For those in arrears for more than two, but less than three, there will be an additional penalty - documents would not be posted (whether the CPS have offices in Geneva or not), and they would be precluded from acting at the annual sessions of the GATT CPS on the recommendations relating to the budget.

In the case of those in arrears for more than three years, the budget committee would consider and recommend other measures to reinforce the obligation to pay.

While the GATT council adopted these recommendations, and passed them to the annual session of the contracting parties for adoption, a number of Latin American countries made statements to the effect that they could not accept a decision that would diminish the rights of contracting parties under the agreement.

In other decisions relating to the budget, the GATT council also recommended that in future observer-countries are the GATT are to be charged a minimum contribution of 1,000 dollars towards the cost of the documentation service provided by the secretariat.