Dec 3, 1987


GENEVA DECEMBER 1 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The need to strengthen GATT and make it more effective was the common theme of speeches of Ministers and Senior Officials in the General Debate at the 40th. Session of the Contracting Parties that opened Tuesday.

But while everyone appeared agreed on the objective, their diagnosis of the ills and prescriptions for remedies differed considerably.

Several speakers, particularly those, who had participated in the informal meeting of few Ministers at Lausanne Sunday, lent support for the idea of a mid-term review of the Uruguay round negotiations and for efforts at "early harvest".

But the European Communities (which was also at Lausanne) flatly ruled out any priorities except in the case of "tropical products", and for advance on all fronts "with few fanfares".

The U.S., which has been pushing for the mid-term review and early harvest to encompass agriculture and services, was silent, though its supporters advanced this view.

But while the U.S. appeared to suggest that the door should be left open for rewriting the Punta del Este mandate, and expanding the future role of GATT beyond even the new themes on the agenda (services, intellectual property rights and investment issues) to take on tax and competition policies in countries, several other countries warned against efforts to rewrite the Punta del Este mandate or expanding the GATT role.

Pakistan’s Commerce Minister, Mahbub Ul-Haq, among the third world countries lent some support to the idea of an early harvest including on services, but he too underscored the issues of concern to the third world including agreement on end to the Multifibre regime and return of trade in textiles and clothing to GATT rules and disciplines.

India’s S. P. Shukla however pointed out that the idea of early agreements and advance implementation was envisaged in the Punta del Este declaration only in the area of goods, and could not apply to services negotiations.

There should be progress on broad front, and priority should be given to safeguards, without which no trade liberalisation could be undertaken, on tropical products, an area engaging GATT attention for 25 years and identified as sector important to the third world and involving no competitive situation for industrial countries, and returning textiles and clothing trade to GATT disciplines.

U.S. Trade Representative, Clayton Yeutter reportedly departed from his text to advocate what several third world participants saw as keeping the door open for rewriting the Punta del Este mandate. Apart from actions on agriculture, intellectual property, investment and services issues, Yeutter advocated GATT becoming involved on issues of national tax policies, competition policies and relationships of trade to monetary policies.

He also wanted vigorous surveillance in GATT to call to account nations taking actions inconsistent with "the spirit" of GATT, and design GATT rules and codes that would motivate nations to join them, reward national policies consistent with these codes, and penalise inconsistent policies.

The U.S. delegate also appeared to advocate change in GATT procedures to prevent any single country from blocking actions through the consensus rule. At the same time, Yeutter did not also want introduction of voting.

As some participants noted later he thus appeared to want to have the cake and eat it too.

In other remarks, Yeutter sought Ministerial involvement in GATT’s work through periodic meetings, improved co-operation and communication amongst GATT, IMF and World Bank, and re-exploring the possibility of creating an international organisation to encompass a broad range of agreements.

To Mahbub Ul-Haq the real message of the recent stock market crash was that the U.S. dollar would be phased out as an international currency over the next decade and the U.S. could no longer function as the central baker of the world. It was hence necessary to begin the search for a new international central banker, he said.

The world trading system should also be made more open through a major restructuring of GATT’s role, and this must involve full participation of all countries to make the system truly universal.

There was need to impart a sense of urgency in the Uruguay round negotiations. This should be done through a mid-term Ministerial review in second half of 1988, and early harvest agenda to include institutional issues like dispute settlement, GATT surveillance and safeguards, agriculture (along lines of the U.S. and Cairnes Group proposals), services and textiles.

In textiles, Haq complained of " a silent compact" between some industrial countries and the highest quota recipients in the third world (the far east suppliers like South Korea and Hong Kong) to put the issue on a back burner. This was not acceptable, and it would not be worthwhile for third world countries to participate in the Uruguay round MTNS if the textiles and clothing issue was not in the early round.

But Willy De Clercq, speaking for the European Communities, flatly rejected the early harvest idea and made clear that with the exception of tropical products there could be no priorities in the Uruguay round, and it "must progress across the whole spectrum of subjects on a broad front, including trade in services".

De Clercq also called for advances "with few fanfares".

While there should be improved co-operation between GATT and institutions primarily responsible for monetary and fiscal matters, this would not be enough. Without coherence of national economic policies and co-ordination of such policies, the Punta del Este declaration would be "in serious danger of remaining a mere piece of paper".

De Clercq also referred to the Acapulco declaration of Latin Heads of States and said their appeal to alleviate regions debt problem and high interest rates could not be ignored.

On agriculture, De Clercq noted the growing realisation in all countries that key problems of excess production and support should be tackled, and agriculture more fully exposed to market forces. But this process could only be gradual, though short-term action was needed to stabilise agricultural markets both internally and worldwide.

But "let us be clear: total and unbridled free trade in agriculture is not in our grasp. It is an illusion".

To make GATT relevant, there was need to bring some order into the fields of intellectual property, investment issues and in trade in services. But GATT should open its doors to worldwide membership only on the basis of "the values and principles of the market economy".

Japanese Foreign Minister Sosuke Uno said Japan would be submitting soon its own proposals on agriculture calling for more effective operation of market mechanisms "in a long run", ensuring market access through further liberalisation of trade and permitting certain category of import restrictions for stable supply of foodstuffs under more specifically defined conditions.

Japan would also want all export subsidies to be phased out within a certain period, and for progressive and concerted reduction in a balanced and flexible manner of other subsidies having trade-distorting effects.

Australia’s Michael Duffy said the mid-term early harvest package should involve early relief measures and agreement on long-term objectives in agriculture, general agreement on approaches to increase market access, significant reductions of barriers to market access in tropical products, agreement on a general framework on services.

Norway’s Trade and Shipping Minister, Kurt Musbakk said the stock market crash showed the obvious need for co-operative actions, and confidence and credibility among market agents and governments should be restored if a recession was to be avoided.

While there had been progress in all negotiating groups of the Uruguay round, the speed of the round so far had put strain on smaller third world countries and ways should be found to provide them assistance. In what was seen as a reference to the U.S., the Norwegian Minister called on all GATT CPS to live up their obligations to finance the GATT.

The successful conclusion of the Uruguay round and liberalisation of trade, the Norwegian Minister suggested would promote improved standards of living and ameliorate the environment – goals that the World Commission on Environment and Development had forcefully and convincingly argued for.

Swedish Trade Minister, Ms. Anita Gradin said the comprehensive and complex nature of the Uruguay round was a reflection of reality only by putting everything on the negotiating table could something be produced for everybody, and a negotiating leverage created in an organisation based on consensus.

She also underscored the one priority expressed in the Punta del Este declaration, namely liberalisation of trade in tropical products, an area of direct interest to third world countries. This was one area where negotiations must yield early results, she said.

Hungary’s Peter Veress said any country undertaking GATT disciplines and obligations was entitled to equal, non-discriminatory treatment from all CPS "irrespective of its size, economic power, economic system or level of development".

India’s Shukla said while work in all negotiating groups had progressed at technical level, the determination of issues for negotiations and agreement on a common basis for negotiations, called for in the initial phase, had not been achieve so far. There was also a persistent tendency on the part of some to extend scope and mandate of the negotiations, and this only impaired the solid basis of consensus in the Punta del Este declaration.

A year after the launching of the round, there were repeated proclamations of faith in multilateral trading system, and at the same time open-advocacy of cartel-like arrangements, unilateral departures from non-reciprocity and non-discrimination principles in trade relations with third world, a disturbing lack of commitment to the general principles of GATT, and violations in letter and spirit of the standstill and rollback commitments.

India did not favour selective approach to early harvest that would disturb the balance in the Punta del Este declaration.

But special emphasis needed to be put on the safeguard agreement, liberalisation of trade in tropical products, and return of the textile trade to GATT disciplines.

The special and differential treatment of third world countries, promised in the Uruguay round mandate, had not been reflected in various proposals in negotiating groups, while in the tropical products group third world countries were actually being asked to provide reciprocal concessions.

The Indian delegate was also critical of the efforts of industrial countries to pressure third world countries to remove their Quantitative Restrictions maintained in the context of Balance of Payments (BOP) considerations, and the persistent efforts in the Uruguay round itself to revise the GATT BOP provisions, "the only defensive mechanism available in GATT for developing countries facing unavoidable and serious BOP difficulties".

There were also efforts to question the content and direction of autonomous development policies, though this was acknowledged to be beyond GATT purview.

Some industrial countries were also seeking linkages with trade in goods and such matters like foreign direct investment, protection of IPRS, services and "fair labour standards". At UNCTAD-VII, such linkages were rejected in the final act, though it remained to be seen how far those commitments would be adhered to in the Uruguay round.

Brazil’s Paulo Tarso Flecha De Lima said while GATT had outgrown its modest origins to become a pillar of multilateral trading system, there was inadequate attention to the economic development problems of the third world countries.

Indebted third world countries had been forced to generate huge trade surpluses, in a period of slow growth in OECD economies and world trade, in order to service their debts.

It was essential that the commitments for standstill and rollback in the Punta del Este declaration should be fully observed and lived up to.

But developments in trade field could not proceed in isolation from developments in financial area or in economies of major industrial countries, the Brazilian delegate observed.

The Punta del Este declaration itself had recognised the interdependence of trade and finance, and need to address the Central issues of third world debt.

If GATT was to survive, there should also be clear respect to the GATT law and rejection of "the rule of the might".

Referring in this connection to the U.S. threat to take actions against imports from Brazil, and the complaint circulated on this by the Brazilian delegation, Flecha De Lima said this would be "a true testcase" of GATT law. Instead of self-righteous and negative behaviours, there should be prompt return to the consensual and constructive spirit of GATT.

Citing the Acapulco declaration of Latin heads on the debt and need to observe GATT rules and disciplines, the Brazilian delegate said that crisis of the eighties could only be resolved through restructured international economic relations, avoiding the mistakes of the past and based on durable and equitable framework for growth and economic development.

The Uruguay round was launched on the basis of consensus and equitable participation of all in decision-making, and this approach should guide future actions also.