DRAFT FINAL ACT - AN "APPROXIMATION" THAT DEFIES THE LEXICON.

Dec 3, 1990

DRAFT FINAL ACT - AN "APPROXIMATION" THAT DEFIES THE LEXICON.

GENEVA, NOVEMBER 29 (BY CHAKRAVARTHI RAGHAVAN)— The "draft Final Act" that has been forwarded to the Ministers at Brussels for their consideration and decisions describes itself as a "first approximation" of the results of the Uruguay Round.

According to the Oxford English dictionary, the verb "approximate" used in relation to quality or numbers, etc, means "bring or come near but not exactly".

But the choices and alternatives for decisions by Ministers on the package that could be put together as the final results of the negotiations are such, and involve so many disjointed and missing parts of the puzzle, that the use of "approximation" to describe the document and its contents appears to stretch the dictionary meaning to the point of snapping.

FINAL ACT: Everything relating to this including whether it is to be a final act or process verbal and its contents are in square brackets and yet to be agreed.

Ministers have to decide whether or not the various agreements on trade in goods, Trade in Services, and Trade-related Intellectual Property Rights (TRIPs) will be in separate instruments or those in goods and on TRIPs would be combined into one and automatically lodged into the GATT. They have also to decide whether they want to "institutionalise" GATT, or create a new umbrella organisation and structure to deal with and administer all Uruguay Round agreements and continue negotiations in these areas left unfinished, or deal also with trade and development issues, and whether it should be done through the GATT?

They have also to decide whether the "political" meaning of the term "single undertaking" and "globality" used so far in relation to the various Uruguay Round negotiations is to be converted to incorporate the outcomes in a single legal instrument forcing everyone to sign and accept the entire package of results or whether principles of international law for negotiating and concluding treaties and amendments should continue to prevail.URUGUAY ROUND (1990) PROTOCOL:

The protocol, according to standard GATT practice, is to incorporate in a schedule to be annexed to GATT all the tariff and non-tariff concessions that will be exchanged, and where bilateral negotiations are continuing and will continue in Brussels.

But Ministers have to decide on the period of implementation for the tariff and other concessions.

RULES OF ORIGIN:

This governs the way the customs administrations will allow imports and the duties they will levy, in accord with the concessions granted and bound.

Ministers have to decide whether preferential rules used for determining origin of goods (such as in GSP, Lome Convention, etc.) should be included within scope of the agreement, whether CPs should commit themselves to use the same rules of origin for all purposes, whether CPs should be committed to notify in advance changes they propose to introduce in rules of origin and enter into consultations with affected parties, and whether some of the disciplines proposed should continue if the work programme envisaged for harmonisation fail to produce expected results.PRE-SHIPMENT INSPECTION:

The basic question to be resolved is on the standard to be used by inspection agencies in undertaking price-verification. Should it be based an prices offered for exports from the same country to anywhere or only to country of import or in other words should exporters be able to engage in price discriminations - a common way of transfer-pricing and capital-flight.

TECHNICAL BARRIERS TO TRADE:

Should the obligations of CPs in this area apply to local government bodies and should it rest on a "best endeavour" clause or be made a legal obligation to comply?IMPORT LICENSING PROCEDURES:

The ad interim text evolved is subject to a reservation to its adoption. India has linked it to establishment of a working party for evolving similar procedures and agreement on export licensing.

SUBSIDIES AND COUNTERVAILING DUTIES:

Ministers are being called upon to take some important political decisions including whether or not agricultural subsidies would also be covered, the level of disciplines on use of subsidies and whether they would fall in the prohibited and/or actionable categories based on quantitative thresholds above which they would be deemed to cause serious injury to trading partners vs. permissive categories of subsidies including those to correct distortions at regional levels in countries.

The agreement also has provided for "graduation" of countries based on per capita incomes and thresholds of world share in exports in one or more products, and their ability to use export subsidies - incorporated as a part of the special and differential treatment in the 1979 Tokyo Round code - and committing them to a time-phased programme that would obstruct their efforts at diversification and promotion of exports through subsidies to correct market imperfections or help their enterprises to enter markets as new-comers.

The approach in the agreement exempts all least developed countries, and adopts a graduation approach for others. The per capita approach has produced some absurdities like Gabon which owes its per capita to export of petroleum to be committed to immediate zero export subsidies on all industrial exports like Singapore and Israel, a 11 year period for phasing out by an intermediate category and a third category allowed to continue subsidies for economic development programmes. This category will be automatically graduated into the second if its annual per capita income is over 1000 or its export share in world trade in one product reaches a threshold of four percent (which the U.S. and EC want to reduce to 2 percent). This last would "graduate" some of the low-income countries like India and Pakistan, etc., who fall in the exempted per capita category and are approaching 2-4 percent levels in just one single product textiles and clothing.

ANTI-DUMPING:

There is no agreed text or draft for negotiations. Ministers have to decide on changes in the present code as to what extent actual data should be used to determine dumping margins? If averaging is used to determine a home market price, should there be also averaging to establish an export market price? What is the appropriate period to calculate the recovery of costs in establishing whether a home market price is below cost of production? How is material injury to be established before action is taken and to what extent should "small margins" of dumping and "small quantities" of imports be ignored?

Are anti-circumvention provisions needed and if so should be the provisions and to what extent should third country manufactures were covered?CUSTOMS VALUATION:

The agreement involves decisions on valuation by Third world countries on imported goods on basis of officially established minimum values when they doubt the truth or accuracy of declared values and problems relating to valuation of goods imported by sole agents, sole distributors and sole concessionaires, into a country.AGRICULTURE:

Ministers are being asked to provide political decisions on some questions on basis of which agreements could be drawn up.

One issue is the base period for start of the cuts in domestic support, border protection and export subsidies.

The EC has offered 1986, the U.S. average of 1986-1988. A compromise posed is April 1989 when the mid-term accord and the standstill on existing protection (levels of support, border protection and export subsidies) was agreed upon.

Another major issue is about special and differential treatment to Third World countries. While there is general agreement that this should be permitted, the De Zheew text and some of the proposals and offers would provide derogations only so long as domestic price in Third World countries is not higher than world prices at border - a price which in fact is determined by the subsidised exports (under whatever name) of the EC, U.S. and other exporters.

Other questions include speed and rate of cuts, scope and specificity of product coverage, criteria to be used for exemption of certain products, modalities for tariffication and reduction, reduction of border protection and export support merely on basis of percentage figures or also on strengthened GATT disciplines and rules, and special safeguard provisions. There are also questions about sanitary and phyto-sanitary provisions and issues relating to their harmonisation.SAFEGUARDS:

The questions to be decided include whether or not there should be provision to permit use of "selectivity" or taking safeguard actions against some but not all sources of imports, question of structural adjustment assistance and whether governments could use them without provoking retaliations over subsidies, bringing "grey area" measures under discipline of safeguards, issues of special and differential treatment for the Third World, time periods for phasing out safeguard provisions.TRIPs:

Ministers have to decide whether there is to be one agreement implemented as an integral part of GATT or there are to be two agreements one on Trade-related Intellectual Property Rights and the other on Trade in Counterfeit goods, with the latter to be implemented in GATT and the former on standards and principles governing availability, scope and use of IPRs to be implemented in a relevant international Organisation. The issue of international implementation of this second, according to the mid-term review, is to be decided by Ministers meeting on the occasion of a Special Session of Contracting Parties, when the negotiations are concluded and results in all the areas established.

Tied to the resolution of this issue are those relating to dispute settlement as well as provisions for acceptance, withdrawal, non-application and reservations on the agreement.

On substance there are a number of differences, some North-North and many more North-South. There are questions about most-favoured-nation treatment and national treatment, which involve departures from the WIPO-administered Paris Union Conventions.

On copyright and related matters, decisions are to be provided on protection of computer programmes, an whether there should be "rental rights", the rights of performers and broadcasters, the term of protection for phonograms, the issue of "moral rights" of authors, limitations and exemptions from copyright and definition of "public" in relation to commercial exploitation of a work.

In Trademarks, outstanding issues relate to special requirements that countries could place an use of a mark, differences over issues of marks of geographical indications and/or special provisions relating to wines and alcoholic beverages and bilateral agreements, on industrial designs and what can come under this for protection, and on criteria for protecting designs.

In Patents, the issues involve the area of patenable subject matter. These include questions relating process and products, to biological and genetic material and processes and products and their protection, the right of governments to exclude particular areas from patent protection, rights conferred by process patents and whether process protection extends to products and reversal of burden of proof, working of patents in the territory vs. import rights, non-voluntary licensing and conditions and government use of patents, non-discrimination as to places of invention in dealing with patent rights.

On protection of lay-out designs and integrated circuits, one of the issues is whether the TRIPs agreement should involve "plus-elements" or additional provisions to the just concluded Washington Treaty under WIPO auspices in terms of various norms and standards.

Another issue is over protection of "trade secrets" or undisclosed information under patent rights. There are also issues relating to Control of Abusive or Anticompetitive policies in contractual licenses of IPRs.

The issue of transitional arrangements and provisions in respect of least developed countries and other Third World countries is also referred to Ministers. On several issues there has not even been any work done, and they have been merely flagged including for example on question of 'dispute settlement in transfer of technology disputes.

TRIMs:

There is no text for Ministers but at his press conference on 27 November, Dunkel said there are "black-market" texts. Ministers are called upon to decide on basic divergences in negotiations.

These include whether a TRIMs agreement should cover measures imposed when an investment is made or also to measures applied to established firms and industries, and whether they should also cover measures enforceable by a government offering or withdrawing incentives - advantages, subsidies, etc. - or only legally enforceable TRIMs?

Should the agreement and its disciplines cover investment measures per se or only through trade remedies on effects on a case-by-basis. Should the prohibition approach be used to have disciplines to prohibit local content requirements that are purportedly covered by GATT Articles III (national treatment between domestic and imported products when latter cross borders) and Article XI quantitative restrictions.

Should export requirements be prohibited as inherently restrictive and distorting in their effects?

Based on answers to some of these questions, what flexibility should be provided for Third World countries.

Should a TRIMs agreement also deal with corporate practices by addressing the restrictive business practices of enterprises.

TEXTILES AND CLOTHING:

A number of basic questions are to be resolved in relation to the integration of this trade into the GATT. These include the timespan of transition for integration and the products to be listed and included in an annex - all textile products or only those under restraint and thus outside the GATT derogation in the MFA (automatically integrating immediately the unrestrained products and trades), the stages of integration and whether they should encompass a percentage of products under restraint and drawn from four different degrees of processing and the percentage numbers for each stage of integration.

There are also issues relating to the base levels and whether these should be first increased, the growth rates on the base levels during the integration process and the question of minimum growth rates. Another set relates how to differentiate between categories of exporters including new entrants, small suppliers, etc.

There are questions whether during the transition periods, the present MFA-sanctioned selective safeguards, namely restrictions based on source of import should continue or whether there is need for a non-discriminatory approach in its application, the duration of the period of transitional safeguards, and the terms to be provided for growth and flexibility (switching between sub-product categories and time-spans in using quotas), and the issue of relationship to normal GATT safeguard provisions and non-recourse to it for two years after removal of the MFA-based restrictions, review procedures and adjustment of the provisions of the agreement to integration process where parties alleged to be not complying with GATT rules and disciplines.GATT ARTICLES:

To avoid the problems of amendment and their ratification and applicability, etc., all the proposals are presented as agreed understandings and interpretations to be adopted under the Art. XXV route of actions by CONTRACTING PARTIES by consensus.

There are ad referendum agreed texts on Art II: l (b) - other charges and duties that could be levied at the border and their bindings; on Art XVII - State trading enterprises.

Decisions are sought from Ministers on interpretations and understandings on Art. XXII and XXIII - dispute settlement procedures where the issues for decisions by Ministers relate to actions on panel reports, unilateral measures and non-violation complaints.

There is also an understanding sought relating to the Art. XXIV provisions about customs unions and free trade areas where there are some reservations from delegations including one on the ground that there would only be limited understandings while the issue of growing regionalism and bilateralism are being ignored.

There are questions about the time-periods for automatic expiry of existing GATT waivers without time limit and for specific time-bound waivers being granted in future. These are also linked to the issues in agriculture.

There are also texts for understandings on renegotiations of tariff concessions in schedules, on the issue of interpretation of non-application clause whereby the present provision for limited right of non-application (namely not engaging in negotiations, rather than dependent on results) is sought to be extended, for ending the "grandfather" clause privileges granted to countries under the provisional protocol of application of GATT and in accession protocols, and for definitive application of GATT.

A major North-South issue is whether at all there should be negotiations relating to the Balance of Payments provisions of GATT, particularly XVIII: B applicable to Third World countries.