Dec 7, 1989

UNILATERALISM TO DEFEND NATIONAL INTERESTS INEVITABLE - U.S.

GENEVA, DECEMBER 5 (BY CHAKRAVARTHI RAGHAVAN)— The United States in effect made clear Tuesday that it would continue to use unilateral actions to defend its perceived national interests so long as GATT rules remained "inadequate" to meet U.S. needs.

The U.S. view came in a speech by Amb. Rufus Yerxa in his statement in the general debate at the 45th session of the GATT contracting parties Tuesday.

A number of third world delegates who spoke Tuesday complained, like others Monday, of the uneven progress in the negotiations fast movement in areas of interest to the industrial countries and little or no progress in traditional GATT areas of interest to the third world.

Brazil underscored the trade, debt and finance linkages and cautioned that if no satisfactory solutions were found, at the end of the day indebted third world countries could not be expected to "jeopardise their already precarious situation" by granting trade concessions not matched in the areas of finance and debt.

The Brazilian delegate, Amb. Rubens Ricupero, warned that the progress in east west-relations would ultimately remain precarious in the face of the north-south rifts.

The U.S. recourse to "unilateralism" had been criticised Monday at the CPs session by the EEC, Japan and India, with the latter (in the text made available to the press by the GATT), naming the U.S.

In his statement Tuesday, Yerxa gave little ground. The U.S. delegate made clear, in effect, that the only way to avoid U.S. unilateralism under S. 301 of its domestic law was to yield to U.S. demands in the Uruguay Round.

Earlier, he put a positive gloss on the GATT: its emerging as "a stronger and more credible institution" after the battles of 1989 and its success in dispute settlement, as he put it, due in part to the "courage and neutrality" of the secretariat and individual panellists.

He also spoke of the reduction of trade barriers in Latin America, the "noticeable" move throughout the third world towards supporting the Uruguay Round and enhancing the GATT system, and strong movement in industrial countries towards acceptance and implementation of GATT rulings.

Yerxa also spoke of the economic reforms sweeping the soviet union and Easter Europe, the U.S. welcome to the Soviet decision to seek observer status in GATT, the U.S. administration's determination to resist protectionist pressures and take GATT obligations seriously, and the need to use the GATT system "to propagate and strengthen belief of governments in a system of market-oriented free trade".

The U.S. delegate also spoke of the "dark clouds" of protectionist forces in every country and their capacity to unravel the Uruguay Round given a chance.

He referred to the criticism of the U.S. over its unilateralism in this context and said "the real problem which afflicts U.S. all is that GATT rules are inadequate. As long as the rules are inadequate, countries will resort to their own methods of defending what they perceive as basic national interests".

This tendency, Yerxa claimed, was not limited to one country.

In a reference to India, whose reduction of GATT-legal tariff and non-tariff measures is a U.S. S. 301 demand, the U.S. delegate said that it was "a little dangerous" for those with high tariffs and high non-tariff barriers to single out the unilateralism of the world’s largest importer whose average effective tariffs are below five percent.

Criticising the EEC too, Yerxa added, "nor should a participant with a highly protectionist, unilateralist agricultural policy be so anxious to condemn the trade policy of a country that is proposing and is willing to accept sweeping reforms in agriculture".

GATT, Yerxa said, was not "an abstract set of rules", but a process to allow trade liberalisation through reciprocal trade concessions.

Viewed in this context, "the GATT has not fulfilled the expectations of the U.S. Tariffs in many countries are still unacceptably high, particularly in a number of less developed contracting parties (LDCs); non-tariff barriers abound throughout the globe; large areas of trade, such as agriculture and services, are covered inadequately or not at all. That is why no one country should stand in judgement of another at this point".

Looking to the 1990's, Yerxa added, the U.S. was convinced of the need to work with its trading partners to enhance world trade and expected a commitment by others. The U.S. was prepared to accept a system of clear and enforceable trade rules covering "all areas of economic activity", and a new era of reciprocal trade liberalisation.

Ricupero referred to the "new and unpredictable winds of change" sweeping across east Europe and said the cold was coming to an end in its essence - the division of Berlin, Germany and of the world in two irreconcilable ideological blocs.

For some "hasty observers" the death of ideology seemed to spell the end of history as a "dialectical opposition between two competing models of political and economic organisation".

"However", Ricupero declared, "another division has not shown signs of receding and with it remains the unacceptable and greatest of rifts between different segments of mankind, one that makes recent progress ultimately precarious: the north, rich and dynamic and the south, poor and without hope".

"Indeed, the easing of tensions between east and west and the widening of the gap between the have and have-nots appear to point to an omen of perverse tendency, reducing the four global stages to only two: north and south".

This scenario, Ricupero underlined, was a cause for concern, particularly if one looked at the expansion of trade whose benefits were not being shared equally, and the instabilities and uncertainties arising from imbalances among the three major economic powers.

All this had a "most disheartening" impact on the third world, with international credit shrinking and inflation soaring to undreamed of levels in Latin America.

The sweeping changes that were daily renovating the face of the earth appeared to have had scant effect on the trade area.

At a time when president Nixon’s prophesy (in his inaugural address) about the era of negotiations replacing the era of confrontation was finally taking shape "it is sad and anachronistic indeed to witness in GATT a return to unilateralism as a tactic of confrontation and threat in order to gain advantage in negotiation", Ricupero declared.

Referring to the trade liberalisation that Brazil has already undertaken, and the elections under way and the review of the country's economic performance and foreign trade that would follow under a new government, Ricupero said that whatever the outcome of such a process, no new government would manage to plan for the future without relying on progressive expansion of trade.

The recovery of the development process in Brazil would not be possible unless there was a reversal of the present crippling transfer of gigantic resources every year to the north.

This underscored the finance, debt and trade relationship.

The GATT was drafted in the context of the efforts for European recovery and its clauses became fully operative only when there was enough capital flow to finance trade expansion stimulated by GATT.

This scenario was valid even now and trade and finance were just two sides of the same coin.

For Brazil, a positive and expanding flow of resources must be restored. Credit, new investments and a rational and equitable solution to the foreign debt problem "constitute elements without which the country's ability to participate fully in the multilateral trading system will be seriously impaired".

The Punta del Este declaration had recognised the trade/finance links, even though no satisfactory solution to the issue had been forthcoming. It was to be hoped that in the final months of the Uruguay Round a sense of urgency would be brought to this very important question.

The insertion of the third world countries in the world economy depended a great deal on internal efforts on their part, and this had already been achieved by Brazil.

But "without a consistent international solution to their financial problems, any results achieved by the third world countries, internally or in the-round, might prove meaningless".

No part of the Punta del Este declaration could be forgotten or left untouched under the excuse that the problem had to be tackled elsewhere or was too complex to be tackled in the negotiations.

"The round is a single undertaking and, at the end of the day, developing indebted countries cannot be expected to further jeopardise their already precarious situation by granting trade concessions that are not matched in the area of finance and debt".

In other comments china's Amb. Fan Guaxiang hoped that international economic relations would develop under normal conditions and cooperation among states would be strengthened on the basis of equality and mutual benefit.

In an obvious reference to U.S. efforts in this area, fan added: "states should make their own choice as to what economic system suit their domestic circumstances and development needs. It would run counter to the principles of state sovereignty and basic norms governing international relations if a certain economic system and development pattern were imposed on the others".

Fan also complained of the sharp imbalances in the various Uruguay Round negotiating groups and contrasted the quick developments in services, TRIPs and TRIMs under "high pressure" of major players and the extremely slow pace in negotiations on market access issues - textiles, natural resource-based products, agriculture, and tariff and non-tariff measures.

On some subjects, he noted, the negotiations had got bogged down, and the status and legitimate interests of the third world countries in GATT were being challenged.

He hoped that these serious imbalances would be overcome by next year, keeping to the objectives and principles of the Punta del Este declaration.

The recent policy measures of tightening control over the economy, fan explained was part of a three-year readjustment programme aimed at correcting the structural imbalances that had accumulated over the years as also the overeating of the economy and high-inflation. But China, he added, would continue to pursue the policy of reform and opening to the outside world.

China, a full participant in the Uruguay Round, is an observer in GATT since 1982, and is seeking to resume its membership of GATT, vacated in the 50’s by the KMT regime after it fled to Taiwan.

The meetings of the GATT working party on the Chinese application were put off, at U.S. instance, by the GATT secretariat in the aftermath of the Tiananmen square incidents.

The working party, which was about to begin drafting China's protocol of resumption, after an examination of its trade policy regime, is resuming its work next week, after a long recess, but the U.S. and other ICS want to re-examine Chinese trade policies.

Referring to this Fan said that full participation in the multilateral trading system was an important policy decision of the Chinese government in pursuing its economic reforms, and expressed his "sincere gratitude" to the delegations which stood for normal processing of the working party.