URUGUAY ROUND: "HORSE-TRADING" OR "STALLION-TRADING?".

Dec 23, 1989

URUGUAY ROUND: "HORSE-TRADING" OR "STALLION-TRADING?".

GENEVA, DECEMBER 21 (BY CHAKRAVARTHI RAGHAVAN)— Among the rhetorical speeches and exchanges at the year-end meeting of the Uruguay Round Trade Negotiations Committee (TNC) this week was one involving the EEC delegate, Amb. Tran Van-Thinh and U.S. delegate Yerxa as to whether the next phase of negotiations in the round, starting mid-January would involve "horse-trading", as the EEC thought or "stallion-trading", as Yerxa preferred to term it.

Both were referring to, and disposing off, complaints of Third World delegations who had spoken of the imbalance in the round, and the failure to make any forward progress in issues of interest and concern to the Third World, such as tariffs, textiles, tropical products and other market access issues.

Non-English speaking delegates as well as several English speaking ones had to consult a dictionary later to be sure of the difference between a "horse" and a "stallion" (an uncastrated male horse especially one used for breeding), and what the U.S. delegate had in mind.

Interestingly, at his year-end press conference, Dunkel chose the term "horse-trading", and when he was asked he preferred the "horse" over the "stallion", first said he was merely quoting a delegate, and then hastened to concede that the word "stallion" too had been mentioned.

But whatever the rhetorical nuances, as Uruguay Round negotiating processes wound up what was being termed the "first phase" of the post-midterm review stage of the Round (when participants were expected to put on the table their proposals and demands) and move from mid-January on to the second phase of "hard negotiations", overall the situation of the Third World seemed to be worse than after the mid-term review accords in April 1989.

When the EEC tabled its proposals on Agriculture Wednesday, even its severe critics (Cairns Group and U.S.) viewed the tabling of proposals as an important step forward towards negotiations.

Judged by this yardstick, in several of the negotiating areas of priority and interest for the Third World, the major ICs who are the Third World's interlocutors, have not put forward any counter-proposals to those from the Third World or engage in any serious dialogue.

GATT Director-General, Arthur Dunkel told newsmen this week that he knew several delegations were working on proposals to put forward on the table in the New Year.

Privately, some of the major ICs make clear that they would show their hands in areas like Textiles, etc., only after they had achieved their objectives in the new areas.

But one thing was becoming clear by the day, except for those who refuse to see: while the U.S. and the EEC continue to spar and fight each other in areas like Agriculture they are working in parallel, if not jointly, in extracting the maximum from the Third World. Through the rule-making processes of the round, both in the old GATT issues and in the new areas of Services, Intellectual Property Rights and Investment, they are constructiving step by step, under the talk of "interdependence" a new transnational economic system of dependency for the Third World, with "rights" for their citizens, enterprises and duties and obligations for governments in Third World countries.

In all areas, the term "trade" before every subject, a term which everyone in the South thought by definition could cover only border measures, has been stood on its head to "discipline" and force change in national development and economic policies on the specious argument of their indirect trade effects or distortions in the trade flows that would take place in their absence.

U.S., EEC and other leading ICs, as well as the GATT secretariat, which has never been more partisan in the interests of major ICs than in recent years, have been ad nauseum propagating (and even convincing some Third World countries) the view that there is no North/South or East/West in these negotiations, and that there is no division of interests between the North and the South, and that the countries of the South have various interests.

Nevertheless, over the last few weeks, it is becoming equally clear that all the ICs, even when they have differences, have been coordinating their positions, at least vis-a-vis the Third World, through the OECD processes in Paris and various other ad hoc arrangements at Geneva and elsewhere.

Only the Third World Countries continue to be in disarray.

GATT officials, from Dunkel down, no longer use old GATT terms to describe the individual negotiating areas, but describe the round as covering three areas of market access, rule making, and new themes, on the theory that each of the 15 negotiating areas involve all three.

Over the last three years of negotiations, Third World delegations have been talking as if the round is about their gaining access to markets of Industrial Countries through the latter fulfilling their past commitments, in return for which they (in the Third World) might have to make concessions in other areas, but even then gaining some flexibility through the "special and differential (more favourable) treatment" provisions of GATT and the Punta del Este mandate.

But when negotiators adjourned Wednesday, it was clear that in every negotiating area now the "demanders" are the major ICs and the "yielders" are to be the Third World nations.

Brazil's Amb. Rubens Ricupero cited in the GATT a few months ago the story of the French chef who asked the chicken in which sauce it would like to be served, making clear that this was the only option and not whether or not it was to be slaughtered.

As the 1980's end and the 1990's begin, this appears to be the kind of option that Third World governments, "autonomously and independently" would be allowed to exercise.

Even less do the generality of their delegates seem to realise that the EEC Commission's officials and negotiators, wily in the art of formulating words and negotiating with the 12-member states, are leading several of them up the garden paths the U.S. continues its "good cop - bad cop" strategy of the administration wanting to accommodate and help the Third World but the "bad" Congress is against it, and the Japanese adopting their "inscrutable" ways of not revealing where their government stops and private operators in the market begin.

There is also the combined attack of the secretariats of the institutions controlled by the North on the South: The IMF and World Bank through their conditional lending policies, and now the GATT Secretariat through its efforts to expand its empire and institutionalise itself through the "FOGs" negotiations, efforts which it has not abandoned despite the rebuff it got in November.

More than three years after the Round was launched several of the Third World capitals and delegations are yet to grasp the sweep of the Round and its implications for the future of their Countries and their peoples. Even those who agree with this aspect, do not seem to be able to coordinate within their own countries in looking at the broad picture at every stage, and in every negotiating area, but make ad hoc attempts.

In the area of tariffs, where there has been a deadlock between the U.S. insistence on a "request/offer" approach and the EEC "formula" approach of an across-the-board tariff cut (except in agriculture), the differences have taken more prominence than their united view that the "high-tariffs" in Third World countries should be drastically brought down and "bound" to prevent future increases.

According to the midterm accord, agreement on the tariff cutting approach was to have been completed and substantive negotiations for tariff cuts involving also tariff peaks and tariff escalation at every stage of processing was to have begun in July 1989. The tariff group is to meet in mid-January to continue its search for an agreed approach.

A compromise in tariffs being discussed, and which Dunkel indicated at his press conference would probably be agreed to in the new year, is one to permit any country to adopt any of the two approaches, but with its "contribution" to be tested against an overall benchmark of reduction of 30 to 40 percent in the country's weighted average tariff.

For most of the Third World, and many of the leading economies among them, tariffs are not merely protective devices as in the North but also a source of revenue for the state.

Giving the deadlock in Tariffs as an excuse, Industrial Nations have neither put forward serious proposals nor allowed negotiations and discussions to move forward in other negotiating areas including non-tariff measures, natural resource-based products.

In this last area, as the Xmas of 1989 rolled in, it is now clear, from simulations done in UNCTAD, that the 1989 Montreal "Xmas gift" to the Third World Tropical Products exporting countries EEC’s concessions is a case of "Robbing Peter (Africa) to Pay Paul (Asian and some Latins)", and that concessions of Japan and Australia and others have benefited Europe more than the Third World countries themselves.

In the non-tariff area, there is so far no move by the ICs to discuss and deal with their proliferation of "grey area" measures those that may not be strictly illegal but are not also sanctioned by the General Agreement.

In the related area of implementation of the rollback commitments, not only has there been no movement, but attempts by Ics to portray measures they have had to take to remove some restrictions held by panels to be GATT-illegal to get credit for it as implementation of the rollback.

The records of the surveillance body show that even a simple suggestion by Chile that the Secretariat should compile the various restrictions that have been ruled by GATT panels to be illegal, did not gain acceptance, and Chile was asked to negotiate with the Secretariat on what could be done.

The subject of natural resource based products (NRBPs) had been put on the agenda by some of the resource-rich nations of the North and South in an effort to put together a data base of various types of restrictions on their exports and negotiate them down. Instead, the negotiations have turned into an exercise by which the U.S., EEC and Japan want assured access to the natural resources of other countries, and making sure that such access would inhibit local processing and value added.

Under GATT Articles, those provisions that provide an element of flexibility to Third World Nations, such as BOP provisions, are being targeted for changes. Even practices, which have sound economic basis, such as state subsidies to correct market imperfections in an economy, are sought to be attacked, and the limited GATT prohibitions against export subsidies are being sought to be expanded to the Third World's domestic economic organisation and production.

On the other hand there is extreme reluctance to bring under ex-GATT multilateral scrutiny the practices of OECD countries in port credits where at present what they agree in non-transparent processes at Paris are automatically legal under the Tokyo Round code on subsidies and antidumping measures.

But articles of GATT where Third World countries would like better disciplines, such as adverse effects of customs unions and free trade areas and other such arrangements on third parties or in tariff and other renegotiations where the interests of small countries and their the major exports are now totally ignored on the ground that they are only small suppliers in the market and have no negotiated or established rights, have received little attention.

In the important area of "safeguards", where every one has agreed to take a draft text of elements prepared by the chairman as a basis for discussion and negotiations, a footnote reference to the view of some favouring "selective safeguards" now looks like advancing from the footnote to the main text.

In the new areas, in the area of TRIPs, the Industrial Nations are inexorably pushing towards GATT agreements on higher standards of protection in various areas of intellectual/industrial property rights, extending such protection to virtually all areas of inventive activity in a sweep so wide that a few ICs themselves have found it expedient to specifically seek to exclude patentability of human beings!

In the area of investments, not only are "local content" requirements which are per se illegal in GATT (unless Third World countries justify their import restrictions on grounds of their bop situation), but also cover export performance (held to be GATT legal by a panel), manufacturing requirements, domestic sales requirements, product mandating requirements and trade balancing requirements are sought to be disciplined, by creating new GATT provisions.

While the major ICs have differences among themselves in this area, all of them are united to make sure that Third World nations are unable to use any of these leverages and requirements to interfere with the activities of TNCS.

In the area of services where a draft text to form the basis for negotiations in 1990 has been reported out of the Group of Negotiations on Services, while it bristles with some 160 square brackets, and while Third World delegations claim that all their interests have been included in square brackets and thus keeping them on the table for negotiations, a more careful study shows that some of the gains at Montreal have been given away.

If past GATT "green room" negotiations, including the mid-term one at April be any guidance, formulations of ICs placed within square brackets because of reservations of Third World Nations usually are resolved by removal of square brackets, while those of Third World Nations get resolved by knocking out the formulations within square brackets.