Geneva 18 Nov (Chakravarthi Raghavan) -- The Clinton win on NAFTA in the US House of Representatives, and by a comfortable 34 vote margin, was received with relief by Uruguay Round negotiators in Geneva who however fear that the price for that win may have to be paid by developing countries in the Round.

Many developing country delegations, and some Europeans too, fear that the US is likely to try a more arrogant and aggressive approach in the Uruguay Round over the coming days -- fortified by its NAFTA win and its hope of lining up APEC support at the Seattle meeting.

GATT Director-General Peter Sutherland giving an upbeat view at a press conference of what was 'already in the bank' in the Round, hoped that the NAFTA battle would not complicate the conclusion of the Round.

He was answering a questioner who noted that for the NAFTA win, President Clinton appeared to have done deals and provided 'sweeteners' to the US protectionist lobbies and asked whether these would not endanger needed US concessions to enable the Round to be concluded.

Claiming he was not avoiding the issue, Sutherland nevertheless said he could not comment since he had no direct knowledge of the details (of the administration promises) beyond what had been reported in the press, but that he had been told that the Nafta outcome would not damage the Uruguay Round.

Earlier, he had congratulated effusively Clinton and his team for the NAFTA win against protectionist lobbies, but it was only half the battle and the other half remained, namely concluding the Uruguay Round by 15 December and consolidating the multilateral trading system.

With graphics and charts and cartoon, all keyed to TV coverage, Sutherland made a media show and tried to project a picture of the considerable gains already achieved in the Round, which would become operational after a successful conclusion.

Asked to explain what had changed in Geneva negotiations over the last 48 hours to justify his present 'sweet and light' message in contrast to his 'doom and gloom' scenario speech on Monday at Harrogate (in UK to British industry and business) or whether only the NAFTA vote had changed the picture, Sutherland suggested the 'doom and gloom' scenario was the media presentation of his balanced summing up of the benefits of the Round and dangers of a failure and that his presentation Thursday was merely aimed at emphasizing what had already been achieved.

On the mandated evaluation of the results of the Round from the point of view of developing countries and whether it would be possible to correct the outcome in the light of it, Sutherland said the evaluation was to be done by the contracting parties, and from the perspective of each party, and should not be looked at in terms of 'developing' vs 'developed' country.

This Sutherland view though is quite contrary to the letter and spirit of the Punta del Este Declaration which calls for a mandatory review in terms of the guidelines and taking into account "all issues of interest to the less-developed contracting parties (the GATT term for developing countries)".

A key developing country negotiator said that the review mandated at Punta del Este is an 'issue' oriented review, not a country-oriented one, and specifically mandated to take account of all issues of interest to developing countries. And since the guidelines also relate to what the developed countries had undertaken to do visavis the developing countries, it is a North-South issue -- however much the industrialized countries or Sutherland might like to wish it away.

Sutherland in his 'sweet and light' presentation spoke also of what had already been achieved in terms of the mid-term review decision to ensure a 30 percent reduction -- in the 'offers' in market access package and in services. He then stressed the need for the US and EC and the Quad countries to quickly settle their own differences and expand on their Quad accords.

One EC official said Wednesday, before the NAFTA vote, "we have to conclude the Round; and if NAFTA is defeated or won through the kind of 'deals' being made, the EC may have to pay a price in the form of a more modest market access package, but developing countries may be paying more."

The various assurances, concessions and deals made by the administration with various lobbies and Congressmen to get their votes over NAFTA, and Clinton having had to rely on Republicans and facing his embittered Democratic Party, have made clear that the market access package and other hoped for benefits for developing countries in the Uruguay Round will be even more modest than thought earlier.

EC officials think that a clearer picture of the US strategy and tactics for the Uruguay Round would be available only next week -- after the weekend APEC meeting and summit where the US, with help from Australia, would try to use the APEC as a card against the EC, and the meeting on Monday between Mickey Kantor and Sir Leon Brittan.

Some developing countries, who have put in 'conditional offers' in goods, said they too may have to claw back -- in the light of Clinton's NAFTA deals and its possible refusal to improve on its offers and the EC using that as an argument for inability to improve its package either.

While Sutherland also projected a positive picture of the 'offers' in services, several developing countries said with the change in US position on financial services, they would be clawing back their own 'offers' in financial services in view of the US stand on a two-tier approach to financial services -- whereby it would provide on an MFN basis only existing access to the GATS signatories, and provide a reciprocal non-MFN access to Europe and others having more liberalised financial services.

Ironically, a compromise that the US pushed for and got on the institutional questions in the Lacarte group (on the MTO and dispute settlement) may help this process.

Sutherland spoke of 'large package' and mentioned the various 'offers' by developing countries, and said that a large number of participants would have achieved a 36% tariff reduction for agricultural products, 24% by developing countries, and a 33% reduction for non-agricultural products.

But the offers on the table -- in relation to the exports of the developing countries as a whole -- according to some rough estimates would amount to no more than a 15 percent tariff cut on a trade-weighted basis.

The industrialized countries, and the major markets among them like the US and EC, would be able to use the zero-to-zero tariff cuts in some sectors and cuts in peak tariffs in others, but mainly in trades among themselves, to achieve the target of one-third reduction in tariffs.

However, one of the major promises of the Uruguay Round was supposedly that in return for the acceptance of higher obligations by developing countries -- in rules, in intellectual property, services etc -- they would gain greater market access in their export goods and thus benefit.

This premise has already been, by and large, falsified, and the final market access package seems likely to be even less for the large majority of developing countries whose exports are in textiles and clothing (where they will continue to face discriminatory quota restrictions for another ten years), some agricultural products, including tropical products, and fisheries and other natural resource products.

But with President Clinton having reportedly given various assurances to Congressmen to gain their NAFTA votes -- only minimum 15 percent tariff reduction (required under the DFA) for citrus fruits and fruit juices, no tariff reduction on textiles and clothing and a promise to try and extend the transition for phasing out of the MFA from 10 to 15 years, and others that are likely to be known more precisely in the coming days -- the size of the package is likely to shrink further.

In many sectors and sub-sectors of manufactures and processed products, the developing countries are not the principal or major suppliers and, if the US stands pat, even if Japan or EC want to do something for the developing countries (and this is by no means certain, despite the sympathetic words coming out of these quarters), it would not be possible in GATT terms, but only in terms of GSP (which though has no contractual obligation), one trade official explained.

EC officials confirm this, and agree that the US administration is likely to point to the difficulties over NAFTA in order not to make any concessions but attempt to gain more from others. They however insisted that even with a small package, the successful conclusion of the Uruguay Round would still be beneficial.

However modest the immediate trade benefits, one EC official said, for the first time in post-war period, the trading system will be based not on political commitments of governments (as the GATT is), but on clear rules, with a quasi-judicial system of enforcement through dispute settlement mechanism.

The benefits of this to the trading community could not be under-estimated, he said but agreed it would all depend on what kind of final institutional arrangements survive.

The building blocs of this rule-based system, the EC officials said, were the Comprehensive Understanding on Dispute Settlement with near automaticity in the entire process and the Multilateral Trade Organization under a definitive treaty, and the rules and disciplines, by and large clear and certain.

While acceptance of the US demands for changes in anti-dumping rules would weaken a rule-based system, the EC official thought at the worse the anti-dumping and countervailing agreement could be given up and they could all live with the Tokyo Round code.

But if the US does not accept the MTO (by whatever name it is called) in the shape of an international treaty providing an institutional framework, even if many of the substantive provisions of the MTO and the Dispute Settlement Understanding are incorporated in a US proposed protocol or contract, it will result not in a rule-based system but a system based on political commitments of governments.

And while it is difficult to repeat history excepting as a farce, if the US refuses to accept an MTO or if the Congress turns it down, and at that time attempts are made to bring the Uruguay Round accords into force through a protocol of provisional application, or even a definitive protocol based only on political commitments of governments and the vague "free consent, good faith and full implementation" concepts in the Vienna Law of Treaties, it would not suffice in the trade area -- whatever its merits in the more general area of international treaties.

Then the trading partners of the United States would have ended up with the worst of all the worlds.

At his press conference, Sutherland agreed that there still remained "significant difficulties" for concluding the Round and that it needed leadership from the US and EC.

He was hopeful that the problem over the audio-visual sector between the US and EC would be resolved.

EC sources said the agreement would recognise the cultural specificity of this sector -- and would provide for a standstill (that would ensure for the US its current 60-80 percent access), but enable all countries, now and in the future, to promote cultural policies through state support without inviting complaints of trade-distorting practices.

EC sources said the US stance, pushed by US treasury, for a two-tier approach on financial services whereby the US could hope to gain more by bilateral pressures and deals and the tax-carve out, were two areas that could prove troublesome.

However, this was the approach favoured by US industry and business, but one detrimental to the developing countries and smaller trading partners who would be better off by a multilateral system.

In his other comments, Sutherland said the Trips agreement was one of the biggest achievements and did not see why one or two outstanding issues could not be resolved by compromises -- even if they were significantly difficult political questions involved.

His reference seemed related to the US attempt to get 'pipeline protection' with retrospective effect from the launching of the Round for product patent rights for pharmaceuticals and agrochemicals and to the Indian demand for clarification of "farmers' rights" over seeds and to enable countries to preclude gene-patenting.

In recounting the various gains, and including in it the agreement to phase out the multifibre agreement on textiles and clothing, Sutherland made clear that no changes could be expected in that text.

India and Pakistan have been pressing for changes so that the integration process would involve products now actually under restraint and not unrestrained products in the MFA basket being taken out and put into the Uruguay Round basket of integration.

Sutherland stressed that what remained in the Round were political issues needing political leadership. He did not think that a solution of the US-EC differences over agriculture, for example, could be put off till the last moment.

The GATT head also said that he could not accept criticisms about transparency and claimed "there can be no more transparent organization than the GATT". He also drew back from the 'apocalyptic visions' of failure of the Round that had been promoted from various quarters including by the GATT media management, and said he did not believe in such a prediction. However, a failure to conclude the Round would mean a severe damage to the multilateral trading system.

Sutherland said he did not think a ministerial meeting would help resolve the difficult questions -- and not one contracting party had suggested it -- though he would not rule the possibility of a smaller group meeting. But there is no plan for this at this stage, he added.