Apr 27, 1990

U.S. AND EEC PUSH FOR "SELECTIVE" SAFEGUARDS.

GENEVA, APRIL 25 (BY CHAKRAVARTHI RAGHAVAN) -- Negotiations resumed this week at the GATT, after the Easter recess and the informal meeting of some Trade Ministers at Mexico, with the U.S. and EEC pushing for changes in GATT rules and provisions that would enable them to take actions against competitive imports from the Third World countries.

The negotiating group on "safeguards" was holding informal discussions on the various issues, while a senior GATT official was chairing another informal consultations on issues relating to anti-dumping actions under the General Agreement and the Tokyo Round codes.

Safeguard measures under Article XIX are the GATT permissible emergency protective actions against imports of particular products whose imports in "such increased quantities and such conditions" are causing serious injury to domestic producers of like or competitive products.

Increasingly, however, ICs are using antidumping and countervailing duty actions as a protective measure against competitive imports coming in at lower prices.

The term "dumping" would normally mean export of the product below cost and at prices lower than its sale in the domestic market. But the EEC wants to hit products which it views are being imported and sold below "cost" even if the prices are same or higher than prices in domestic market - on the theory that the price to be taken into account is the price "in the ordinary course of business" and anything sold by a manufacturer inside the country when "below cost" could not be considered to be "in the ordinaries course of business".

On Safeguards, in June last year, the chairman of the negotiating group, George Maciel of Brazil, had put forward a draft text of a comprehensive agreement on safeguards, based on proposals of participants and suggestions made in private consultations, as a basis for further work.

The informal consultations this week is apparently on another informal paper prepared by him, reflecting the discussions on his draft and the subsequent proposals of participants, in the light of which he would prepare a revised draft text of a comprehensive agreement.

In the original draft text of Maciel, one of the stipulated conditions for application of safeguard measures was that "the measures are applied to products from all sources".A footnote reference in that text had said, "the negotiating group should examine the possibility of exceptions to this requirement, to be applied in special situations (e.g. serious injury caused by sudden increase in imports from a very limited number of suppliers) which would permit the application of selective measures on a mutually agreed basis, subject to adequate guarantees for all exporting countries and stricter disciplines and surveillance in order to prevent abuse".This reference to "selective safeguards" and the multilateral disciplines to prevent its abuse would now appear to have advanced from the footnote to the text of the revised paper, as a proposal in square brackets and as a proviso to the application of non-discriminatory safeguard actions against all sources of imports.

Discussions this week would appear to have focussed on this informal paper and the selective safeguards proposal.

The issue of a comprehensive agreement on safeguards has been on GATT agenda since the mid-70ís when the Tokyo Round was launched. At the Tokyo Round the EEC was the strong proponent of "selective safeguards", and no agreement could be reached with the Third World countries vigorously opposed to it.

The issue since then has been under discussion in a GATT working party and subsequently at the 1982 GATT Ministerial and the subsequent work programme, and now the Uruguay Round.

"But the arguments are the same, and there is nothing new, though now some of the smaller industrial countries too have come out in opposition", one of the participants said.

On the other hand, while previously, the European Community was alone in demanding the right to take "safeguard" actions against some, and not all sources of imports, in cases where imports were causing "serious injury" to domestic producers of like products, now it has the support of the U.S. and Canada, though publicly their comments have nuances.

However, even at the time of the 1982 GATT Ministerial the U.S. had privately pushed for what was then called "consensual" selective safeguards, as different from "unilateral" selectivity imposed by the importing country.

For the record the U.S. position still is that it is not for "selective safeguards" but if it is to be provided for it should be under strict disciplines and specified conditions.

In what it called "elements" of a safeguards agreement, the U.S. that there should be two sets of disciplines, one for MFN measures and the second, "a more rigorous set, for selective measures applied on a mutually-agreed basis".The "selective" measures, the U.S. elements paper said, should be for "shorter" duration (e.g. five years), with mandatory regressively after first year of relief and with no reduction of retaliation or compensation requirement - those affected being compensated or allowed to withdraw equivalent concessions.

But privately, U.S. negotiators now argue that some provision for "selective" safeguard actions would have to be included to enable them to get the support of the Congress for Uruguay Round Agreements. This is a normal negotiating ploy of U.S. negotiators: blaming the Congress for what they seek.

After the Puerto Vallarta meeting, the Deputy U.S. Trade Representative (USTR), Julian Katz, had said that at the informal Ministerial meeting it was agreed that an effort should be made to elaborate on the limited circumstances and the kind of multilateral disciplines - a view of the outcome that other participants question.

The EEC External Relations Commissioner, Frans Andriessen, has also been quoted as saying after the Puerto Vallarta meeting that the EEC position was being misunderstood. He was also reported, in his remarks, as trying to reassure the concern of countries about the proposal with the explanation that any such safeguard actions would be clearly defined and linked to injury to the domestic industry.

But given that under the GATT provisions, the safeguard or temporary protective action can only be taken in conditions of serious injury to domestic industry, Andriessen's public comments have been far from reassuring.

At the consultations this week, a number of Third World countries were opposed to the intention of Maciel, in his "non-paper", to bring the footnote reference into the body of his revised draft text, as an alternative negotiating text or proviso or to negotiate the specific conditions and disciplines under which selective safeguards could be applied.

They reportedly said the U.S. and EEC and others wanting some provision for "selectivity" should spell out the "special situations" where exceptions to the requirement of non-discriminatory safeguard actions would be called for.

Third World delegates and others opposed to selectivity of actions reportedly said that the group could not set out to accept the concept and then negotiate the multilateral discipline to reduce or prevent its abuse. It was for the proponents of such a provision, so fundamentally contrary to the GATT, to spell out the exceptions and special situations and the provisions to prevent its abuse and convince others.