Nov 23, 1990

NEGOTIATORS ERECT MORE ROAD-BLOCKS FOR MINISTERS.

GENEVA, NOVEMBER 21 (BY CHAKRAVARTHI RAGHAVAN) With just nine days for the Brussels meeting, and less than five days for the Uruguay Round Trade Negotiations Committee (TNC) at official level to outline clearly the elements in each of the negotiating areas needing decisions from Ministers, more hurdles and roadblocks are being set up.

The latest, participants said, has been a U.S. proposal in the services negotiation which would negate a fundamental principle of multilateral trade, namely the most-favoured-nation treatment under which any party would extend to any other party the same benefits and concessions it extends to any trading partner.

The U.S. proposal, an amendment to a draft that had been evolved by a small group of key delegations including the U.S., was put forward late Tuesday night and it was such a fundamental change that it will virtually wreck the services negotiations, they said.

In other developments, the U.S. Trade Representative, Mrs. Carla Hills has said at a Washington press conference that the Brussels meeting would not be able to wind up the negotiations, though she was only willing to consider its extension, in the light of political decisions of Ministers, to draw up and sign detailed agreements at Geneva in time for the administration to send them to Congress by March 1 to take advantage of the "fast track authority".

There are pending moves in the Senate to change the rules to end the fast track authority. The administration has written into its budget law provisions to enable the restoration of agricultural domestic support (cut back under the budget cuts) in the event of failure of the Uruguay Round talks, but leaving it to administrations discretion if rule changes take away fast track authority.

Washington reports suggest that the various domestic lobbies, including textiles, service sectors, and farm lobbies opposed to the U.S. moves, are coalescing and could roll up the 51 votes needed in the U.S. Senate to deprive the administration of its fast track authority in January when the new Congress convenes.

The U.S. proposal in the services negotiations would knock any substance out of a multilateral services agreement, other participants in the negotiations said Wednesday.

A new draft with more square brackets and formulations where there are disagreements is being prepared by the secretariat in the light of the discussions that ended early Wednesday morning and will probably have to be referred to the Ministers at Brussels, participants said.

The services issue is to be the subject of the "green room" consultations in GATT on Thursday but this is not expected to resolve anything and would merely be able to send the text to the Ministers at Brussels, participants said.

The "green room" consultations now no longer involve any serious negotiations and have become farcical as far as the major players are concerned, GATT observers said.

Only the Third World participants are adapting tactics that are not easily understandable and allowing things to move forward, the observers added.

The GNS discussions ended early Wednesday morning and the U.S. services negotiator left for Washington the same morning (after tabling this and a couple of other important changes on instructions from the capital) and is not expected back in Geneva but will be going to Brussels, they said.

Though the U.S. has been the prime mover behind the drive for a services agreement, in recent months various service sectors in the U.S. have lined up against any agreement encompassing their sector and the negotiators have now been left high and dry, they said.

The U.S. maritime, telecommunications, air transport and other sectors and subsectors have all ganged up against multilateral liberalisation through a General Agreement on Trade in Services (GATS), but only through bilateral agreements based on reciprocity.

Under the latest U.S. proposal except in respect of the framework's provisions for "transparency", the U.S. would be free to apply to any other party whatever treatment it likes, whether on a unilateral or bilateral basis, until it enters a commitment in its schedule of concessions (about national treatment and liberalisation of market access, etc.).

Also, even after the U.S. enters into commitments in its schedule, it would be still free to give better treatment than in its schedule to any party it chooses to.

The U.S. proposal would thus nullify a concept that has gained ground over several decades, namely the most-favoured-nation treatment as a general and fundamental obligation.

It was the departure from this generally accepted principle, in favour of bilateral reciprocity, during the inter-war years that brought about the Great Depression and it was to prevent its recurrence that in the GATT this concept was made a fundamental concept that could not be changed without unanimous consent.

Now the U.S. wants to go back to bilateral reciprocity, a delegate commented.

Some participants have been willing to consider provisions for some kind of derogations, temporary and limited, in some sectors through so-called annotations to the framework in sectoral annexes, but not for virtual abrogation of the principle.

The idea has been that countries could seek derogations in respect of particular sectors and for very limited periods, which could be extended, but not automatically renewed.

But this was apparently not acceptable to the U.S., even though some believe this might be tactical and with an eye to Brussels.

Among the other new proposals of the U.S. in the services text was one to deny right of any country to take "safeguard" actions for reasons of balance-of-payments (BOP).

With "trade" in services involving "transactions" which are not strictly cross-border, many Third World countries have said they could not contemplate undertaking any liberalisation commitments, particularly in the absence of any real data that would enable them to judge the effect of any liberalisation, without the capacity to impose BOP restrictions.

While a reasonable compromise was evolved in this in the drafting group of a few countries, Washington apparently did not want it, since it was seen as undercutting the U.S. drive in the GATT to deprive the BOP rights of Third World countries under Art. XVIII and asked its negotiators to resile from it, participants said.

Apart from differences over the general framework the service negotiators are also far apart on various sectoral annexes and their contents.

The U.S., EEC, Switzerland and a few others are keen on a financial services sector annex, and in consultations among themselves had evolved a text which was essentially a separate agreement providing for some "instant liberalisation" by every party, and providing for some parties undertaking higher levels of liberalisation but whose benefits would be applicable only to them. But a number of key Third World countries have refused to consider this as a basis or agree to send this to Brussels.

In other developments, a new draft text for an agreement on "Trade-related Investment Measures" has been prepared and put forward by the Hong Kong representative who was entrusted with the job after the text prepared by the chairman of the negotiating group, Tomohiko Kobayashi had been rejected as a basis for negotiations by the Third World countries.

The Hong Kong representative, K. Broadbridge, in his covering note has said that it is still based on the Kobayashi text.

The only difference, one participant said, is that it is now in more understandable English.

The new text follows the same approach rejected by Third World participants, namely prohibiting some of the measures involving use of local materials and/or phased domestic production requirements as also export requirements, and making others actionable.

In his covering note Broadbridge has however said that the Ministers at Brussels would need to decide on whether investment measures relating to use of local materials that might attract GATT provisions under Art. III (national treatment for imported products) and Art. XI (relating to quantitative restrictions) and export performance requirements should be prohibited.

Ministers under the Broadbridge draft would also have to decide on the question of the time periods for transitional arrangements (for parties to bring their existing TRIMs into line) and for application of the provisions of Part IV of GATT (for special and differential treatment to Third World countries) which imposed no obligation but calls only for a "best endeavour" effort.

The question whether the agreement should also deal with restrictive business practices or trade effects of investment measures taken by private operators are also suggested as an issue for decision by Ministers.