Dec 11, 1990


BRUSSELS, DECEMBER 7 (BY CHAKRAVARTHI RAGHAVAN)— The four-year old drive of Industrial Nations to restructure the world economy and international economic relations has received a serious setback with the indefinite adjournment of the Uruguay Round talks.

The Brussels Ministerial meeting of the Trade Negotiations Committee (TNC) which was to have concluded the Uruguay Round of Multilateral Trade Negotiations, ended Friday without any results.

In ending the meeting, but extending the Round "for a brief period", the participants left the door open for a possible revival of the talks and conclusion of agreements.

The Chairman of the official-level TNC, Arthur Dunkel, has been mandated to pursue "intensive consultations" from now till beginning of 1991, to promote agreements in all the areas where there are outstanding differences and in the light of that reconvene the TNC at an appropriate level to conclude negotiations at the date he considers appropriate in the light of his consultations.

Dunkel’s consultations are to be on the basis of the 391-page "draft Final Act" forwarded to the Brussels meeting by the Geneva negotiators. The work carried out in Brussels and any new texts and partial texts incorporated in reports of the Ministers who chaired the six working groups would be taken into account by Dunkel but would not bind any of the delegations.

Prospects of success, participants agreed privately as they left Brussels, were very dim and would depend very much on whether the Community could move forward on the agricultural issue in terms of committing itself to an irrevocable process of fundamental reforms in its Common Agriculture Policy (CAP).

And if the Community does manage to do that, pressure would be on Third World nations to yield to the U.S. and EEC in areas like intellectual property, investment and issues like their GATT rights in defence of their balance-of-payments.

The negotiations on agricultural trade reforms broke down thursday night when the European Community refused to accept as a basis for negotiations a compromise text put forward by the Swedish Agriculture Minister, Mats Hellstrom, under which assistance to farmers would be cut by 30 percent over five years in all three areas - internal support, border protection and export subsidies.

Like the EC, Japan and Korea too refused.

At that stage, Argentina and Brazil, supported by the U.S. decided enough was enough and called off the agriculture talks, and a little later the two Latin American nations also withdrew from the negotiations in other areas, thus ending the Brussels process.

For the EEC accepting the Hellstrom paper as a basis for further negotiations would have meant acquiescence to an irreversible process of fundamental changes in its CAP.

But with no one wanting to take the responsibility for a breakdown of the trading system and a trade war - even if they still loom large on the horizon - in further "green room" consultations friday, it was agreed to extend the Round for a "brief period" and authorise Dunkel "to pursue intensive consultations" between now and "beginning" of 1991, with the specific objective of achieving agreements in all areas of the negotiating programme where there are outstanding differences.

The EEC sought to set a definite date in January for the resumption of the talks, but the U.S. and others would not agree.

Ultimately, the formula of Dunkel being able to summon the official-level TNC at any time at short notice, and the reconvening of the TNC at the "appropriate level" to conclude the negotiations and at the date he considered "appropriate" in the light of his consultations was adopted.

The U.S. Trade Representative Mrs. Carla Hills however made clear at a press conference that no one would return to the negotiating table unless Dunkel could assure that conditions were ripe for serious negotiations.

The Chairman of the Agriculture Group (Hellstrom), she noted, had put forward a "creative proposal" that provided a basis for successfully concluding the negotiations but this was rejected by a few countries with substantial economic strength, who were not prepared to negotiate fundamental agricultural reforms.

Hills called on participants to reflect upon their positions "at the highest political level", spoke of U.S. commitments to maintain and strengthen the multilateral trading system and bringing the Uruguay Round to a "positive and timely conclusion".

"When it is clear that a basis exists for successfully concluding the Round, the United States will return to the negotiating table", she said, leaving little doubt that for this the EC must change its stance on agriculture reforms.

The EC Heads of Governments who meet in Rome next week for their summit are expected to address some of these issues, but it seemed clear that any fundamental change in their CAP is possible only in the event of a rupture of the Bonn-Paris axis.

The Community's Council of Ministers, in a statement blamed the outcome as due to "objective difficulties" arising from the disparity between the ambitious goals the participants set for themselves and the "political possibilities" of achieving them within the available timespan.

In an obvious attempt to head off any trade wars, the EC's Council appealed to all parties "to refrain from any unilateral or bilateral action to improve their negotiating position".

"The Council is convinced", the statement said, "that on this basis the early resumption of negotiations will enable a balanced overall package to be put together which could then form the subject of a final and collective political effort in the near future. The Council considers it necessary to set a date now for the resumption of the technical discussions. The Council wants this date to be as soon as possible".

In private comments after the collapse of the negotiations the U.S. and the Cairns Group blamed the EC for the failure, but the EC Agriculture Commissioner, Ray MacSharry suggested that it was up to these countries to reduce their expectations of what the EC could deliver as otherwise "there would be no progress in agriculture".

The EC Vice-President and Trade Commissioner, Frans Andriessen was less combative and said the Community had been prepared to negotiate and had offered to talk about specific commitments to cut export subsidies and import barriers. "Unfortunately we have not been given very much in return", he said.

The EC in its discussions with Hellstrom had offered to put a cap in volume terms on its subsidised exports (which would have been a way of preserving its current market shares) and had also offered some growth in import quotas and excepting from the "rebalancing" of tariffs vegetable oil seeds and Soya.

For the Cairns Group, Australia’s Neil Blewett said that international trade reform was simply not achievable without reform in agriculture.

Looking to the immediate future, EC officials privately said the EC would "move" on agriculture and predicted that work would resume soon in Geneva and an agreement would be reached by March. However, they continued to underline the global character of the Round and the need for parallel progress.

However, some of them seemed to suggest that for this there was the need for serious negotiations in Geneva on the other important issues on none of which there had been any negotiations.

However, comments of negotiators from other countries suggested that they would be unlikely to discuss any thing else until and unless the agriculture tangle is sorted out and the EC commits itself unequivocally in the Dunkel consultations to change its position on CAP.

Many of them, particularly from the Third World, seem determined to avoid the same situation they had faced after the Montreal mid-term review meeting when Dunkel had promoted a U.S.-EC accord of sorts on agriculture and then used it to force concessions out of the Third World.

The EC had been cornered over agriculture on wednesday night itself, but had managed to regroup and had accused the U.S. and others of refusing to negotiate in parallel in other areas though they had agreed to do so.

Parallel negotiations were resumed on thursday, with several of the ministers chairing individual negotiating groups providing optimistic reports of progress and their belief that agreements could be concluded.

Among other things in these talks the U.S. indicated it would be willing to modify its position against unconditional MFN in the services accord provided there was "derogation" from MFN for some of the important sectors and enough initial liberalisation commitments from other countries were negotiated as part of the agreement. This, in the U.S. view, must include sufficient commitments from the NICs and other advanced Third World countries.

In Agriculture, Hellstrom produced a non-paper outlining the elements for negotiation of a draft agreement on the Agricultural Reform Programme.

This provided for specific commitments in all three areas:

* For export competition, commitments for reduction could be in form of progressive reduction of aggregate budgetary outlays on export assistance, per unit of export assistance, or total quantity of a product for which export assistance would be provided for commercial exports of primary products. This last is to be calculated taking 1988-90 average as the base and effecting a 30 % percent cut in the volume of product exported.

In respect of Third World countries, the non-paper provided for some flexibility in reduction of internal support - in the form of an extended five-year period for effecting the reforms and the reductions to be in the 50-100 % range of the reduction rates applicable to the ICs.

India and a few other Third World countries said the non-paper could be a basis for negotiations only if the special situation of Third World countries were taken on board in the elements in all three areas.

Given their large dependence on agriculture in these countries reduction commitments were neither politically feasible nor economically necessary, the Indian Minister said in the Agriculture "greenroom". At an appropriate stage criteria would have to be set for Third World countries to undertake obligations to reduce support and these must be based on objective and verifiable economic parameters - such as share of agriculture in GDP, percentage of economically active population employed in agriculture and percentage of total household consumption of food.

The EC, Japan and Korea declined to accept the paper and its elements as a basis for discussion, the EC preferring to use its own "responses" to Hellstrom on the questions posed for ministerial decision in the Geneva documents. This was unacceptable to others and the agriculture green room negotiations broke up.

The focus of Friday's green room consultations by the Chairman of the TNC, Hector Gross Espiell of Uruguay was on how to wind up the Brussels talks. It was agreed that Gross Espiell should propose the suspension in a statement, and the TNC would be adjourned without any further comments or statements from the floor.

When the TNC assembled in plenary session Friday afternoon, it lasted for just five minutes - with Gross Espiell reading out his closing statement and gavelling the meeting to an end.