Dec 13, 1990

URUGUAY ROUND: "MINI-PACKAGE" ACCEPTABLE TO U.S. AND EC IN OFFING?

GENEVA, DECEMBER 11 (BY CHAKRAVARTHI RAGHAVAN) GATT negotiators and officials returned this week from Brussels, with one major preoccupation on the part of the majors and the secretariat, namely whether pieces could be picked up and something could be salvaged from the four-years of technical work and negotiations in the Uruguay Round.

Much appears to depend on whether the EC and its 12-member states would be able to advance considerably from their positions on agriculture to satisfy the U.S. and whether in the light of this an attempt would be made to fashion a mini-package of results involving major Third World concessions in new areas.

When the Ministerial-level negotiations in the Uruguay Round broke up in disarray at Brussels, one "fact" clearly emerged: none of the major trading partners or groups of countries is powerful enough to force its will on the others.

While Third World countries proved at Brussels they were not door-mats to be "walked-over", and major economies among them could still act together to safeguard their overall collective future, there were still some question marks and few answers.

It was also apparent that the U.S. and EC, with the latter perhaps now economically more powerful but unable to act cohesively in any positive way but only to defend itself, would each be trying to line up Third World economies to support them against the other.

This could well turn out to be the nineties version of the efforts of the U.S.-led West and Soviet-led East in the 50s to line up the Third World behind themselves against the other.

To resist U.S. and EC pressures on them, and safeguard their own future, Third World countries however would need to join together in a more positive way than the reactive and defensive stances they have so far taken, Third World observers note.

In extending the Round for a short (unspecified) period and asking the GATT Director-General Arthur Dunkel to undertake a trouble-shooting exercise to promote agreements, the major trading partners and the other European countries appeared to feel that the grand design of the Uruguay Round could still be "saved" if the Community is able to be more forthcoming on agriculture.

When the Uruguay Round was launched at Punta del Este in September 1986, a four-year time span was set for its conclusion.

But at least over the last two years, the real time-limitation against which everyone had been working has been the deadlines for the U.S. administration to get a package of agreements through Congress under the "fast-track" authority.

Under the U.S. Omnibus Trade and Competitiveness Act of 1988, the administrations negotiating authority to negotiate agreements on tariff and non-tariff barriers expires on June 1, 1993.

The "fast track" procedures, under which Congress can vote yes or no to the trade agreements but cannot amend them, will apply to agreements entered into by the President before June 1, 1991.

Assuming the President would enter into agreements by the last possible date of May 31, this requires, in turn, the administration notifying Congress and publishing in the Federal Register by 2 March 1991 of its intention to enter into the agreements and enter into consultations with the Congress and its committees.

The President could however notify Congress on or before March 1, 1991 and seek an extension of the fast track-authority, and unless either house of the Congress disapproves, the authority would be extended.

However, the U.S. administration is unwilling to seek such an extension and become involved in a Congressional fight.

The general expectation, in extending the round "for a short period" has been that if the U.S. is able to obtain from the EC, in direct talks as well as the Dunkel consultations, assurances of basic changes in the EC's Common Agricultural Policy and commitments for sizeable cuts in domestic support, border protection and export subsidies, the administration might then be willing to seek an extension of the fast track authority in order to complete negotiations in other areas and get agreements.

For the U.S., it would mean the EC should yield in cutting support at least as much as the U.S. has already been forced to do under its budget deficit-cutting exercises.

In this scenario, it is presumed that the U.S. and EC would have some common interests in forcing Third World countries to fall in line - on intellectual property rights, investment issues, changes in exercise by Third World countries of their GATT balance of payments rights, services and other areas.

Given the strength of the textile lobby, both in the U.S. and EC, it would also have to involve the Third World exporting countries "scaling down" their ambitions and agreeing to a longer period and slower pace of "integration" and transitional safeguard measures that could be worse than those under the MFA.

When the Uruguay Round was launched, and in the earlier stages of preparations, the U.S. administration pushed for it and gradually obtained the agreement of the EC, Japan and other ICs. The others, particularly Third World countries were dragged into the negotiations through a carrot and stick approach, but with the latter more prominent and visible.

But in the period since then, the U.S. position as the leading Centre has considerably changed.

Nothing illustrated the weakened U.S. power than the publication in the media on 6 December of a news report of the looming failure in the talks and U.S. threats over the EC agriculture policy and another showing President Bush seeking financial and other support from Europe and Japan for the Gulf War.

The U.S. has now become a major debtor country (depending on resource flows from Japan and Europe) and not a creditor nation. The drive for "opening up" the services markets abroad was led by the U.S. financial sector, but in the four years of negotiations the other service sectors (like basic telecommunications, the air and maritime transport) have all joined to protect their domestic U.S. market and prevent liberalisation.

The U.S. Trade Representative, mandated to open up foreign markets (using also the threat of S.301 actions to back it), may have the power "to take" but little "give" - the USTR has no real domestic constituency to enable it to "give".

The entire negotiations has been postulated on the basis that the major TNCs that want to gain "markets" and "earnings" abroad in the new areas would be able to lobby Congress and prevent and push back the growing protectionism in older industries and activities.

The same arguments have prevailed in the EC too.

But when it has come to the crunch it has become clear that the capacity of the major trading partners to "give" and prevail over their domestic protectionist lobbies are limited.

The U.S. and EC are unable to move significantly and decisively forward in Textiles and are seeking a 10-15 year transition period, with major restraints to continue until the very last five year period when they would be overnight de-restricted - an unbelievable scenario and promise.

The EC has been unable to deliver on the promise of "progressive and substantial" reductions in agricultural support and agree to an irreversible process of fundamental reforms in its common agricultural policy.

Under the rubric of "trade negotiations" the Uruguay Round was launched as the most ambitious of post-war economic restructuring of the world economy and with 15 areas of negotiations - several of them in fact involving domestic economic and social policies of countries and requiring Third World countries to abandon the paths pursued in the past by the current Industrialised Countries to reach that stage in their development.

The major justification, often advanced by the GATT Director-General has been that it would enable trade-offs across sectors.

This is despite the Punta del Este declaration and the general principles governing negotiations, which has stipulated that "Balanced concessions should be sought within broad trading areas and subjects to be negotiated in order to avoid unwarranted cross sectoral demands".

So long as the issues and negotiations were being discussed without much public attention and in the GATT's non-transparent processes, this strategy appeared to be working.

But as things moved towards the final conclusion, both in the U.S. and the EC, the large number of areas and sectors of negotiations and interests affected has resulted in creating broad coalitions of domestic lobbies intent on using each other's strength to prevent agreements.

This has become very apparent in the U.S. where the textile lobby, the sectoral service lobbies, environment groups and those representing the (relatively) small farmers have all joined hands to prevent extension of fast-track authority and even attempt to change U.S. Senate rules to deny this authority.

It was in this atmosphere that on the eve of the Brussels meeting there has been talk (by the EC) of "scaling down" of ambitions on the part of its trading partners, and similar noises from others including the GATT officials.

Even the draft "Final Act" for the Uruguay Round package, including provisions for institutionalising GATT through a "Multilateral Trade Organisation" were related to this.

Just before Brussels there was also the talk and scenario of a "mini-package" of results at Brussels - in which each of the major trading partners had looked for its own package that could be "sold" to its domestic lobbies and political authorities.

When the talks collapsed and Dunkel was given the troubleshooting mandate, it was difficult to see what could be achieved within the short-time available (for the U.S. fast track authority deadlines).

Some of the Third World countries appeared relieved that they would not face pressures from the U.S. and EC to yield in new areas, but at the same time they were a little chary of the Dunkel role and the possibility of repetition of the Montreal experience - when Dunkel promoted U.S.-EC accords and then used the pressure of the two to win concessions from the Third World in intellectual property, investment and other areas in "green room" consultations.

At their instance the Chairman of the Ministerial TNC, Hector Gross-Espiell has been provided a role (and this is mentioned twice in his one-page concluding statement) but this is more likely to be a pro forma exercise.

Third World observers do not see Dunkel being able to play any major role in solving the U.S.-EC agriculture tangle and believe this would depend very much on high political-level contacts between the U.S. and EEC - after this weekend's EC summit in Rome.

But if and when the two are able to reach some accord, and it is difficult to see one involving a radical change in the EC position on agriculture, the Dunkel process will however result in considerable pressures being mounted on the Third World countries.

For the U.S. and the EC, an agreement on TRIPs where the Third World countries would be forced to yield and agree to enhanced and uniform standards and norms for intellectual property protection (for the TNC owners of such property) would be the price.

At Brussels, the informal Third World group repeatedly expressed its concerns over the procedures for consultations and their complete lack of "transparency".

In a statement on its behalf on the penultimate day, the chairman of the group, Amb. Rubens Ricupero of Brazil had underscored the group's dissatisfaction with lack of adequate attention in the negotiations to areas of special interest to them, their resist any attempt to impose a "ready made package" put together b a few participants.

The group also reiterated its determination to carry out the evaluation of the results (before finally concluding the agreements) called for by the Punta del Este Declaration from the point of view of the Third World countries and in particular from the perspective of the application of special and differential treatment for Third World countries.

When the negotiations broke up in disarray, and the group met on the morning of 7 December to agree on the procedures, it was repeatedly said that the first thing members of the group would have to address at Geneva would be the current non-transparent procedures for consultations.

To buttress this, they took up in the "green room" chaired by Gross-Espiell and got inserted into his closing statement references to his guidance and role in the Dunkel consultations and to the need to "conduct an effective evaluation" of the extent to which the special and differential treatment objective had been attained.

But it is not very clear what they would do to end the GATT's non-transparent processes of negotiations.

On his return to Geneva from Brussels, Dunkel does not appear to have indicated to the Third World participants about what he plans to do. He would perhaps do so only in the light of the EC summit actions (if any over agriculture) and after this week's meetings of the GATT Contracting Parties.

The CPs' meeting will probably see some initial U.S.-EC confrontations over the EC effort for a vote on its request for "waiver" over the German unification and special arrangements for the trade of the former GDR with East Europe.

There are also other pending disputes over which the two sides are flexing muscles, but the general expectation is that until things become clearer over the next couple of weeks, both sides will attempt to refrain from provoking the other.

(This is second in a two part series. The first was in SUNS 2509).