7:18 AM Feb 17, 1994


Geneva 17 Feb (Chakravarthi Raghavan) -- The Janus-face of US trade policy -- professed attachment to 'free trade' and negotiating multilateral global and regional agreements, while pursuing and exercising mercantalist objectives through bilateral pressures under threat or use of unilateral sanctions -- figured at the GATT Council Wednesday during the Trade Policy Review of the United States.

This is the third time that the US trade policy has come up for review under the GATT Trade Policy Review Mechanism (TPRM) exercise in place since the Uruguay Round mid-term accord of April 1989 and in which the policies of each of the four major trading blocs come up for review every two years.

The review is on the basis of report provided by the US and a GATT secretariat report, with Amb. William Rossier of Switzerland and Amb. K.Kesavapany of Singapore leading off as discussants.

The Secretariat report notes the increasing role of the external sector in the US economic development over the last several years -- with 43 percent of the improvement in US real GDP between 1988-1991 accounted for by net exports of goods and services and such exports cushioning the impact of the 1990-1991 recession. Developments over the last two years, it adds, have shown the growing importance of trade in US economy.

On the one hand, since the last review of US policy (in 1991), the US continued to affirm its adherence to the principle of free trade and played a major role in bringing the Uruguay Round to a successful conclusion, while also at the same time pursuing regional trading interests, notably through negotiating and subsequently ratifying the NAFTA.

On the other hand, the US administration has also maintained bilateral pressures for opening of external markets. In addition, areas such as agriculture and textiles remain exceptions to the US adherence to liberal trading principles -- with high tariffs and other measures in place.

While the implementation of the Uruguay Round would begin to redress this situation, "nevertheless, given the size of the US economy and its importance in world trade, any distortions stemming from trade intervention have significant effects on world trade and international economy", the report adds.

The report also refers to the concerns expressed by many contracting parties about US unilateralism in trade policy -- as embodied in the 'Section 301' family of laws and what the cps consider to be "contradictions inherent in laws aimed at opening markets based on threats to close the US market".

The US legal armoury providing "remedies for fairly and unfairly traded goods", as the US government report puts i, covers some eleven provisions -- the various S.301 "family of laws", the antidumping and countervailing duty measures, 'unfair import practices', US agriculture act restraints on imports, Trade law provisions for trade adjustment assistance to workers and firms, and the general provisions (under S.332 of the Trade Act) for fact-finding investigations.

In his intervention as a discussant, which apparently sparked off later several equally hard-hitting comments by delegations, Kesavapany in effect accusing the US of acting with 'some meanness' currently in trade policy, said: "It seems to be an axiom of human nature that when life is good and things are looking up, there is a tendency to be warm in spirit and generous in sharing endowments with others...(but) when the going gets tough and life becomes difficult, a certain meanness of spirit and harshness of action creep in."

He went on to the US role as the 'grazing ground' for the international community in the first four post-war decades, with the US even now perhaps continuing to be the most open market in the world, and the situation since the mid-70s when, faced with domestic conditions and external factors adverse to it, the US had been introduced measures to restrict easy access to its markets.

Despite the plethora of such legislation since 1974, the US had not been successful in redressing its problems with trading partners, leading the administration to use unilateral trade instruments to establish "new trade obligations and eliminating unfair trade practices by others" and by "opening up foreign markets".

While these objectives might be laudable, in that the gains of market openings were to be on MFN basis and thus of benefit to the international trading community, a distinct feeling of discomfort has begun to arise because of the US determination to pry open markets by managed or targeted trade, and use of a "crowbar" (Bush administration Carla Hill's words).

Referring to the US-Japan trade conflict, and the US pressures on Japan to make concessions under "framework negotiations", Kesavapany said while it might appear bilateral, given the globalisation and specialization in the world economy, others could not but watch with concern the deterioration in relation between the two biggest trading nations and reflect on its implications.

The Uruguay Round negotiations were begun to address these issues and it was hence "unfortunate and a matter of concern" that so soon after the conclusion of the Round, and even when they were at the pointing of establishing the WTO "managed trade, in its various forms, does not seem to have lost its short-term attractions for some major trading nations".

However, trade was not a one-way street and those who had benefited from the US open markets and liberal system had an obligation to contribute to the strengthening of the system by reducing their own barriers. It was unacceptable to continue citing excuses such as "cultural factors and inability of foreigners to compete in their markets" and unless these were rectified, persistent trade irritations were bound to occur and arbitrary demands for corrective action liable to increase, Kesavapany added.

The secretariat report, in its overview of developments in the US since the last review, referred to the increased resort by US to anti-dumping and countervailing laws over the last two years.

Since July 1990, an average of 60 AD investigations had been launched each year, compared to 40 in the 1980s. The number of AD orders in effect on US imports had increased steadily to reach 268 by June 1993.

In over 50 percent of cases of calculations of the dumping margin, the US has proceeded on the criteria of "best information available" which, other trading partners and particularly in steel cases, complained was essentially information supplied by complainants.

In the case of constructed costs (where actual costs were not available), the home market price was increased by ten percent for overhead costs and eight percent for profit margins, regardless of exporters actual profit and overhead costs.

The number of countervailing duty actions had increased steadily since 1990, reaching a total of 86 final orders in place in June 1993 -- with the cumulative effect of anti-dumping duties and countervailing measures resulting in margins of over 100 percent.

In his intervention, Kesavapany said that the antidumping and countervailing duty actions was causing concern to GATT CPs and it was their hope that with the changes in the Tokyo Round antidumping code (in the Uruguay Round), most, if not all, of their concerns would disappear.

However, one wondered whether in fact there was any ground for optimism, after reading the report of the US Industry Policy Advisory Committee (IPAC).

This report claimed that the US administration had told industry that their understanding of the agreement about negligibility threshold, de-minimis standard and averaging the position applied only "to the investigation phase of the proceedings and not to any type of review conducted after an order was issued". The report also cited the administration as saying that in regard to the representative character for initiating the cases, the Administration would "exercise considerable flexibility in determining support and opposition in cases where labour unions weigh in with their views".

In view of this what changes could be expected in the US anti-dumping legislation as a result of the Uruguay Round agreement, he asked.

On the Trade and Environment issue, and the statement by the State Department Counsellor, Timothy Wirth about the categories of cases where the US would take unilateral actions to support environmental objectives, Kesavapany asked the US as to how its trade and environmental objectives would be reconciled or made compatible with the WTO.

On the financial services issue and the pending bill before Congress for "Fair Trade in Financial Services Act", which the US Federal reserve is opposing, Kesavapany about the likely impact of this legislation on resumption of financial services negotiations which would stretch to six months after WTO enters into force.