6:07 AM Oct 24, 1994


Geneva 24 Oct (Chakravarthi Raghavan) -- The European Union and the African, Caribbean and Pacific (ACP) countries, Parties to the Lome Convention, have now sought a 'waiver' from the GATT Contracting Parties in respect of the EU's obligations under Art 1:1 of the General Agreement (the MFN clause).

In a communication dated 10 October, now circulated to the GATT Council for consideration at its 10 November meeting, the Lome Convention Parties have said they are seeking the waiver in terms of Art XXV:5 of the General Agreement in order to "improve the legal certainty of ACP countries".

The communication notes that ACP exports to the EU in 1992 was 18 billion ECU ($21.6 billion) and accounts for 3.5 percent of total imports into the EU. It was 26 billion ECU ($31.2 at current rates) or seven percent of total EU imports. Nearly 41% of the ACP countries earnigns come from the Lome preferences and exports to EU and for some countries the dependency is over 70 percent.

The request is due to come up for consideration at the GATT Council meeting on 10 November.

Under Art XXV:5, of the General Agreement, "in exceptional circumstances" not otherwise provided for in the General Agreement, the CPs (acting jointly) "may waive an obligation imposed on a contracting party". Any decision to grant a waiver has to be by a twothirds majority of the votes cast, with such a majority accounting for more than half of the contracting parties.

The EU's trade preferences (tariff and non-tariff) for the ACP countries under the Lome treaty has been held by two GATT panels to be contrary to the GATT obligations of the EU member-countries.

Both panels on banana imports into the EU, and the discriminatory tariff and non-tariff regimes governing these imports -- one from the ACP countries and the other from the Latin Americans.

Before both panels, the EU placed reliance for its policy on the Lome Agreements, arguing they were in the nature of agreements for a Customs Union and Free Trade under Art. XXIV of the GATT, and thus the trade arrangements among such members could discriminate against non-members.

The EU also argued that the one-way, non-reciprocal preferences of the Lome agreement (with the EU providing duty free entry for imports from ACP countries, without the latter having any corresponding obligations) was covered by the Part IV of the GATT.

Both panels rejected the EU view and held against the special banana regime. Both however suggested that the EU could seek waiver from the GATT Contracting Parties to provide such preferences.

Neither of the two panel reports have been adopted by the GATT Council or Contracting Parties -- the EU and the ACP countries having blocked its adoption in the Council.

The EU sought to get around the problem, through its tariffication in the Uruguay Round agricultural agreement, with fairly high tariffs, and tariff quotas to ensure current market access. These have been incorporated in the EU's schedules for the WTO.

By agreeing to increase the tariff-quota overall, and dividing it among the Latin American countries and enabling them to allocate it nationally, the EU tried to get around the problem.

While Colombia, Costa Rica, Venezuela and Nicaragua, accepted this, Guatamala, Mexico and one or two other contracting parties, as well as several Latin Americans not contracting parties have rejected this.

More recently, the United States Trade Representative, at the instance of the US banana trading transnationals, has accepted a complaint under US 301 law about the EU's practice -- and has sought consultations with the EU and could lead to a new dispute under the WTO.

Meanwhile, a GATT working party has reported on the Lome-IV agreement.

The working party recorded the "general recognition" in the party that the objectives of Lome Convention was "commendable as it aimed at improving the standard of living and economic development of the ACP countries, including the least developed among them".

But it was unable to conclude that the accord was in conformity with Art XXIV and recorded the two opposing views:

"The parties to the Convention reaffirmed their view that the trade policy objectives resulting from the Convention were in conformity with the rules and practices of the General Agreement, and entirely compatible with their obligations under Art XXIV in light of Part IV. However, other members who were not parties to the Convention maintained that the Convention was not in conformity with Art XXIV and Part IV."

At the meeting of the GATT Council earlier this month, when the report was presented and the Council took note of it, the US and Canada suggested to the EU that it seek a waiver.

So far, the EU had been reluctant to seek the 'waiver' -- since it would impact on a whole range of agreements of the EU -- not only with ACP countries, but Mediterranean countries, East Europe etc.

Under the WTO, waivers are also to be for limited time durations, and pre-WTO waivers of GATT will come up for review after five years.

In any event, while the waiver will make the Lome accords and the special preferences regime 'legal', it would still leave the way open for any contracting party, claiming that benefits accruing to it are being nullified or impaired would still be able to raise a dispute in terms of Art XXIII 1.(b).

However, to win a ruling, it has to show that it has actually suffered some damage to its trade interests, unlike a case relating to GATT legality where nothing further is needed.

But the continuing uncertainties and problems has now influenced the EU to take the waiver route.