8:38 AM Nov 3, 1994


Geneva 3 Nov (Chakravarthi Raghavan) -- The United States will give the 60-day notice and withdraw from the GATT 1947, as soon as the US Congress approves the implementation bill.

The US withdrawal from GATT 1947, and the Tokyo Round codes, are to take effect soon after the WTO comes into being,

This US position has now been publicly announced via the Wall Street Journal by the deputy head of the US Mission to GATT, Andrew Stohler, even as the Preparatory Committee, where the US is in a minority of one on this issue, has been trying to find solutions to genuine problems of a transition where there will be dual rights and obligations.

The issue is being handled in the WTO Prepcom subcommittee on Institutional, Legal and Procedural (ILP) issues, chaired by Amb. Kesavapani of Singapore.

Only last week, at the Prepcom meeting Kesavapani had adverted to this problem, noted that one delegation (whom he did not identify) had indicated its intention to withdraw from GATT 1947, while all others felt the need for a transition period when both agreements will coexist and that discussions were continuing to find a solution to some of the transition problems of coexistence.

According to some GATT sources, there had been an informal understanding that no one would comment on the statement of Kesavapani as chair of the ILP subcommittee.

US Ambassador to GATT, Mr. Gardner, who was at the meeting remained silent after Kesavapani's statement.

However his deputy Stohler, in an interview to WSJ, has said that the notice of withdrawal had been held up only because of the delay in Congressional action, but the US would give notice after Congress had acted on the implementation bill.

Stohler also said that once the US withdrew from GATT 1947 and the Tokyo Round codes its obligations under that would also cease.

Asked about unresolved trade disputes, Stohler told WSJ "they will all go up in smoke".

GATT sources said the US was particularly anxious to use this route to kill all pending disputes, and leave others, whether GATT 1947 members who are not in the WTO or the WTO members without any legal remedy in terms of the investigations begun on anti-dumping.

It is also hoping that this will kill both the Tuna panel rulings, which are pending before the GATT Council, but whose adoption has been blocked by the US.

However, as far as this last is concerned, after the WTO comes into being, parties to the WTO could start a dispute anew and there will be binding rulings.

As for antidumping, said to be the real objective of the US, according to some sources, there are some 200-300 pending antidumping complaints against Japanese enterprises alone.

The WTO's anti-dumping agreement, as also the subsidies agreement, have provisions that their rules (and rights and obligations) will apply to investigations started after the WTO entry into force.

The WTO's DSU will apply only to cases where requests for consultations begin after entry into force.

In the US reading there is an area of doubt about the investigations begun in anti-dumping and subsidy complaints before the WTO's entry into force.

The official GATT view (in a note to the ILP subcommittee) has been that the Vienna Law of treaties (which codified the international law) will apply and rights and obligations of treaties would prevail until the time of withdrawal.

But the US is not a party to the Vienna Law of Treaties, though the administration has said it will generally follow its provisions.

Other GATT participants said there will be quite a messy situation, but the US will have some mess on its own doorsteps and it is not going to be a one-way affair.

For one thing they said, there are also other countries where anti-dumping investigations, some against US enterprises are under way. And US companies would be hit in those countries.

And other countries might initiate anti-dumping complaints against US enterprises, just to have a bargaining chip.

Also, the US might proceed against particular imports on anti-dumping grounds and impose countervailing duties in such cases, acting under its own anti-dumping law.

However, as far as the countries against whose enterprises it acts, if they are members of the WTO, the US may have no obligation under GATT 1947 and claim the WTO anti-dumping agreement does not apply either; but the US will have no rights flowing out of GATT 1947 either.

As a result any duty imposed would often exceed the US bound duty (in the WTO/GATT 1994 schedule) and thus violate Art II of GATT 1994, and since it will be hitting particular country exports, it will also be a discrimination (whether or not it is a bound duty) hit by Art I (MFN clause).

On this ground alone, a complaint under DSU would arise, even if it takes a few months to run its gamut. The US may then find itself hit by panel rulings which could provide retrospective relief and force US to give compensation.

Trade diplomats of other countries are somewhat puzzled by the US stance, and its going public, at a time when they have been trying to avoid giving a handle to the anti-WTO forces in the US Congress, and trying to find solutions.

Some even accuse the US of 'bad faith' in that the US actions would be against the spirit, if not the letter of the Marrakesh agreements and decisions. One of the diplomats said it was a case of show of "arrogance" by the US.

The entire scheme of the WTO and its annexed or 'covered' agreements, including GATT 1994 as separate and distinct from the GATT 1947 and the Tokyo Round codes, has been on the basis that there would have to be a short period of transition where the two would co-exist to enable GATT 1947 cps to get needed time to ratify and join.

The Marrakesh ministerial decisions envisage a two-year period for laggards to complete formalities and join the WTO as original members, but with stipulation that their obligations would have retrospective effect.

During the pre-Marrakesh and post-Marrakesh periods, the US has been repeatedly saying in private that it would have difficulties in having dual sets of obligations and its preference was for simultaneous withdrawal from the GATT 1947.

The United States right through the negotiations for a WTO in December 1993 has been making this known, and thus others were not unaware of it.

However, the US is a party to the consensus decisions leading to and at Marrakesh itself.

There will be a problem, for a while, for countries who are not in the WTO, but only in GATT 1947, and are in the process of joining the WTO.

But once they do so, they can restart the proceedings for assertion of their WTO rights.

Many long-time observers of the GATT scene are intrigued about the US stance. The US, they note, has much larger stakes in seeking to ensure that countries are unable to get out of their international obligations. The US is the major beneficiary of any WTO.

For the US to take actions at the start of WTO which puts into question its good faith, and creates some doubts about the international law, will probably a major act of folly, though US history is replete with such follies, one observer noted.