US ELECTION CREATES MORE UNCERTAINTIES

7:47 AM Nov 9, 1994

US ELECTION CREATES MORE UNCERTAINTIES
Geneva 9 Nov (Chakravarthi Raghavan) -- Trade officials Wednesday were engaged in the equivalent of looking at sheep-entrails and tea-leaves to figure out the likely implications to them of the US mid-term elections where President Clinton has suffered a crushing defeat in his Democratic Party losing control over both Houses of Congress.

But as in ancient Greece, everyone saw answers that they wanted, but also found many questions.

All reports from Washington suggest a massive rightward lurch with major losses for the centre of the political spectrum -- and with everyone starting preparations for the 1996 Presidential polls.

The GATT and the Uruguay Round trade agreements appear to have scarcely figured in the campaign and may or may not have moved voters.

But judged by the yes vote to the California referendum (against availability of health or educational services for illegal immigrants) and other such trends, the Republican wins don't necessarily mean a win for the traditional Republican 'liberalism' and 'free-trade' over Democratic protectionism.

Two questions facing trade officials here are whether the US Congress, summoned in a lame-duck session to vote on the Uruguay Round implementation legislation, will do so and, even if they do and the World Trade Organization comes into being on 1 January, whether Washington would carry out in letter and spirit its commitments.

The reverses for the Democratic Party had been very much on the cards, but no one had probably anticipated its extent.

In terms of the Uruguay Round implementation, would the Republicans who have blocked the legislation till now, come back and abandon their objections (including over the Budget waiver issue in the Senate) and allow a lame-duck Democratic controlled Congress give one 'victory' atleast to President Clinton?

Or would they want to wait for the new Congress, with both Houses controlled by Republicans, to do this and claim victory? Would it involve merely a procedural question of re-introduction of the new bills and its passage through a procedural fast-track approach?

Would the Democrats who have lost -- in the House or the Senate -- feel any sense of party loyalty (a commodity even normally in short supply in the US political process) and come to vote it through -- on the basis of the goodies in the package for their successors' constituents? Or would they be looking to their roles as lobbyists in Washington and the pros and cons of voting in relation to this?

Unless the US Congress says 'yes' in the votes scheduled for 28 November and 1 December in the two Houses, and the US thus binds itself to the WTO, none of the other majors will do so either.

If the Republicans decide to put off the process till they come back in the New Congress (as the Republican majority leader Sen. Bob Dole, once talked before the polls), so would everyone else.

In this event, the implementation conference to set a date for WTO entry may have to be put off.

But with US the major 'gainer' in Uruguay Round accords it is difficult to believe that the Congress would do the 'folly' of not adopting the legislations now. But it is not unknown to US history.

But the real question for trade officials is that even if the US immediately ratifies, and the WTO comes into being, given the hiatus between White House and Congress, and all sides preparing for 1996, what kind of an implementation the trade partners of the US could expect?

The answers here appear to be even more murky.

A major basis on which most of the negotiators and their trade ministers back home have been selling this accord to their legislatures and lobbies is the prospect of a 'rule-based' system with a multilateral dispute settlement mechanism that would ensure their rights would be secured.

But during the debates in the US Congress, Clinton's US Trade Representative, Mickey Kantor, had sent a letter to Senator Jesse Helms, who will be chairing in the New Congress the Senate Foreign Relations Committee, and which Helms promptly made public.

In that letter, Kantor had assured there was nothing in the WTO and Uruguay Round agreements requiring the US to give up its 'Section 301' family of unilateral trade retaliation laws, that even if a panel ruling goes against the US in the WTO and its DSU, it would still be up to the Congress to adopt or refuse. Kantor though noted that any US unilateral trade actions could be taken up by an aggrieved party as a dispute, but that if it wins and the US Congress refuses to implement, the other party could take retaliatory action.

What would be the reaction of Congress or the trading and business groups proceeding on the basis that they can act as they please in the use of trade instruments and find themselves hauled up before the WTO and told they can't? Meek submission or ask others to retaliate?

In the new situation of a divided power in Washington, and with every likelihood of the protectionist lobbies pushing for some action or other using the panoply of trade instruments, the administration might find it easier to take action, legal or illegal, and want the other party to have recourse to dispute settlement for assertion of rights.

Depending on which industry or lobby initiates the action (and what is its electoral loyalty), an administration might even find it politically more convenient to put the opposition-run Congress in the wrong in deciding not to obey the WTO rules?

No one in Geneva had any answers, but only hopes that these questions would disappear into the fog that normally hangs over Geneva during these winter months.

But for investors and traders in other countries, this would hardly be a reassuring beginning for a rule-based system in which the rights of the weak will be safeguarded.