12:15 PM Nov 23, 1994


Geneva 23 November (Chakravarthi Raghavan) -- The Preparatory Committee for the World Trade Organization at a brief meeting Wednesday morning heard from its Chairman and chairmen of the four subcommittees 'progress' reports -- which in effect amounted to no progress or decision on any of the key pending issues.

Before the meeting began, several of the key delegations said that at this point of time -- with the US ratification process in a flux before the Congress -- no one wanted to take any decisions or say anything that might complicate problems.

One Third World diplomat, not wanting to be identified, said at this stage it is a case of "We don't see problems, we don't hear problems, we don't speak problems, but there are plenty of problems".

Among key issues to be resolved, and some of which could spill over into the WTO, after it enters into force, are: the transitional issues (between GATT 1947 and the WTO, the scope of the General Agreement on Trade in Services, Budget and staffing issues, the WTO Dispute Settlement Appellate Body (its composition and others terms), the Textiles Monitoring Body, the WTO's Headquarters Agreement with Switzerland, the WTO's relations with other intergovernmental organizations.

With the US administration trying to negotiate with the Republican leadership in the Congress (who would take control of the new Congress) on ways to get the Uruguay Round implementing legislation approved at two houses of Congress during the lame duck session on 29 November and 2 December, and with some leading Senators sounding off their views on side legislations, trade diplomats here are by tacit agreement determined to remain silent, despite their major concerns.

They are torn between the need to get the US to ratify -- and without that ratification, the WTO will be dead before birth -- and on the other to ensure that the promises and claims they have been making about the rule-based system and the trade security it offers to the smaller trading nations would remain intact and seen to be so in the public perception.

One leading diplomat took the tack: "we can't get the WTO and its rule-based system and trade security going, without first getting the Americans on board. Let us get them on board and resolve problems afterwards."

A EC Commission senior official last week had told newsmen that everyone knew from the outset that while there an automaticity in the dispute settlement process from the first stage of consultations to the final rulings and their acceptance, it was always known that countries would have to accept and implement the rulings or face the prospect of some trade retaliation.

But several others are very concerned that this 'last resort' (as Art. 3.7 of the DSU puts it) is now being flaunted as the first.

But the very basis of the new trading system was being challenged and damaged even before its entry into force by such talk as that of Senator Bob Dole that the US would have side legislation and the Administration's efforts to accommodate it. Dole has been quoted as saying that he contemplates a Congressional monitoring process over the functioning of the WTO's dispute settlement mechanism, so that Congress could ensure the US pulling out if the rulings went against the US three time (as some published news reports say).

One diplomat said privately "We may as well put as a qualification for appointment of appellate body members and dispute settlement panellists, over and above the US talk of 'ethical standards', the stipulation that they should have the political perception not to rule against the US!"

Another said it was like the husband and wife team, where the wife says that in their house the husband always takes the major decisions, but she decided what is major and what is minor.

A long-time observer noted that the real problem in all the current discussion is that all those who negotiated the complicated agreements, did so on the basis of good faith and knowledge of each other. Most of them had now left the Geneva scene and there are a whole bunch of new comers -- whether from the North or the South -- who aren't even know aware of the delicate balances built into the rules, with some built-in constructive ambiguity.

The attempts to clarify might bring the whole thing down. What wins support of Washington now will certainly create more opposition elsewhere -- even if governments elsewhere choose to ignore such matters, their public won't, the observer noted.

Among the transition issues is the one relating to the co-existence of the GATT 1947 and WTO for a while to enable all those eligible to be WTO original members to complete their formalities.

As a senior EU official put it last week, the US and the EU (and the two other Quad members) can't take all this time to complete their own process and expect everyone else to do it within 15 days thereafter.

But the US Administration, having given a letter to the Congress about its intention to withdraw from GATT 1947 simultaneously with entry into force of WTO, has to find a way for co-existence for a while, perhaps atleast a year. And this can't be done before the Congressional ratification.

On the scope of GATS, the European demand for exclusion from the financial services sectoral annex and agreement, the bilateral or plurilateral social security agreements among countries -- and thus not having to extend its benefits to all WTO members -- remains an outstanding issue. A draft prepared by the Europeans, for a specific exemption or interpretation of the agreement, has not been acceptable to several of the Third World countries, with even the US reported as having some doubts on the wisdom of such a course.

The efforts to negotiate a headquarters agreement between the WTO and the Swiss authorities also faces problems, and this issue as well as the transfer of the GATT headquarters building to the WTO/GATT will spill over into the next year, one diplomat involved in the negotiations said.

The diplomat said that many details of technical nature were still being sorted out through drafting, and agreements would be reached on them, but a lot of work and some tough negotiations were ahead on the issue of immunities and privileges of the diplomatic missions, the WTO and its staff.

The negotiators on the WTO side (GATT secretariat and diplomatic missions) are determined that the whole issue was one package and everything had to be resolved and incorporated into one agreement.

The UN diplomatic missions who have had a running controversy with the host country for quite some years are determined to use the WTO headquarters agreement issue as a lever to get all the problems resolved in all details, one source said.

As for the WTO's relations with other intergovernmental organizations, the GATT spokesman said that there had been discussions about WTO's relations with organizations like the IMF, World Bank, WIPO, the Customs Cooperation Council, and some agriculture-related organizations mentioned in the WTO agreement and its annexes.

"The view is basically now that these discussions will be carried forward into the next year and the relations will not be established by the Preparatory Committee itself. The only exception is visavis the IMF where there is a close link set in the GATT 1994 linking the two on the balance-of-payments questions".

With respect to the WTO's relations with the UN, the GATT spokesman said that Amb. Kesavapani of Singapore -- the chairman of the sub-committee on Insitutional, Procedural and Legal questions -- had reported to the Prepcom that the subcommittee had found no grounds for establishing a "formal institutional arrangement between the WTO and the UN", but that it was recognized that there was a need for cooperative ties between the WTO and the UN and that this should be taken up by the WTO's General Council".

As for the future WTO budget and staffing issues, the outside management consultants who have been called in reportedly gave an oral report to the subcommittee (chaired by Chairman of the GATT CPs, Amb. Szepesi), but the written report is expected by 15 December.

Only thereafter any decisions and recommendations on this would be possible.

GATT director-General Peter Sutherland, who chairs the Preparatory Committee told the members that the implementation conference set for 8 December would have as its essential task the confirmation of 1 January 1995 as the date for entry into force.

(By then the fate of the WTO in the US Congress would be known, though the ratification, a procedural problem, in the EU, Japan and Canada might not have been completed).

The reaffirmation of the entry into force, Sutherland said, would be on the basis of government's commitment to get the ratification and implementing legislation in their countries completed in time.

After the implementation conference, he envisaged, the WTO Preparatory Committee meeting later in December, essentially to adopt its report to the WTO General Council, but also reviewing if necessary the conclusions reached at the implementation conference, taking into consideration the situations in countries that had not yet ratified.