8:11 AM Dec 1, 1994


Geneva 30 Nov (Chakravarthi Raghavan) -- The United States appears to have set the stage for initiation of complaints against itself in terms of its implementation legislation for compliance with the WTO.

The implementation legislation, and notifications by the US Trade Representative, Mickey Kantor, excluding South Korea, Singapore and Hong Kong as 'developing' Parties entitled to the benefits of the Subsidies Agreement provisions for developing countries, is seen as directly contradicting the provisions of the agreement.

At the WTO Prepcom meeting Wednesday, South Korea raised the issue and was supported not only by Hong Kong and Singapore, but a number of other developing countries who criticised the US position.

The United States did not respond, though its Ambassador and Deputy US Trade Representative, Booth Gardner was present. The Prepcom itself merely took note of the statements.

Part VIII of the Subsidies Agreement provides for special and differential treatment to developing countries. While not defining 'developing country Members', it classifies them in two categories: one category in Annex VII of the agreement (the Least Developed Countries and other specified countries so long as their per capita income is $1000 or below) and a second of all other developing countries.

In respect of the former, the stipulation against prohibited subsidies will not apply, and for the latter it will not apply for eight years from WTO entry into force, provided the countries concerned phase out the prohibited subsidies in a progressive manner over an eight-year period.

The US implementation legislation, in its S. 267, stipulates that in applying the subsidies agreement, the term 'developing country' means a country designated by the USTR. The USTR, in a statement of Administrative Action relating to the implementation has announced that the USTR will not designate Hong Kong, Korea or Singapore as developing countries. The USTR statement has noted that at the time of the conclusion of the Agreement, both the EU and the US had said that they could not accept these three as developing countries.

In raising the issue and voicing its concern, the Korean ambassador Seung Ho, said that throughout the Uruguay Round negotiations Korea had participated as a developing country. If it had been the wish of the US to treat Korea otherwise, a consensus should have been reached on this before the conclusion of the negotiations.

The Uruguay Round package represented a balance of rights and obligations among participants and the special treatment for developing countries was part of that package and Korea had agreed to that package with the "legitimate expectation" that it would benefit from the special treatment. "Denial of such benefits through any unilateral or arbitrary determination on the part of a participant as to the status of others is therefore not only inconsistent with the long-standing practice of 'self-election', but it also goes against the bona fide nature of the negotiations".

The Korean ambassador sought to register in the Prepcom his country's "strong concern" on this matter, urging the US to address these concerns and reserving Korea's right under the WTO to take appropriate action if necessary.

In supporting Korea's stand, Hong Kong stressed the long-standing practice of self-election in the GATT of the developing status, and said that if the US provision were enacted in its current form it would impair Hong Kong's rights. If such unilateral designations were extended to other areas of the WTO, it would create a most undesirable precedent.

It was also "a self-serving" exercise for the US in that when it suited some Hong Kong was a developed party (as in subsidies) though no one suggested it was one when it came to trade in textiles where the MFA restrictions are applied among developed contracting parties.

Singapore in its statement said the WTO agreement was a multilateral one, and not a bilateral which the US, or any other CP for that matter, could arbitrarily pick and choose to impose its unilateral interpretations of what constituted a correct balance of rights and obligations. Citing Shakespeare (Julius Caesar's talk about honour and honourable gentleman), the Singapore ambassador added: "Singapore will honour all the commitments it has undertaken. Likewise it expects its trading partners to honour their obligations."

Speaking for the developing country group, Amb. Siraj Haroon of Malaysia said the US legislatiion and the statement of administrative action pointed towards the "unilateralism" and the "arbitrary and unilateral interpretations" of the agreement by developed contracting parties to suit circumstances against which developing countries had cautioned against on 15 December last at the time the negotiations were concluded. It was disheartening that the rules of the game were being changed midstream for some developing countries, thus effectively undermining their rights and obligations. While the WTO, like the GATT, had no provision for designating developing countries, and the GATT had a long-standing practice of self-election, the entire Uruguay Round package had been agreed with this established practice in the background.

Moves like that of the US, Haroon said, which either directly or indirectly disturbed the overall balance of rights and obligations should best be avoided and he hoped the US would give serious consideration to the issue and contribute to a successful implementation conference.

Others who spoke in support included Brunei (for the Asean), Brazil, China, Mexico and Bangladesh.

Brazilian ambassador Lampreia said he took the floor to speak lest it be thought that this was only an issue that concerned Asian countries. It was also of "central" concern to Brazil. Firstly, self-election had been the practice in the GATT on development status and it would be dangerous to tinker with this. Secondly, it would be detrimental to the multilateral trading system if countries were permitted to change the rules after an agreement was reached. Thirdly, those who had negotiated in good faith should not be placed into positions whereby the fruits of their negotiations were called into question. If this were allowed to happen an "essential pillar" of the multilateral trading system would be hurt.

Mexico's Amb. Alejandro de la Pena said the maintenance of the self-election practice was an intrinsic part of the Uruguay Round package and all the provisions in the WTO about special and differential treatment for developing countries had been negotiated and agreed to on that understanding. It was inappropriate to change the balance of this negotiated agreement. This issue of developing country status, he recalled, had been discussed at length during the negotiations in the Prepcom on the terms of reference of the WTO Committee on Trade and Development also.