7:13 AM Dec 9, 1994


Geneva 9 Dec (Chakravarthi Raghavan) -- GATT Contracting Parties and officials engaged in much, understandable, self-congratulations Thursday at their 50th Session, the last de facto one, marking what could be a historic change -- from the provision GATT trading system to a more formal World Trade Organization and hopefully, a rule-based system.

Speakers at the session generally lauded the provisional General Agreement's greatest achievement, namely, making possible the establishment of the World Treaty Organization from 1 January 1995.

Meeting at their annual session, soon after the Implementation Conference formally set the 1 January start-off date for the WTO, the Chairman of the CPs, Andras Szepesi of Hungary, and others who followed him looked nostalgically about their past achievements, and spoke of the bright future ahead.

But behind the scenes, in the corridors and in small consultations, they were still struggling on a range of unfinished business for a smoother transition to the WTO.

These included the knotty problem of who will lead the WTO on 1 January (and whether a solution could be found in naming one of the three candidates -- Salinas of Mexico, Ruggiero of Italy and Korea's KIM) and a number of other minor and major issues, including the composition of the WTO's Textile Monitoring Body and its independent Chairman.

While the Europeans were trying to apply pressure, directly and via Japan, to bring about the withdrawal of the South Korean candidacy and swinging its backers behind Ruggiero, and hoping by this to secure an overwhelming support for him for the top post, the US President's public endorsement of the candidacy of Salinas makes it difficult to envisage its being abandoned thereafter in favour of Ruggeiro's consensus election.

Korean sources say that their candidate is there to stay till the end, while the Europeans argue that no one can hold the post without the support of the US and EU, and atleast full backing of one, and hence Kim should withdraw.

The view is increasingly gaining ground that no solution can be found before the WTO start-off date and that GATT Director-General Peter Sutherland might have to be asked to stay on at the post into the New Year till the issue is resolved.

The EU though is opposed to it. In such an eventuality it fears there might be pressure for all the three candidates to be withdrawn, and a new attempt to choose a candidate might be started, that could jeopardise the EU's determination to have an European in the post.

The GATT CPs' chair, Andras Szepesi, who is conducting the consultations, is having a small luncheon meeting Friday with a few key delegations, and is to follow it up with a informal meeting of the heads of delegations of the CPs.

In opening the session, Szepesi injected an optimistic note on the prospects for the world economy, referring to the GATT economists estimation that the world trade in 1994 would be double that of 1993 which registered a 3-1/2 percent growth. He also trotted out the GATT figures of gains to world trade and economy in year 2005 -- of volume gains to world trade of 9-24 percent more than in the absence of the Uruguay Round and of world income gains in the $110-$510 billion range.

Others who followed made similar claims and projections of the future, based on the higher estimations made by the GATT economists -- based on the 'monopolistic competition' view of the world's markets.

Canada proposed an acceleration of the tariff cuts already agreed, and further negotiations for the socalled zero-for-zero option (of tariffs being cut across sectors) as a way of keeping up the pressure for market access and trade liberalization.

The Canadian Ambassador, Gerald Shannon, also called for further disciplines in use of export subsidies for agricultural products and working towards full elimination.

New issues

Shannon also suggested that trade and competition policy should rank high on the agenda of new issues for the WTO. Competition laws so far, he said, had been predominantly domestic in orientation, but differences between jurisdictions on scope, coverage and enforcement might influence cross-border flow of goods and services. Also, while trade agreements had focused on governmental measures affecting trade, "private commercial behaviour which extends beyond a domestic jurisdiction remains largely unconstrained" and ultimately an agreement establishing international norms for competition policy could prove a useful approach for reforming trade remedy measures.

(At a press conference Thursday, Sutherland stressed that the WTO already had an enormous amount of unfinished business, arising out of existing agreements, on its plate. Various WTO structures and bodies had to be set up and all these should have first priority. As for issues mentioned at Marrakesh, the Trade and Environment would continue to have priority and negotiations under way in financial, telecommunications, maritime services and movement of natural persons (as a mode of delivery) should all be first completed. New subjects, he added, could not be brought up on the agenda without a full debate and reaching consensus on critical issues would take sometime to be achieved.)

Lome waiver for vote

In other actions, the CPs agreed to send for a waiver vote, the request of the European Union and ACP countries for a waiver from GATT obligations for the Lome-IV preferential trade and aid treaty.

The CPs also agreed for a final another year, EU's separate request for a waiver arising out of the German reunification -- namely special trading arrangements of the former east Germany and several of the East Europeans who had special trade relations under the old Comecon.

The draft decision on the Lome waiver request which was approved by the CPs session and sent for a vote -- waiver from the MFN obligations of Art. 1 of the General Agreement and to the extent necessary to permit the EU to provide preferential treatment for products entering the EU from the ACP countries -- has been sought until 29 February 2000.

The waiver has to be approved by twothirds majority of the votes and a simple majority of the 124 GATT members. This is expected to be achieved even over the next couple of days: a large number of ACP countries who have no representation in Geneva (and generally would have cast their votes in the slower postal ballot) have all come down from Brussels to cast their votes immediately.

Before the decision to send the request for waiver was approved, the United States noted that it had always believed the EU should seek a waiver for the Lome (and not treat it as a Art. XXIV free trade area agreement), but that the US had problems with the EU-Lome banana regime which two GATT panels had found to have discriminatory effects on the system and adversely affecting interests of the GATT contracting parties. The EU's preferential arrangements for banana imports (governed by one of the protocols attached to Lome), the US said, helped the EU importers and traders more than the Lome Convention countries themselves. The grant of the waiver would not relieve the Community of the need to address the discriminatory elements of the arrangements and failure to do so would leave other contracting parties the right to pursue their own rights in the matter (through consultations and dispute settlement processes).

(The US Trade Representative has accepted a petition from the US Chiquita bananas, under Trade law S.301, over the EU regime and has started investigations. But the US itself cannot claim any exporter interest 'right' of its own to raise a dispute in the GATT/WTO.)

Guatamala, which has expressed reservations over the EU's tariff quotas in the WTO's market access schedules, under the banana regime, said that it had held a number of consultations with the US and the EU and that an overall solution was needed. The grant of a waiver, Guatamala made clear, would not abridge its own rights in the matter.

EU Commission's top trade negotiator, Hugo Paemen, later told newsmen that the Lome waiver would go through, noting that the preferences related to the least developed countries of Africa.

In other decisions, the EU and Sweden in effect blocked the adoption of a panel ruling on the socalled US levies and taxes on the 'gas-guzzler' automobiles -- a levy purportedly to protect the environment. Of the three levies that the EU had complained about as discriminating agaist imported cars and their distributors, the panel had found in favour of the US on two, but had found the third levy discriminatory.

In a lengthy legal brief it presented, the EU explained why it was unable to accept the legal argumentation in the report and why it was faulty in not having properly addressed the complaints of discrimination involved.

Sweden too took a similar stand.

On the second tuna panel report, the EU and Venezuela pressed the US to allow the adoption of the report. The US said it had been preoccupied so far by the processes for the ratification of the WTO and had not yet applied its mind to the second tuna panel (holding the secondary bans on tuna imports to be GATT-illegal) and would do so in time for the meeting of the GATT council in 1995.

Earlier, in debates on the report of the GATT Council and its activities, Canada said that the entire Trade Policy Review Mechanism (set in place provisionally in the GATT at the 1988-89 mid-term review), but now incorporated as an agreement in the WTO. Canada said the exercise was now becoming excessively burdensome on both the countries involved, the system and the secretariat.

In presenting the GATT Council's report to the CPs, Council Chairman, Amb. Munir Zahran of Egypt had said of the exercise (which so far had undertaken 53 reviews since inception) that "yet more active participation in the meetings" would be valuable both to the countries under review and to the viability of the system. In respect of the major trading nations, the TPRM, he said, provides "essential monitoring" of the evolution and change in their trade policy regimes, while for many developing countries the reviews had opened their regimes to international scrutiny and had contributed significantly to their domestic process of trade policy formulations.

The TPRM agreement in the WTO, provides for a review by the Ministerial Conference no later than five years. The TPRM exercise provides for the policies of the four majors to be reviewed once in two years, and that of others over 3-8 year spans depending on their importance.

Many delegates seemed to privately share the view about the need to reassess the TPRM, but were cautious if the Canadian suggestion implied lesser frequency for the majors, and greater frequency for the others.

After initial novelty, even the media seem to have lost interest in the Council's TPRM review and discussions or the summing up of the Chair.

The Lome waiver will come up for review in 1997 in the WTO.

The waiver decision provides for the EU and the ACP countries entering into consultations with any interested contracting party over any difficulty arising out of the preferential treatment for ACP products and, in a case of benefits being impaired for any other cp for a "satisfactory adjustment" (meaning in GATT parlance, some 'compensation' by the EU).

It enables any c.p. that feels the preferential treatment under the waiver is applied inconsistent with the waiver or that benefits accruing to it under the General Agreement being impaired by the waiver, and finds the consultations with the EU 'unsatisfactory' bringing the matter before the CPs. The rights of other contracting parties under Articles XXII and XXIII have also been preserved.

In other interventions, Japan expressed concern over the EU enlargement processes and the modifications of GATT concessions that might result (from the expansion of EU to embrace Austria, Sweden and Finland) and sought Art. XXVIII consultations (on renegotiation of schedules).

The EU responded that it was only recently the enlargement picture became clear (after Norway turned down accession in a referendum), and that the EU would work out the consequences after the final ratification processes were completed and would then undertake the necessary tariff renegotiations under Art XXIV (free trade area/customs union accords).

Canada brought up a new trade dispute over the US's use of export subsidies under its Export Enhancement Programme -- providing for some 2.6 million tonnes of barley being eligible for such subsidy and out of this for 50,000 tonnes to be sold to South Korea, a traditional Canadian market. The Canadian complaint was supported by Australia and Argentina, but got no response from the US.

Canada announced separately that the special safeguard measures it had put in place against imports of beef, and against which Australia has repeatedly complained, would end at the end of the year.

Brazil announced the withdrawal of its long pending dispute with the US over the levy of special duties on imports of non-rubber footwear from Brazil. A GATT panel had ruled in favour of Brazil, but the US till now had not implemented it and Brazil has been raising the issue at the Council meetings repeatedly.

The United States has incorporated some provisions in its Uruguay Round Implementation Act to meet Brazil's viewpoint and as a result Brazil has withdrawn the complaint.