7:37 AM Dec 15, 1994

WTO MUST BE OBSERVED IN LETTER AND SPIRIT

Geneva 15 Dec (TWN) -- The conclusion of the Uruguay Round has been a fundamental and far-reaching achievement which restores confidence in the multilateral trading system, but members must abide by the letter and spirit of the World Trade Organization to ensure a forward looking momentum and maintain confidence in the multilateral trading system, according to the GATT Director-General in his annual report.

Governments, the GATT chief says in the report, will continue to face the same intense domestic pressures for protection in the new system as they did in the GATT.

"The system may have been fundamentally altered, but the domestic landscape has not," he says.

"Although the WTO norms define instruments that governments can use to intervene in trade under certain conditions, they also define the actions that have been agreed to be outside the system.

"Even permissible actions," he adds, "should be used judiciously in order to forestall, as the experience of dispute settlement in the anti-dumping area has shown, an increasingly wide gap in perceptions of the acceptable limits of action. In addition, the flexibility that is present in the Uruguay Round Agreements to implement commitments should not be abused to undermine the legitimate expectations of trading partners.

"As the experience of the multilateral trading system over the past two decades has amply shown, departures from the system to meet one particular set of demands for protection inevitably undermine the functioning of the system as a whole. After seven years of painstaking effort to reverse the unfortunate legacies of the past, it is imperative that the outcome not unravel. This will require vigilance and determination on the part of all WTO members, both individually and collectively."

Referring to regional agreements, the GATT report underlines the need for the WTO to consider the implications of the trend to regional integration agreements and, in particular the need to ensure that provisions of such agreements are consistent with the multilateral rules.

In the period mid-April 1993 to November 1994, eleven new regional trading arrangements - each involving European countries -- were notified to GATT, while additionally, information was also provided on other agreements concluded during the period.

These included: NAFTA, Mercosur, Mexico-Venezuela-Colombia, Bolivia-Mexico Free Trade treaty; the EU's enlargement to include Austria, Finland and Sweden; the various free trade agreements involving EU and Estonia, Latvia, Lithuania; Switzerland's free trade agreement with these same three Baltic countries; EFTA agreement with Poland, Romania, Hungary and Bulgaria; the customs union between Czech and Slovak Republics; free trade agreement between Poland, Czech Republic, Hungary, and Slovak Republic; Free Trade Agreement between the Czech Republic and Slovenia, and that between Slovak Republic and Slovenia; the trade agreement amongst the members of the SAARC (Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka); and the Asean's Common Effective Preferential Tariff scheme for the Asean Free Trade Area (AFTA).

In its survey of trade and economic activity, the report predicts that the period of slow growth in world trade and economic activity which began in 1989 has come to an end and the prospects are for a substantial recovery in 1994 and a further rise in world economic activity in according to the annual report of the GATT Director-General which has just been published.

In 1993, there was only a modest rise in world economic growth, a 1.5 percent -- with acceleration of growth in the US offsetting a decline in Europe and Japan. Economic growth was substantially higher in Asia than in Africa, the Middle East or Latin America. The steep decline in output in the transition economies was not arrested.

Merchandise trade volume decelerated in 1993 -- from a 4.5 percent growth in 1992 to a 4 percent in 1993. In volume terms, world trade actually fell 0.5 percent to $3.6 trillion. While data for cross-border commercial services trade is less comprehensive, available data suggests that it increased slightly in 1993 to $1 trillion.

Looking ahead, the report says that there is now considerable evidence that the period of slow growth and economic activity has come to an end and figures for world economic activity suggest a substantial recovery in 1994.

This recovery is expected to lead to substantially higher and more broadly based world trade growth for 1994. The prospects of recovery have lifted prices of primary commodities and this augurs well for the trade and economic prospects of Africa and the Middle East.

Current forecasts for 1995 anticipate a further rise in world economic growth, says GATT. Beyond 1995, growth prospects will depend crucially on the ability to prevent a resurgence of inflation.$