7:01 AM Dec 16, 1993


Geneva 15 Dec (Chakravarthi Raghavan) -- The Uruguay Round package approved Wednesday, incorporated in a Final Act document of some 550 pages, contains the legal texts and instruments, and ministerial decisions, spelling out the results of the negotiations launched at Punta del Este in September 1986.

Ministers of the participating countries at a meeting set for Marrakesh in Morocco in the week of April 11, meeting on the occasion of a special session of the GATT CONTRACTING PARTIES will conclude the Round, formally approve this package, and agree to take it back to their governments for acceptance, approval or ratification according to their domestic procedures.

While it is yet to be decided by Ministers, it is to come into force in 1995. Originally a 1 January date had been envisaged, but it may be put off till 1 July of that year -- because of the Japanese ratification processes, and their parliamentary session for this work expected to begin only in Feb 1995.

When it comes into force, it will create the World Trade Organization (WTO), a last minute change in title at the instance of the US side -- which had taken a position against the MTO and perhaps needed some cosmetic change -- though in his talks with the EC, USTR Mickey Kantor said he did not like the word 'multilateral' in the name, and Brittan had insisted on retaining at least 'organization'.

The Final Act, with the WTO agreement, and the various agreements and instruments and ministerial decisions annexed to it, and all forming one integral part of the Final Act, is the longest and most detailed body of rules to govern the international trade relations among its members, with a quasi-judicial and binding system of settlement of disputes - and in some ways even going far beyond the existing state of international law and relations among States.

Whether it will in fact lead to the establishment of a world trade order based on the rule of law would depend on a number of factors.

But a major factor will be how far the two major entities, the United States and the European Communities accept and obey and implement this rule of law or whether as the most powerful they adopt the middle ages European concept of divine right of kings to rule (and be above the law that subjects had to obey). The final outcome of a negotiating process which began at Punta del Este with some 80-odd participants, ending with 117 (by the accession of Brunei), was brought about by the two coming to agreements and understanding reflecting their mercantile interests and forcing all, or virtually all their views on others.

These two elements if they prevail in the future would have laid the seeds of instability and inevitable social upheavals and breakdown and disorder.

In his speech at the TNC Wednesday, Sutherland viewed the occasion as a "defining moment in modern economic and political history" when some see the post-Cold War World as full of new risks and tensions. Sutherland viewed trade as a binding factor bringing people together and in accepting the agreement, the participants had chosen openness and cooperation instead of uncertainty and conflict, he said.

Sutherland saw the outcome as the completion of the unfinished task of the post-war economic reconstruction system envisaged at Bretton Woods and described the WTO as one of the three pillars of the world economic system, the other two being the IMF and the World Bank, founded 49 years ago.

But the WTO and its joining ranks with the IMF and the World Bank comes when these last two have lost their legitimacy (following the collapse of the Bretton Woods monetary and financial system in 1971) and now preside over a collapsed system which does not have any role over the "majors" and their monetary and financial policies or the private financial and monetary system they have spawned, but are trying to run the rest of the world on behalf of the majors and their corporations.

How the WTO and its new trade order will shape up, and whether in fact it will be part of the New Order, is thus into the future.

If the majors, who now need the markets of others as much as others need and depend on their markets, change their thinking and neo-mercantilist behaviour, and practice what they preach and observe the substance, and not merely the form, of a democratic decision-making based on consensus, it may still provide the seeds for a new world in the making.

But the chances of this are slim. And, if the majors persist in their present ways, it would be one more building bloc towards a world of disorder.

Francis Fukuyama, in 1989 after the tearing down of the Berlin wall, spoke of the "end of history" and President Bush in 1990 spoke of the New World Order. Since then the collapse of the Soviet Union, and assistance from the IMF and the World Bank in their 'big bang' policy advices, have for the present created economic disorder and is giving rise to right-wing nationalism.

Whether the WTO would help or hinder this process, and whether its trade order will lead to greater disorders in the developing world, would depend not so much on the promises of expansion of world trade and growth due to the "liberalisation" achieved, but on more basic macro-economic forces and policies.

The nearly seven-years of negotiations have provided international institutions and governments of major entities and finance ministers all around an alibi to avoid macro-economic policies and look to the end of the negotiations to resolve all problems.

Now that the negotiations have been concluded, and the benefits to the world economy, if any, won't be visible or come for at least 2-3 years, governments might be compelled to pay attention to these fundamentals and that could be for the good.

In terms of the oft-repeated phrases of the developing and the developed world of the rule-based trading system that is emerging, the WTO and the its Dispute Settlement Understanding provide the core of this rule-based system, with the various agreements and decisions and understanding laying down the details of the rules in trade.

The DSU is to apply, not only to disputes arising out of various agreements, but to disputes over rights and obligations arising out of the WTO and of the DSU.

Taken together, they provide an obligation on WTO members to ensure compliance of domestic laws, procedures and measures to be in accord with their obligations under the WTO, settle all disputes arising from them through the dispute settlement system, and implement the decisions.

But where a member does not carry out the decision on the disputes, the remedy for the complainant is through 'retaliation' or withdrawal of concessions -- but after getting authorization.

Thus, in the final analysis, the weak, who have no power of retaliation or find use of that power will hurt them more than those against whom they have complained, have no instrument to get their rights enforced against the strong - excepting to the extent that there is peer pressure from the community of states. It did not prevail in the old GATT, as in the case of Nicaragua against the US; whether it will in a similar circumstance in the WTO -- and the test of a rule-based system is how far the rights of the weak are respected and enforced against the strong -- only the future can tell.

The WTO, in terms of a rule-based system, provides (Art XVI:4) that "Each Member shall ensure the conformity of its laws, regulations and administrative procedures, with its obligations as provided in the annexed Agreements".

This probably could be interpreted in the US (where this will be a highly charged political issue in the weeks and months ahead in the Congressional fast-track process) as meaning that there is no automaticity, in the rules of international law embodied in area of international trade in the agreements, prevailing over the US laws. But failure of the US to get its laws, regulations and administrative into conformity with the obligations of the various agreements and understandings would breach its WTO contractual obligations.

Thus, whatever claims may be asserted by the US Congress or the administration, S.301 of the US trade law in any form would be contrary to the WTO and any recourse to it, or even a threat which could threaten the contractual trade rights of another, would provoke a dispute and require the us to abide by that ruling.

This WTO and its rule-based system, while it provides security in trade and trade relations among states and enables enterprises and traders, has rules that are strongest and most specific in areas where the developing countries are being obliged to undertake obligations -- such as on TRIPs -- and foreclose to them the paths that today's developed had followed to reach where they are.

To that extent the system will prove oppressive to the weak and their efforts to catch-up.

In other areas such as dumping and subsidies, where the trade instruments have been used as selective protective instruments and a source of trade harassment by mere start of investigations becoming a source of uncertainty, targeted against individual countries or enterprises, the rules are an improvement on the present. But in some areas, they are still vague or ambiguous and vest the authorities in an importing country with considerable discretion.

These coupled with some limitations in the case of antidumping on what a panel could do may make the rules in this area much less of a security than claimed.

Much would depend on how the panels will actually interpret and the kind of precedents they will set up.

India's Amb. B.K.Zutshi put it Wednesday that the dispute settlement system is a quasi-judicial system in the international arena, and no quasi-judicial system would easily agree to reduce its jurisdiction.

But then the majors will come back to change the rules again in their favour -- unless the others affected, and developing countries are affected most, join forces and act together.

This did not take place in the Uruguay Round -- and may not in the future either, particularly so long as this is an issue left to be handled by trade or finance ministries.