May 2, 1988

TROPICAL PRODUCTS - LIBERALISATION FOR WHOSE BENEFIT

GENEVA APRIL 27 (IFDA/CHAKRAVARTHI RAGHAVAN)— Liberalisation of trade in tropical products is intended to provide additionally of benefits to Third World exporting countries and this should be reflected in the proposals and negotiating approaches, Third World countries have reportedly stressed in the Uruguay Round negotiations.

This viewpoint was reportedly put across at this week' s meeting of the negotiating group, when several participants also argued that the basic issue before the group was one of securing 'market access', and other issues whether of 'subsidy' or general agricultural trade issues should not be injected into the negotiations on tropical products.

Multilateral consultations aiming at fullest liberalisation of trade in tropical products, in the light of different techniques and modalities suggested by participants in the Uruguay Round negotiations, are to be held in the week of may 30.

As decided by the tropical products negotiating group at its meeting in January, the group has received a number of proposals and indicative lists elaborating approaches, formulae and measures (tariff and non-tariff) on the negotiations.

The group had planned a two-days meeting this week to review all the proposals, preparatory to the two rounds of pre-negotiation multilateral consultations set far may 30 and June 27.

However, the negotiating group appears to have had only a brief half-day meeting, where some of the proposals and ideas were reportedly discussed, but without advancing the process of achieving a common negotiating basis.

Apart from the proposals and indicative lists, the U.S. and EEC have also addressed communications to individual Third World countries seeking information on their trade regimes in respect of a number of agricultural/tropical products, presumably with a view to addressing 'requests' for liberalisation of imports on products of export interest to the U.S. and EEC.

These communications, and some of the concepts and ideas in these and other proposals and papers from industrial countries raise, the question about the objectives and purpose of the negotiations.

Since 1963, when the tropical products issue first appeared on the GATT agenda, it has always been seen as an area of export interest and importance to the Third World countries.

Even the grouping ' tropical products, classifying some of the agricultural products (raw material and processed), was drawn up from the point of view of items of export interest to the Third World.

The Punta del Este declaration also recognised this, and the mandate in this area provides that ' 'negotiations shall aim at the fullest liberalisation of trade in tropical products, including in their processed and semi-processed forms and shall cover both tariff and all non-tariff measures affecting trade in these products".

The declaration added on this issue: ' 'contracting parties recognise the importance of trade in tropical products to a large number of less-developed contracting parties and agree that negotiations in this area shall receive special attention including the timing of the negotiations and the implementation of the results as provided in B (II) (of the declaration)".

In that para the declaration envisages the MTNS in goods being treated as 'parts of a single undertaking', but enables implementation on a provisional or definitive basis, of agreements reached at an early stage, prior to the formal conclusion of the negotiations.

In commenting on the U.S. and EEC requests at this week's meeting of the negotiating group a number of Third World countries reportedly expressed their reservations and comments, pending consideration of these matters in their capitals.

However, several of them reportedly also expressed their concern over what they saw as efforts to distort the mandate and focus of the negotiations by injecting other issues being dealt with in other groups.

The EEC, for example, has sought information from a number of Third World countries on their import regimes, claiming that the aim of the EEC initiative "is to draw a complete picture of trade barriers, both tariff and non-tariff ones, affecting trade in tropical products, as a basis for a comprehensive negotiation in line with the objectives set out in the Punta del Este declaration"

By using the term "in line", the EEC has clearly sought to extend the scope of the mandate and the negotiations.

The U.S. similarly has sought information on the import regimes and production or export subsidies.

Brazil, Colombia, India and Peru were reportedly among those who spoke expressing concern.

India, supported by Colombia, questioned the request for information on subsidies in the context of the work in the TP group. The group was concerned with 'market access' for tropical products exported by Third World countries and not 'subsidies' which was being dealt with in a separate negotiating group.

There was also an effort to establish linkages with agricultural issues, which again were being dealt with in a separate negotiating group. India was also concerned 'that while tropical products had been identified as a special priority issue, the negotiating group was devoting minimum time even for discussion of the issues.

Earlier, Sri Lanka on behalf of a group of Third World countries (Sri Lanka, Bangladesh, Colombia, Cuba, Egypt and Nicaragua), put forward a paper on the negotiating modalities to be adopted in order to achieve concrete results before the end of 1988.

Sri Lanka delegate, P. Nagaratnam, noted that in July 1987 these and other countries had provided an initial list of products whose imports should be liberalised, and though a general approach.

The modalities of liberalisation should be related to particular problems in the areas of tariffs, non-tariffs and phytosanitary measures affecting tropical products.

In the area of tariffs, a distinction should be drawn between unprocessed products and semi-processed and processed products. Problems in these two areas were different and would have to be treated differently.

Unprocessed tropical products at present enjoyed mainly duty-free entry - either under the MFN tariffs or under GSP schemes.

But duties did exist on a few items and in a few markets.

This was a 'residual problem', and there should be an immediate elimination of such duties, and bindings an unprocessed products at zero level duty.

In the case of semi-processed and processed products, the problems encountered were those of tariff peaks and tariff escalation depending on the degree of processing.

To deal with tariff peaks, and prevent any likely aggravation of tariff escalation following elimination of duties on unprocessed products, there should be an immediate reduction of tariffs on semi-processed and processed products to a given level.

The criteria for this 'x' level had to be looked into carefully, but it must address essentially tariff peaks and prevent unwitting tariff escalations.

Also, over a time frame to be agreed upon, there should be a phased elimination of tariffs from that 'x' level, with a formula depending on whether the MFN route or GSP route was taken.

In the area of non-tariffs, there were three different types of problems.

There were the problems of selective internal taxes - confined to four products (cocoa, coffee, tea and bananas) and to certain markets.

There was also the problem of 'variable levies' in certain markets (as in EEC, where levies are used to bring impart prices in line with domestic prices).

There were also prohibitions through quantitative restrictions, licensing, etc., in some countries on some products, which should be eliminated.

The continuation of such non-tariff measures would make no sense, with the proposed elimination of tariffs, if the fullest liberalisation were to be achieved.

Sanitary and phytosanitary measures having effects of non-tariff measures should also be abolished, and other measures should be simplified.

Sri Lanka also said that while the sponsors of these proposals were willing to make contributions, 'such contributions will not be related to this sector ... (but) in the context of negotiations as a whale".

The group also received proposals from Australia and Switzerland.

Australia, listing a number of products of export interest to it, proposed a formula or systematic approach under which all participating countries would:

--Negotiate phased elimination within ten years, preferably on an accelerated basis, of all trade protective barriers on TPS up to and including their primary processed stage,

--Negotiate reductions in overall levels of protection for other TPS, preferably as part of a formula approach covering both tariff and non-tariff measures including subsidies which have a trade effect, and

--Negotiate tariffs bindings on all TPS.

In its paper, Switzerland has proposed a formula approach, applied multilaterally and directed in particular at tariff peaks and tariff escalation. But if other participants did not consider this feasible, a request-and-offer procedure would have to be considered.

On a few 'particularly sensitive' products on which Switzerland had non-tariff measures, it was willing to negotiate on an ad hoc basis using a request-offer procedure.

Switzerland however 'insisted' that both industrial and Third World countries should contribute to liberalisation of trade in tropical products, though 'what is expected of developing countries must not be incompatible with their development, financial and trade needs'.

The contribution from the 'main beneficiary countries', the Swiss further suggested, would be their participation 'mare fully' in the framework of rights and obligations under GATT.

Also, Third World countries with a dominant position as suppliers should undertake to dismantle measures distorting competitive conditions for trade, such as export restrictions and refund systems.

Both Austria and EEC also tabled proposals, elaborating on their 'offers' at earlier meetings.

In comments on various proposals before the group, India reportedly noted that though tropical products was not the most important item in international trade, it had been singled out for special mention because of its export interest to the Third World countries. The proposals should thus ensure additionally of benefits to Third World exporting countries.

But this element was missing in all the proposals.

Also, according to available information, the industrial countries had the principal suppliers rights in most of the industrial markets not only for processed and semi-processed, but even for a number of primary products.

GATT sources said that while information was available on the countries that had 'initial negotiating rights', or had 'principal supplying interest' in terms of tariff schedules, no detailed data were available about trade flows and suppliers at various stages of processing. But the position stated was perhaps correct.

It was well known, the sources said, that the TNCS dominated the bulk trades of these products. And while Third World countries were the major suppliers and exporters of these products in their raw forms, the story was very different at even the first rudimentary stage of processing.

In such cases it would probably be true that main or major suppliers were industrial countries, and TNCS based in them who impart the raw materials and processed them before re-exports.

Also, same of the smaller industrial countries, like EFTA members, might not be imparting directly even raw materials but through firms in the EEC that import raw materials from ACP countries, do some elementary processing before re-export.