Jun 20, 1988

U.S.-EEC SOYABEAN DISPUTE FOR GATT PANEL.

GENEVA, JUNE 16 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The U.S. dispute with the EEC over soybean imports was referred Thursday to a GATT panel for adjudication, but with France openly disputing and disagreeing with the move agreed to by the European Community.

Though France asserted its rights as a GATT Contracting Party in the Council to deny a consensus, the chairman ignored the French objection and announced the consensus decision for reference of the dispute to a panel for adjudication.

Chairman Amir Jamal of Tanzania himself offered no explanation, but the GATT Director-General Arthur Dunkel made a statement to the effect that this was in accordance with the practice stretching back to a number of years in the council and other GATT bodies that the representative of the European Community had the full authority to commit the Community to a Council decision.

Under the Treaty of Rome setting up the European Common Market, it is the Commission that has the jurisdiction over external trade of the member countries, and negotiates on behalf of the member-states.

However, the Rome treaty itself has never formally accepted by the general agreement, and the member-states of the Community are all full Contracting Parties.

The U.S.-EEC dispute is over the payments and subsidies paid by the Community to processors and producers of oilseeds and related animal-feed proteins.

The U.S. complained that under the Community regime, processors of oilseeds enjoyed subsidies from the Community for use of domestic production, but not for use of imported raw materials.

This was contrary to article III of the general agreement, which called for national treatment for domestic and imported products.

Also, the U.S. complained, the Community subsidised production of oil-seeds.

These Community policies, the U.S. has complained, had nullified the concession made to it in 1952, during the negotiations for formation of the EEC, when the latter agreed to a zero-tariff on soyabean imports and bind that tariff in GATT.

The EEC’s subsidy policies had nullified this benefit to the U.S., and it had also caused substantial commercial damage. The U.S. has claimed a loss of about one billion dollars worth of exports to the U.S. market.

This issue had figured in the April meeting of the GATT Council. The EEC had then opposed the establishment of the panel.

At the GATT Council Thursday, Amb. Michael Samuels of the U.S. pressed for a panel, arguing that bilateral consultations had not produced any solution.

The Community spokesman, Amb. Tran Van-Thin while agreeing to a panel warned that the U.S. could be undertaking " a mistaken endeavour".

The issue, Tran said, was not a common place dispute but one of vital interest to the Community. It reflected major differences of approach to agriculture and farm support as between the U.S. and EEC.

Tran cited some figures to suggest that the agricultural support on both sides of the Atlantic was now more or less on the same levels, though the methods of support differed.

U.S. support and intervention in agriculture in 1979-81, Tran said, was an average annual 29 billion ECU’s, and had risen in 1984-86 to an annual 79 billion ECU’s. The comparative figures for the Community were 376 billion and 79 billion ECU’s, Tran said.

In the U.S. 59 of the 79 billion went directly to farmers and 20 billion cost was borne by consumers. In the Community 50 billion was borne by consumers and 29 went directly to farmers.

The Community had eleven million farmers, and their interests could not be sacrificed.

The U.S.-EEC differences on agriculture were one to be sorted out through the Uruguay round negotiations and not through GATT dispute settlement panels, Tran contended.

Either way the panel decided it would not help the Uruguay round negotiations.

If the decision went in favour of the EEC, the purpose of the negotiations would be diminished. If the decision went in favour of the U.S., it would paralyse the negotiating process.

After some further exchanges between Samules and Tran, when the Council was about to adopt the reference by consensus, the French delegate Jean-.Francis Boittin took the floor to express France’s opposition.

Boittin underscored the fundamental nature of the issue, and said that while France was attached to the GATT dispute settlement procedures, it could not agree to the issue being referred to a panel. The chairman of the council should hence not agree that there was a consensus.

Boittin’s remarks reportedly sparked off a lengthy discussion on the issue of "consensus", the basis for all decisions in the GATT Council, and the rights of Contracting Parties who are members of the European Community when they have views contrary to that of the Community.

While Boittin continued to insist there was no consensus in the Council for a panel, Tran continued to insist that the Community was in favour of a panel and that under the treaty of Rome only the Community was entitled to speak for the member-states in these matters.

GATT participants said that at this stage Australia’s Alan Oxley suggested to chairman Jamal that despite France’s objection to the consensus, the chairman should go ahead and announce a consensus.

India reportedly objected to this that while it did not want to enter into the issue of the competence of the EEC Commission vis-à-vis its member-states, if a Contracting Party stated its clear objection to a consensus, there was no way the chairman of the GATT Council or any GATT body could declare a consensus existed.

Brazil, Jamaica, New Zealand, Peru, Mexico and Hong Kong either supported India or took similar stands.

Mexico reportedly added that in any hypothetical case if it opposed a consensus it would constitute a lack of consensus while Hong Kong said it was concerned over the institutional aspects and that this could not constitute a precedent.

Australia, Canada and the U.S. however argued that it was for the EEC to determine whether there was a consensus within its member-states.

After further exchanges, and with Boittin continuing to insist on France’s objection, the chairman reportedly announced a consensus in favour or reference of the dispute to a panel.

Responding to Jamaica which noted that the EEC Commission did not even have jurisdiction over all trade matters, the GATT Director-General would appear to have intervened to say that it was GATT practice that the representative of the European Communities had the authority to commit the Community to any Council decision.

However a number of participants took the floor to make the point that this should not in any way be regarded as a precedent with respect to decisions by consensus.

Some third world participants later explained that the issue was not merely one related to the EEC and its member-states, but to the wider issues of GATT and it’s functioning.

They say that in the Uruguay round negotiating group on the functioning of the GATT system, the Nordic countries and Switzerland have argued that the consensus rule in GATT itself should be revised on what they call "procedural matters".

Reportedly these countries suggested that such "procedural matters" included questions like "launching of a new round" and that one or two CPS objections should not lead to blockage of a consensus.

Third world countries in the group reportedly objected to this, and despite this the chairman of the group, a former U.S. assistant Secretary Julian Katz has reportedly put the idea on the agenda of the next meeting of the negotiating group – which itself is a violation of the GATT and Uruguay round negotiating groups procedures for decisions by consensus.