3:41 PM May 10, 1995


Geneva 10 May (Chakravarthi Raghavan) -- Unless some serious attention is paid to the chaos in the monetary and financial systems, and coherence between the two and the trading system is brought about, the newly established World Trade Organization and its system will collapse, the European Union's former chief representative to the GATT, Amb. Paul Tran Van-Thinh, said here Wednesday.

Tran made the comment at a press conference to announce the holding of a "Global Traders Conference" in Geneva next week.

Tran was the European Commission's representative right through the Uruguay Round negotiations, and till the end of the negotiations in December 199. In that capacity he had played a key role not only in the fashioning of the WTO (at that time it was envisaged as the Multilateral Trade Organization) but also in persuading several leading Third World negotiators and lining them behind the EU on this, as an important way of curbing US unilateralism and trade sanctions to get its way.

Asked about the continued flourishing of its unilateral S.301 weapons by the United States -- and its imminent use against Japan now -- Tran dismissed it, saying that the US could only "harass" but could not take any actions. "If it did, it will put itself outside the pale of the WTO," he said. But Tran could not say how countries could deal with trade harassment and trade bullying, and the trade insecurity to countries caused by such American tactics.

The United States is due Wednesday to announce in Washington the trade sanctions it plans to adopt against Japan in their dispute over auto-part imports and purchases by Japanese enterprises. The US is due to announce a list of several billion dollars worth of imported products of Japanese origin, on which it would raise duties after 30 days.

This would violate, Art I MFN clause of GATT, and also Art II, US schedule of bound duties, where the duties are bound by the US. The US action would also violate the WTO's Dispute Settlement Understanding (DSU) under which members have agreed to have recourse to its processes in all cases of trade disputes and grievances.

Japan has said that it will not undertake further negotiations with the US once trade sanctions moves are under way, but would promptly bring the issue before the WTO and its DSU.

Washington media reports have said the US also plans to bring the dispute before the WTO, basing its complaint, under Art XXIII:1, on the ground of "nullification and impairment"

This would be a case of what is known as the "non-violation" clause of the GATT -- Art XXIII:1 (b) where a member complains of its rights being impaired or nullified by the application of any measure by another whether or not it violates a provision of the GATT or XXIII:1 (c) where nullification and impairment is claimed on the ground of "existence of any other situation".

This would be the first time this last provision is invoked in a dispute in the 47-year old history of the GATT. In such disputes, the automaticity built into the DSU will apply only till the stage of the circulation of a panel's report to the members -- and not for its automatic adoption.

The US action and threat, Japan's response, and the outcome will represent the "moment of truth" for the WTO, and its negotiators, members and the WTO head who have been talking of its being a rule-based system providing trade security and credible dispute settlement.

Earlier at his press meeting, Tran spoke of the turbulences on the exchange markets and its severe adverse effects on trade and production, and citing a Marrakesh declaration on coherence between the trading and monetary and financial systems, said the WTO in conjunction with the IMF and the World Bank would have to deal with it to bring about coherence.

He conceded however that the IMF and the World Bank had no influence or control over the industrialized countries, and particularly the three majors (US, Japan and Germany) who were responsible for the monetary chaos, and that the Group of Seven was now useless and could not do anything. He however suggested the WTO would have to deal with this issue and bring its influence to bear, but could not explained how or what could be done against the majors and their policies.

"But if they don't, this edifice we created after 7-1/2 years will collapse," he said.

Tran also said the WTO would have to pay attention to the "social dimensions" of trade which he said was part of the global economy and its effect. "Whether we like it or not, we have to take it into account," he said, adding he had no answers "but the actions must not be unilateral or protectionist".