Jul 8, 1989

FINANCE LINKS EXPLORED IN GATT COMMITTEE.

GENEVA, JULY 7 (BY CHAKRAVARTHI RAGHAVAN)— The linkages between trade, finance, money and debt, appears to have received some in-depth discussions last week at the GATT meeting of its committee on trade and development (CTD).

The issue is expected to be taken up further at the next meeting in October, when more substantive discussions are expected to take place.

This issue of trade, debt and finance link was one of the items on which no agreement could be reached at Punta del Este when launching the Uruguay round and was referred to the GATT machinery.

But since then the U.S. and the GATT secretariat have been trying to use the negotiations on functioning of the GATT system into securing through GATT enforcement of IMF advised policies.

The CTD chaired by Amb. Rubens Ricupero of Brazil, is reported to have had what one participant called an "extensive brainstorming cession", with active participation of a large number of delegations at ambassadorial level.

Participants said that in order to secure some full and frank discussions, without the inhibitions of a negotiating forum, it had been agreed before hand that there would be no formal decisions or agreed conclusions, but that the occasion would be used to exchange views and throw up ideas that could be pursued in the various Uruguay round negotiating groups.

One participant said that except for the U.S. which had a negative approach (to any discussions on this in GATT, preferring the Bretton Woods forums), others appeared to be willing to have further discussions.

The EEC reportedly referred to the importance of the trade finance link, the growing population in the third world and the need for faster development and said that third world countries could not expect to base their growth on foreign trade and exports to the industrialised world finance their development, since the industrial world would not be able to absorb their exports.

Rather third world countries should rely on their own internal markets and create an atmosphere to attract investments.

Brazil reportedly underlined that third world countries were now the main victims of recent developments in trade and finance environment. Latin America, for example, was honouring daily 100 million dollars in debt-interest payments. But for that they had to restrict imports, endangering their capacity to export, in view of protectionist barriers in export markets. Only increased imports by industrial markets and investments by them in the third world would enable latter to increase their own imports.

It was thus necessary to provide a concrete trade-finance link, consider how autonomous liberalisation measures of the third world countries could be given "credit" in the Uruguay round, and consider how the contradictory demands on the indebted countries increase of their exports reduction of imports to service debt could be resolved.

The GATT Director-General who had been mandated to hold consultations with IMF and World Bank heads and report should deal with these matters also.

Peru reportedly noted that it had placed some specific proposals on the table (at the fogs negotiations and the TNC) and these should be pursued.

Mexico felt there should be some kind of an "escape clause" in Uruguay round agreements so that the highly indebted countries should be able to take care of their problems via trade, while Argentina underscored the need for specific solutions for special cases, while keeping the global picture in view.

India, Tunisia and several others referred to the debt, trade and finance links and problems in different regions and the need for solutions keeping these in mind. Egypt in this regard also reportedly brought up the problems of indebted net-food importing countries, whose import costs would go up under "liberalisation" of agricultural trade.

Canada, without committing itself to various suggestions, agreed on the importance of the discussions and need to address them. There were obvious links between protectionism and its serious implications for financial markets.

Colombia felt that the ideal would be that at the end of the Uruguay round, third world countries should have a better atmosphere at the financial level so as to provide more concessions during the round. The somewhat inadequate references in the Punta del Este mandate had borne little fruit. There was no progress in stemming remittances from Latin America, and the responses to the trade finance link and the market had been also limited.

The U.S. felt that the issues raised were being dealt with in other fora, and it had agreed to participate in CTD discussions on the basis there would be no conclusions or practical implications for negotiations in the round. The subject should not become a permanent agenda on the CTD, and could at best be explored further at one more meeting.

Uruguay, supporting the views of other Latin American countries, however underscored the mandate of the CTD and its full competence to deal with all these issues of concern and interest to the third world. The fact that other fora were dealing with debt matters did not mean that GATT should not deal with its implications in trade.

Uruguay also reminded the industrialised countries that the Punta del Este mandate provided that to ensure effective application of the special and more favourable treatment to the third world in the round, at the end of the round the group of negotiations in goods had to undertake an evaluation of the Uruguay round results in terms of the Punta del Este objectives and mandate and the issues of interest to the third world.

At that time the question of debt and its solution would inevitably have to be on the table, and the third world countries would be asking what concessions had been provided to them to alleviate their problems of foreign debt.

The implication of the Uruguay remarks appeared to be to politely remind the U.S. and others that at that stage the third world might not agree to the various decisions in individual negotiations, taking the "global view" of the negotiations in goods as a "single undertaking".