Nov 12, 1987

CLIMATE FOR INVESTMENT AND BUSINESS IMPAIRED, SAYS GATT.

GENEVA NOVEMBER 11 (IFDA/CHAKRAVARTHI RAGHAVAN) – While the Uruguay Round, including its surveillance mechanism, have exercised "a steadying influence", trade restrictive or distortive protectionist policies pursued by governments continue to create doubts about the capacity of governments to follow the rules, and have impaired "the climate of confidence needed for investment and other business decisions", according to the GATT Secretariat.

This view of the Secretariat is in the overview of its note to special session of the GATT Council on developments in the trading system over the period April-September.

Developments in the field of trade, the Secretariat adds, have certainly not "matched the turbulence that has characterised financial and exchange markets in recent months and weeks".

"Nevertheless, concern over possible changes in trade policies in the direction of greater protection have continued to exercise and unsettling influence going beyond the field of trade", the Secretariat adds.

It refers in this connection to the proposals of the European Commission for levy on imported oilseeds and oils that have received wide attention, and the omnibus trade bill in the United States which is before the House/Senate Conference Committee for reconciling the versions of the two chambers.

"The Bill remains the largest single source of concern for the future course of trade policies and a number of governments have expressed their concern at its possible consequences, both for trade and for the Uruguay Round".

While tariff levels in industrialised countries is on the whole low and "bound" against increases, these countries now tend to use other commercial policy instruments, in particular Counter-Vailing and Anti-Dumping (CV/AD) duties.

There have been few changes in legislation, but "a significant development" has been the extension of the EEC’s regulations to cover actions against imported components of goods that have been subject to AD measures.

But there has been a drop in the number of AD duties and price undertakings enforced, and in CV actions taken.

While information available to the Secretariat in this area is far from complete, in the period under review 87 CV duty actions were notified compared to 99 in previous six months.

There were also 446 AD duties and price under-taking (where AD action is not taken in return for an undertaking by exporter to raise price to agreed level) as on December 31, 1986.

This was less than the 555 at end of June 1986.

There had been some improvements in the schemes of Generalised System of Preferences (GSP) as well as withdrawals of benefits.

The U.S. withdrawals had affected 4.7 billion dollars worth of imports from third world countries. Some of the withdrawals had been on the ground that beneficiary countries would not grant adequate protection for intellectual property rights or workers’ rights, GATT pointed out.

Though the Secretariat is silent on this, the GSP schemes are required to be non-reciprocal, and demands on GSP beneficiaries that they should in return agree to U.S. demands whether on intellectual property rights or any other are contrary to the basic principles of the GSP, and the decision of GATT Contracting Parties decision which incorporated the GSP into GATT through the 1979 enabling clause.

There has been no indication so far about abatement of use of subsidies for agricultural exports, though there is general recognition that this is a problem area and should be tackled in the Uruguay Round.

The main new development in this area, GATT adds, is in the increased funding for the U.S. Export Enhancement Programme (EEP).

Since its inception in 1985, the U.S. EEP has facilitated sale of 2.1 billion dollars of U.S. far products.

The EEP would receive an additional billion dollars in fudging under pending trade legislation. Meanwhile the EEP’s funding is down to 200 million dollars.

The GATT not brings out that there was some 135 "grey area" measures in place during the period.

The bulk of these were in steel (38), textiles (28), agriculture (21), transport equipment (14), electronics (11), footwear (eight) and machine tools (seven).

On the importing side the countries involved were EEC (69), U.S. (68), and Canada (seven). On the exporting side, countries involved were Japan (25), South Korea (24), and the EEC (seven).

There was a widening of the range of South Korean exports to the U.S., which were covered by such agreements and negotiations by the U.S.A. of eight bilateral agreements outside the MFA restricting the export of textiles.

A major area of concern in trade policy, the note says, relates to the "continuing preoccupation with bilateral trade imbalances".

Discussions to redress such imbalances have taken place in the period, notably between the EEC and Japan, EEC and South Korea, U.S. and Japan, and U.S. and South Korea.

"Another trend in recent years has been the use of threats of unilateral retaliation by major trading powers to solve problems in preference to the use of multilateral dispute settlement mechanisms", GATT notes.

"The threat of retaliation", it adds, "has been preferred because it is seen to be taking less time and more decisive in its operation, even though it may carry high risks".

The dominant issue in the area of trade policy in textiles, GATT says, is the proposed textile bills being considered in the U.S. Congress, which would set limits on imports of textiles and products from all suppliers.

With the administration strenuously opposed to the bills, the main concern is whether sufficient votes would be attracted to over-ride a presidential veto.

Lobbying for the bills, GATT notes, has been stimulated by the record U.S. textiles and clothing trade deficit of 11.86 billion dollars or a 22.5 percent increase over comparable period in 1986.

"However", GATT adds, "this ignores the increase in domestic production capacity utilisation and profits in the U.S. textile industry".

Apart from the bilateral accords negotiated under the MFA – 27 by EEC and 39 by the U.S. – there were 25 restraint-type arrangements concluded by importers with textile-exporting countries not participating in the MFA.