5:33 AM Dec 14, 1993

SHIFTING TARGETS FOR A FINAL DEADLINE?

Geneva 14 Dec (Chakravarthi Raghavan) -- The United States and the European Community announced Tuesday, after marathon negotiating sessions in Geneva, that two had resolved all their outstanding differences to enable the conclusion of the Uruguay Round.

At a joint press conference, where there was considerable mutual praise for the other, USTR Mickey Kantor and EC Trade Commission Leon Brittan said they had both agreed to disagree on the audiovisual sector and keep this out of the services agreement, and that they had reached compromises on the financial services that would be beneficial for liberalisation of world trade.

While formally repudiating that the two were now joining hand to force others to accept the accords of the two major entities and conclude the negotiations, they made clear that they intended to make others make the necessary sacrifices for the benefit of world trade liberalisation.

Kantor trotted up his own projection of a six trillion dollar addition to the world output over the decade as a result of the Uruguay Round, while Brittan equally projecting growth to the world economy and jobs was careful enough to say that the conclusion would bring no immediate benefits, beyond some psychological effects, but would have long-run gains as a result of free trade and liberalisation.

Kantor though made clear that the US would not join others on the audio-visual sector in the Uruguay Round but would use every instrument at its disposal to see that foreign markets for US audio-visual industry and its exports and people everywhere could see what they wanted to see.

Brittan said that the EC had made an attractive offer, namely in effect guaranteeing that the US current access to the audiovisual sector (with US made films and audiovisuals accounting for 80 percent of the market) and willingness to discuss further the question of share in levies on blank tapes. However the US had rejected this and the EC members would now be able to pursue their cultural policies.

On financial services, the two said, they had agreed on a compromise under which:

* the United States would schedule its commitments in line with its two-tier approach - guaranteeing existing access to the foreign enterprises already having a presence in the States, and for areas they have been permitted to trade, and an MFN exemption for a second-tier of countries for which the US would grant full liberalisation ;

* this US MFN exemption for the second tier liberalisation would however be "dropped" for the first six months from entry into force of the agreement, after which period each country would be free to make a decision as to what it would do at that time.

Both Kantor and Brittan said that their overall compromise included US acceptance of the multilateral trade organization -- with Brittan claiming that this and the dispute settlement understanding, would be biggest achievement of the Round.

They would ensure, Brittan said, that in the world of international trade true multilateralism, and not unilateralism and naked exercise of power, would prevail.

Kantor said that the US had some objections, but the various changes in the rules and on the MTO that the others had agreed to would make it possible for the US now to accept it.

The two also announced an understanding of sorts on civil aircraft, but not in great detail. It would appear to involve continuance for the time being of the US-EC bilateral agreements on direct and indirect subsidies and that pending continued negotiations between the two over the plurilateral agreement on civil aircraft the US (or any others) would not use the subsidies rules to attack European subsides to airbus or any other aircraft.

With the announcement of the two major entities, the GATT multilateral process and meetings of heads of delegations to tackle the remaining issues and clear the texts are expected to resume.

Among the issues still remaining to be settled are those relating to the TRIPs text as well as textiles and clothing agreement where the US and EC are pressing India and Pakistan to commit themselves to provide significant market opening to imports of these products, as a price for the eventual phaseout of the 32 years of discriminatory restrictions on their own exports to United States and European markets.

The US-EC standoff till now on the audiovisual and other differences (even after the Brussels accords of theirs earlier in the week) had paralysed the multilateral process and the finalisation of the remaining texts on the table and completion of the market access negotiations and scheduling of commitments.

In what has become a process of continuously shifting the intermediate target deadlines towards completion of the negotiations on 15 December, all the participants have now been given time till noon of 15 December to file their market access schedules in goods and initial commitments in services.

The final session of the TNC to approve the agreements and the package of results has been fixed tentatively for the evening of 15 December, though this is probably likely to go well into the night.

Throughout Monday, as Kantor and Brittan resumed their bilaterals on audiovisuals, negotiators from other countries were put on standby through the night, but without actually being able to meet and finalise the approval of texts.

The approval, which was to have been completed by Sunday night, had already been put off by 24 hours on the outstanding texts, with GATT officials and its Director-General, Peter Sutherland, still insisting on the 15 December deadline being met.

While there is probably that could prevent the conclusion -- given that the two majors would apply their collective pressures to extract the last ounce of concessions for themselves from other trading partners -- there were still some worries that issues like textiles and clothing could prove that the "chaos theory" of physics might intrude into the arena of trade policy and economics and its neoliberal theological approach towards others.

The EC Council of Ministers are also due to meet on Wednesday in Brussels, to give their okay to the final overall package -- with Portugal threatening to veto the agreement if its demands on textiles and clothing are not met.

In part, the Portuguese demand relates to the high peak tariffs of the United States. But both the EC industry and the US industry are pressing for significant market openings commitments in India and Pakistan immediately as a price for the MFA phase-out in 2005.

As of Tuesday morning, neither India nor Pakistan seemed ready to yield to these EC demands and remove their import restrictions now in place for balance-of-payments reasons.

Brittan though was reported in Brussels as having said after the EC Council meeting that in Geneva he would meet India and Pakistan and press them to cede to the EC demands.

Kantor too was expected to directly press the two delegations.

Meanwhile, the US on its own and on behalf of the EC have made proposals for changes in the Textiles agreement, directly targeted against India and Pakistan. This is expected to be taken up during the day at the level of heads of delegations.

The amendment would enable the importing countries to exclude from initial benefits or increased growth rates those countries, who would be notified by the importing countries to the Ministerial Conference, as those not having provided effective market access to their markets on textiles and clothing.

The stand India and Pakistan might take is not very clear as of Tuesday noon, but it would make the Uruguay Round package more difficult to be acceptable to the two countries.

Indian and Pakistani negotiators have, however, over the last several weeks been insisting however that they can't be made to pay a price twice and that it would be impossible for their governments to accept this.

Officials of the two have been pointing out that they were not compensated when their GATT rights to export textiles and clothing were taken away and GATT-authorized derogation was obtained to enable the importing countries to impose discriminatory quota restrictions since 1961.

It was first introduced as a short-term agreement on exports of cotton textiles and clothing, then it became a long-term agreement and replaced in 1973 with the Multifibre Agreement. And with each successive extensions more and more fibres were brought in for restrictions, adding more categories of products and more restrictive arrangements.

While the US and EC industries benefited from these, the US and EC governments as contracting parties did not compensate India and Pakistan -- as they would have had to do if there had been no GATT-derogation and the two entities had to take recourse to the GATT Art. XIX safeguards.

Having enjoyed this "privilege" for over 30 years, the US and EC are now demanding that India and Pakistan -- two countries with massive populations living below poverty -- again pay a price now for getting back their GATT rights in this trade after another 10 years.

An earlier IPS report from Brussels said:

EC foreign ministers agreed to give "some flexibility" here Monday to bridge the gap between the EC and the US in the audio-visual wrangle to wrap up a world trade liberalisation deal by Wednesday.

EC trade negotiator, Leon Brittan, who briefed EC foreign ministers here Monday on the weekend's GATT developments returned to Geneva the same day.

EC foreign ministers will reconvene in Brussels early Wednesday to give their okay to the final package.

An agreement between now and then will largely hinge on a US-EC deal on the audio visual sector and another between the EC, US and other nations over opening of textile markets.

A Belgian EC Presidency spokesperson said Monday that Brittan would hold head to head talks with both India and Pakistan in Geneva on opening their protected markets to EC products.

"It is difficult to say today whether there will be a final agreement or not," assessed one French official.

EC officials said that the U.S. and the EC had been very close to resolving their long standing audio visual differences Sunday night -- incorporating a "separate and exceptional treatment" for the EC's audio-visual sector before the United States changed its tune.

Increased U.S demands in the audio-visual sectors including the better access to the EC market for new U.S audio visual technology and more U.S series on EC prime time television were rejected by EC negotiator Leon Brittan, backed by EC foreign ministers as "totally unacceptable".

But ministers agreed to consider a new demand for royalties on blank tapes. The flexibility agreed by EC ministers will involve consultations with the U.S. over access to EC imposed taxes on blank tapes.

"It would be bizarre if the Round were to fail over blank tapes," said UK foreign minister, Douglas Hurd.

But one Portuguese official played down the new U.S demands as a media move to gain the most in the last minutes of the Uruguay Round.

A written report from Leon Brittan to ministers Monday affirmed that a Uruguay Round deal must preserve in the long-term the "cultural identity" of the EC's audio-visual sector.

Brittan was equally firm on textiles. "A flat refusal of any results in the sector would mean failure for the Uruguay Round. We must negotiate right up to the last minute for approval of market access for textiles...The opening of third country textile markets, whether by developing or industrialised countries has not progressed very far."

His report hit out at what he termed the overprotected markets of India and Pakistan who had categorically refused to take any significant steps so far to open their textile markets.

He added: "This situation is made worse by the United States whose market is attractive for EC exports who have so far agreed only modest reductions in protective tariffs."

One EC official said the demands of some Latin American nations for improved EC access to EC markets for farm produce in the Uruguay Round will be deliberated by EC institutions over the next 48 hours.

EC farm commissioner, Rene Steichen, is expected to seek approval from 17-member European Commission, Tuesday for an improvement in the EC banana quota for Latin American nations.

The proposal would increase the tariff quotas from the present two million tonnes, by 100,000 tonnes for an initial year, and then to 2.2 million tonnes -- provided the Latin America agrees drops the decisions of the first GATT panel against the former EC banana regime and not proceed over the single market regime effective 1 July before the new panel.

The proposal from Commissioner Steichen, said EC officials here, would also recommend that Latin American states could carve up the present one big quota into "country quotas" between themselves.

An EC official also said that the Commission would consider at the same meeting improved access for Chilean apples and Uruguay's beef - proposals that would require approval of member states on Wednesday.

"The feeling here at the EC foreign ministers meeting was that you have to be very careful when talking about improved access for bananas," said one EC official.