NORTH ACCUSED OF STALLING NEGOTIATIONS ON TEXTILES.

Jul 26, 1988

NORTH ACCUSED OF STALLING NEGOTIATIONS ON TEXTILES.

GENEVA, JULY 22 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The industrialised countries have been accused of stalling the negotiating process on textiles and clothing in the Uruguay round, and indirectly warned that progress and success at Montreal Ministerial mid-term review in December would depend on progress in this sector too.

The viewpoint of the third world exporting countries was put forward this week at the meeting of the Uruguay round Negotiating Group on Textiles and Clothing.

The negotiators have been mandated "to formulate modalities that would permit the eventual integration of this sector into GATT on the basis of strengthened GATT rules and disciplines, thereby also contributing to the objective of further liberalisation of trade".

The negotiating group has made little progress since it began work in February 1987.

The lack of seriousness about the negotiations on the part of the industrialised countries is illustrated by the fact that the negotiating group meetings are often staffed by their local, relatively junior, diplomats.

The U.S., which has negotiators specifically named (in the office of the U.S. Trade Representative) for each of the negotiating areas, has none for textiles and clothing.

The third world countries have been pressing for negotiations on modalities to phase out the Multifibre Arrangement, which governs trade in this sector. The MFA is a derogation forms the principles and rules of the general agreement.

In a statement this week in the negotiating group on behalf of the third world MFA exporting countries grouped in their alliance, the International Textiles and Clothing Bureau (ITCB), Amb. Darry Salim of Indonesia, said the discussions in the group should focus on the substantive work to be accomplished by the end of the year.

The negotiating group, he said, must complete the examination of modalities and establish the framework for negotiation of modalities for integration of the sector into GATT at the earliest.

This, he said, would enable the Montreal Ministerial meeting of the Uruguay round’s Trade Negotiations Committee (TNC) in December, "to impart further political impetus to the negotiations".

The ITCB, he said, had put forward four mutually reinforcing elements as a basis for formulation of modalities, and this should be framework within which negotiations should be conducted.

Salim expressed concern at the "postures" being struck by the industrialised countries displaying not only a "lukewarm attitude" to these negotiations, but an attempt "to stray beyond the negotiating objectives".

None of the industrialised countries, he pointed out, had put forward any credible or concrete modality for achieving the negotiating objective, and "their generalised statements only tend to stall the negotiating process".

Explaining the ITCB proposals and approach, Salim pointed out that for over a quarter of a century, and contrary to GATT rules and disciplines, selective and discriminatory restrictions had been imposed on the third world exports of textiles and clothing.

Hence to achieve integration of this trade into GATT, the first priority should be "to freeze further restrictions forthwith".

Such a freeze, he said, would be different from the standstill commitments at Punta del Este, a stop to new MFA restraints was necessary so that the phase-out process was not nullified.

An important aspect of integration into GATT should be relaxation of restrictions, and within the concept of general relaxation, the restraints could be eliminated by abolishing quotas on products for which domestic production had been increasing, on quotas for small suppliers, least developed countries, and wool and cotton based third world exporting countries and quotas based on outward processing traffic.

A major modality for integration into GATT should be the elimination of concepts and practices under MFA incompatible with the general agreement, Salim suggested.

Towards this end there should abolition of the "price criteria" (on the basis of which restraints are imposed), elimination of use of exceptional circumstances, including the Minimum Viable Production (MVP) concept, exclusion of basket extractor and consultation levels, elimination of aggregate and group limits, and elimination of concept of "market disruption".

The discriminatory and selective restrictions imposed under MFA on third world countries had turned on its head the GATT principle (in part IV and in the 1979 enabling clause) for differential and more favourable treatment to the third world.

The process of liberalisation and integration of the textile sector into GATT, Salim said, would have to be phased in and at the same time the MFA should be phased out.

These two elements were crucial, and agreement would have to be reached in the Uruguay round on a date for the termination of the discriminatory and exceptional treatment given to the trade in this sector.

In other remarks, Salim was sharply critical of the Nordic request for studies on the implications of phasing out the MFA and integrating the trade into GATT.

Salim recalled that in 1960, when GATT was seized of the problem of the discriminatory and voluntary export restraints that was already being imposed on third world textile exporters had come up before GATT, the Nordic countries had proposes the phasing out of restrictions through progressively higher growth rates.

Instead of suggesting a similar modality now for integration of the textile sector into GATT, the Nordic countries were proposing a study on implications and possible consequences of achieving the objective of integration, Salim pointed out.

The request for study was being made "as if the Ministers, while setting out this objective at Punta del Este, were not aware of the implications of their decision, and it is for the negotiating group or the GATT Secretariat to give the Ministers at least some idea of what the consequences of their decision could be".

"This is certainly not what the ministers would expect from the negotiating group two years after Punta del Este", Salim added sarcastically.

Any new study on the quantitative consequences of dismantling the MFA, Salim said, was not feasible, since it implied some econometric model, and would involve a number of assumptions on factors other than MFA import restraints.

Some of these extraneous factors would include macro-economic conditions, exchange rates, consumption, consumer and producer prices, profits, investments, imports from non-restricted sources, and exports.

"The feasibility of a quantitative study is thus questionable", he declared.

As for a qualitative study, there was a large number of studies and reports by international organisations, national administrations and research institutes, both on the costs and benefits of MFA as well as consequences of dismantling.

Salim presented the negotiating group in this regard, a note prepared by the ITCB, pulling together the main conclusions of such qualitative studies.

Third world participants at the meeting said that despite the ITCB’s statement, and supporting statements from third world countries, the industrialised countries would not be drawn into any substantive discussions, and the scheduled two-day meeting ended a day earlier on Thursday itself.

According to some of the participants, in private talks the U.S., for example, has made clear that it would have no mandate to negotiate on this sector, even if Congress would adopt the new trade bill as expected, and it just was not ready to negotiate the phasing out of the MFA.

In some informal and formal discussions, Pakistan, India and Mexico, among others reportedly tried to provoke the industrial countries into a discussion, but without success.

At the end the negotiating group merely agreed to meet again on September 19-20, and allow participants to reflect on the note provided by the ITCB.

The members of the ITCB are expected next week, at the meeting of the Uruguay round Group of Negotiations on Goods (GNG), to express their disappointment and dissatisfaction at the way the work in the group was going, with negotiations lagging behind that of other groups.