EEC’S PRICE F0R INTEGRATION OF TEXTILE TRADE INTO GATT.

Jul 26, 1989

EEC’S PRICE F0R INTEGRATION OF TEXTILE TRADE INTO GATT.

GENEVA, JULY 24 (BY CHAKRAVARTHI RAGHAVAN)— The European community has formulated some proposals in the area of textiles and clothing, which, under the guise of "transition" arrangements for integration of this trade into GATT, will incorporate the present discriminatory Multifibre arrangement (MFA) regime into the GATT.

The MFA and its predecessors, in existence since 1961, have always been accepted to be "derogations" from GATT rules and principles and agreed to or extended from time to time as an "exception" and "temporary".

The Punta del Este mandate calls for integration of this trade into the general agreement under strengthened GATT rules and disciplines, which would mean subjecting this trade to GATT rules and principles that apply to other sectors of international trade.

The U.S. and EEC in effect have interpreted this call for "strengthened" GATT rules to mean change of GATT rules to virtually incorporate MFA concepts.

And for doing this, the EEC is asking third world countries to pay a price in a number of areas including lowered tariffs, reduction or elimination of GATT-legal non-tariff measures, and giving up their quantitative or other import restrictions, maintained and justified under GATT balance-of-payments or infant industry reasons.

In addition, the third world countries are also asked to agree to changes in GATT principles and rules and MTN codes relating to anti-dumping and ant-subsidy measures and procedures that would enhance trade-harassment capacity of the north, ensure access to their raw materials and at same prices for exports as for domestic producers, and provide greater protection to intellectual property, particularly trademarks, designs and models.

There should also be "strengthened" safeguard rules, which for EEC means rules to enable it to apply "selective" or discriminatory safeguard measures against third world imports without taking similar steps against imports from other industrial trade partners, and additionally put "transitionally safeguard" provisions to this sector of trade until the entire process of "integration" of textiles trade into GATT is completed.

As one third world participant put it, in effect the EEC is seeking to put the MFA into GATT and call it "integration" into GATT, and to do this is asking the third world to pay a price.

Proposals was presented and explained Monday at the meeting of the Uruguay round negotiating group on textiles and clothing. Besides the EEC, Switzerland also has tabled some proposals, which in some respects appear to parallel the EEC ideas.

The next meeting of the group will be in September. By then participants have been "invited" to notify to the group "other restraints" maintained by other participants which are inconsistent with GATT rules and disciplines.

The U.S. had earlier sought GATT secretariat to compile an "inventory of restraints" including non-tariff measures which, it has conceded, may not per se be GATT illegal, but should still be phased out along with MFA restraints.

Third world countries rejected the idea of secretariat preparing an inventory, pointing out that it could not make a judgement on which restraints were "legal" and which were not.

Switzerland in its paper had said countries could notify the negotiating group about measures of others, which they consider to be GATT-illegal, and the negotiating group could then see what needed to be done.

With EEC and Swiss proposals circulated only last week, and introduced into the group Monday, most delegates reserved their comments.

India in some preliminary comments, rejected the EEC idea of "parallelism" within the group in all the areas covered by the Uruguay round. The textiles group could only look into the integration of this trade into GATT, and other matters like tariffs, intellectual property, safeguards, subsidies, etc., would have to be dealt with in those groups.

As for "contributions" by all participants, India pointed out that the MFA and its predecessors were "derogations" from GATT and third world had already paid a "price" over the last 28 years in accepting discriminatory restrictions. Now the EEC was asking them to pay an "additional price" for removal of the discrimination.

India also rejected the concept of "transitional safeguard" measures for textiles relating to portions of that trade brought into GATT.

While the transition from the start of the integration and phase-out of MFA to full integration could be contemplated, the portion of that trade that would be brought into GATT in the gradual process of integration would have to comply with GATT and its safeguard provisions.

In other remarks, Brazil rejected as "a time-consuming modality and technically difficult of implementation", the idea of converting MFA quotas into tariffs as a way of integration.

For the third world alliance of international textiles and clothing bureau (ITCB), Darry Salim of Indonesia supported the Nordic view that tariffs on textiles could only be dealt with in the tariff group.

"Any attempt to pick out one particular sector for specific linkage with other negotiations is unwarranted," he said.

The EEC paper, which one third world observer called "long on concepts and short on specifics", said the process of integration of this trade into GATT could not begin before the end of the Uruguay, round-

MFA-4, due to expire on 1 august 1991, should be followed "by arrangements, whose specific contents must be negotiated in the light of the prevailing situation at that time", and whether the MFA should be extended, modified or discontinued could only be decided in the textiles committee which would have to meet by end July 1990 (to begin these negotiations and complete it by 1 august 1991).

The process of integration should coincide with entry into force of post-MFA 4 arrangements.

The completion of this integration process is "one of the most sensitive aspects" and could only be examined once the Uruguay round was drawing to a close and overall view of the negotiations was possible.

In effect, the EEC would appear to be saying that it expected the third world to agree to all the EEC demands in the area of subsidies, safeguards, intellectual property etc, and on that basis the EEC would agree to begin examination of the issue of setting a date for the conclusion of the "integration" process.

The EEC said modalities for progressive elimination of restrictions (MFA and others) had "a clear political link" for the EEC to "specific transitional safeguard mechanisms to be available for the duration of the integration process."

The transitional safeguard mechanisms should be developed in the light of experience of articles 3 and 4 of the MFA (which introduce concepts alien to GATT like "market disruption" due to low-cost low-price imports), for bilateral accords (and thus legitimise voluntary export restraints under GATT).

As a "contribution" to this process of integration, all CPS should take actions to liberalise their imports through actions on tariff and non-tariff measures, ceiling up recourse to GATT provisions enabling third world countries to impose restrictions on bop considerations or "infant-industry" arguments.

GATT disciplines should also be improved to enable more effective and rapid procedures for taking anti-dumping and countervailing measures (against subsidised exports) to take account of "seasonal factors and fashion", and the multiplicity of products, processing phases, producers and exporters.

In regard to dumping, since a large number of products and parties are involved, existing GATT provisions and procedures inhibit rapid opening and efficient execution of investigations and prevent actions being taken against those who anticipate such measures and resort to massive imports.

The textile exporting countries should also have to ensure, as a price for integration, that there are "no artificially created price differences" between raw materials for local production and those for export.

All participants should also subscribe to effective protective rules in their national laws in relation to protection of trademarks, designs and models in this sector of trade.

One third world observer commented that if the EEC ideas are incorporated into GATT, third world would not only find it had nothing to gain by integration of this trade into GATT, but that it had nothing to gain and everything to lose by being part of the GATT system itself.