Sep 23, 1989

U.S., EEC FIRM ON THEIR CONCEPTS OVER TEXTILES.

GENEVA, SEPTEMBER 22 (BY CHAKRAVARTHI RAGHAVAN)— The U.S. and the European community would appear to have bluntly made clear that without acceptance of their concepts on the future of textiles and clothing trade there could be no progress on this issue in the Uruguay round.

The Punta del Este mandate calls for formulation of modalities to permit the "eventual integration of this sector into the GATT on the basis of strengthened GATT rules and disciplines, thereby also contributing to the objective of further liberalisation of trade".

The mid-term review accord in this area, weak as it is, still provides for agreement to be reached on the modalities to cover the phasing out of restrictions under the MFA and other restrictions on textiles and clothing not consistent with GATT rules and disciplines and a time-span for such a process of integration.

The progressive character of the process of integration is to start on the conclusion of the Uruguay round negotiations in 1990.

At the last meeting of the negotiating group on textiles and clothing, the EEC had put forward some ideas which among other things had called for special transitionally safeguard measures during the process of integration (which in effect would have enabled importing countries to continue MFA-type discriminatory restrictions against individual countries as also for liberalisation of imports by the third world.

At the meeting of the group this week, the U.S. put forward a paper which made clear that before any substantive negotiations could take place - under the mid-term accord this was to have begun in April - some basic conceptual problems outlined in its paper should be tackled.

The EEC, in a lengthy intervention to respond to the strong criticism of its paper by the exporting countries, claimed that it was in favour of bringing the MFA to an end gradually through phasing out of existing restrictions. It also came out against some of the concepts for integration like converting existing restrictions into tarification of quotas into global quotas. The EEC saw these could create problems and its feasibility was in doubt.

While some third world participants felt the EEC had been slightly more positive, others noted that the EEC negotiator Alex Schaub, had made clear that if the third world countries would not accept the concepts about scope of negotiations, the EEC could not negotiate.

Some third world observers note that some of the exporting countries - both the established exporters with assured quotas who can't expand exports but would lose in competition if MFA is phased out, as well some new entrants who feel a quota system would help get a niche in the market - have been sending signals that they don't want MFA to be ended.

In this situation, the textile industry lobby and governments of major importing countries have become emboldened in both putting off to a long distant future end of the MFA special regime and in demands for this too, even though they never compensated the third world for introducing the MFA.

In its paper, in a general introduction, the U.S. reaffirmed the objectives of the negotiation, namely "the eventual integration" of the trade into GATT.

But the other points and conditions in the U.S. paper suggested that this objective would be a very distant objective where in return for the U.S. giving up MFA restrictions, which are violative of GATT but maintained under a special regime, third world GATT participants would give up their existing GATT rights.

In the U.S. view, the modalities for integration should not merely deal with MFA-type restrictions or others contrary to GATT, but all "trade distorting measures".

Apart from MFA or MFA-type voluntary restraint agreements with non-MFA members and measures taken outside normal GATT procedures, in the U.S. view the trade-distorting measures would include:

--Safeguard measures undertaken to protect infant industries or for BOP reasons, but not formally notified, justified or approved pursuant to normal GATT procedures, and

--Measures such unbound tariffs which, while not inconsistent whit GATT, could be "said" not to be integrated with GATT.

This last appeared to be a somewhat strange U.S. argument.

While GATT CPS have obligations in respect of tariffs which they have agreed to reduce and bind, there are no obligations where they have not agreed to reduce and bind them.

While tariff reduction and exchange of concessions could be a matter of negotiations in the tariff negotiations, in effect the U.S. is bringing the issue into the textile group, with the novel theory where a country has not been involved in tariff negotiations, whether because others had nothing to offer it or any other reason and even though it is within its GATT rights in this regard, it should now be penalised through the textile negotiations.

The U.S. also called for parallel and linked actions on other demands including access to raw materials.

The U.S. also noted the assumptions in several papers that there would be MFA-type transitional safeguard arrangements until full integration of this sector, but suggested also consideration of modalities to convert existing restraints into global quotas, tariff rate quotas or equivalent tariffs.