Nov 2, 1985
GATT COMPETENCE AND PRIORITY FOR SERVICES QUESTIONED.
GENEVA, OCTOBER 31 (IFDA/CHAKRAVARTHI RAGHAVAN)— Questions relating to the competence of the general agreement to deal with issues in the "services" sector, and the priority sought to be given to it would appear to have been questioned by a large number of Third World countries, at the current meeting of the senior officials group in GATT.-The group of senior officials are discussing the subject matter and modalities of a proposed new round of multilateral trade negotiations in GATT.- The group would appear to have completed Thursday discussion on the possible subject matters for a new round and take up Friday questions relating to the modalities of such a round.- While the European Community apparently sought to present it in terms of why there should be negotiations on services, Japan and the U.S. in an orchestrated way would appear to have insisted on GATT competence, and for the ability of Contracting Parties to launch a new round and include services within it by majority.- About a dozen Third World countries spoke up either specifically challenging the jurisdiction of the general agreement in this field or opposing its inclusion as a subject in a new round, according to Third World participants.- Those who took this position included Brazil, India, Egypt, Argentina, Yugoslavia, Nicaragua, Peru, Pakistan, Barbados, Zaire, Cuba and Kuwait.- Brazil, India and others insisted that any GATT involvement in the services sector could only be by unanimous consent of all GATT Contracting Parties.- India and some others even challenged the competence of the senior officials group to consider services issue, in the light of the mandate given to it by the special session of the GATT Contracting Parties, and the 1982 and 1984 decisions of the CPs on the services issue.- The question whether any multilateral action on services was appropriate and desirable had been reserved by the Contracting Parties for their own decision at the 1985 session, and the senior officials group could not prejudice this by discussions on the inclusion or otherwise of the services issue in the new round, they argued.- The principal argument of the U.S. and Japan on services was that though there was no specific GATT provision on services, under article XXV of the general agreement, the Contracting Parties could take "joint action" to further the "objectives" of the agreement, which was wide enough to include services.- The preamble of the general agreement talks among the objectives of "raising standards of livings ensuring full employment and a large and steadily growing volume of real income and effective demand, developing full use of the resources of the world and expanding the production and exchange of goods".- In the U.S. and Japanese view, both the increasing weight of "services" in economic activities of countries, and its close linkage to "goods", was sufficient to bring it within the objectives of GATT.- India however challenged this, arguing that the general agreement and its provisions had to be interpreted in the context of the negotiating history.- This was a reference to the decision of the UN Economic and Social Council in 1947 summoning the Havana Conference for the purpose of promoting "production, exchange and consumption of goods", and the negotiations at Havana on the charter of an international trade organisation.- During the negotiations India, Brazil and Cuba had sought to include "services" in the Havana charter provisions relating to prohibition of restrictive business practices by private enterprises, and it was some of the industrial countries like U.K. and Canada that had opposed bringing "services" into the charter.- The Havana charter itself never came into being because of U.S. refusal to ratify it, but provisions of the charter relating to governmental actions on tariffs and trade were put into effect provisionally as GATT.- Without taking an express position on the competence issue, several other Third World countries, and some of the industrial countries, stressed that the issue of services should not be linked to issues of trade liberalisation and negotiations in goods.- The senior officials’ group itself is not expected to reach any conclusions on any of the subjects or modalities of a new round, but is expected to submit a report on the discussions to the next session of the Contracting Parties.- This is the third meeting of the senior officials group, which is expected to hold at least one more meeting before the annual session of the GATT CPs scheduled for the last week of November.- Earlier, in the discussions in the group this week on textiles and other trade in goods issues on the 1982 work programme, the U.S. clearly hinted that not only questions of further liberalisation of trade in goods, but even the U.S. president's resistance to congressional pressures for protection (like the Jenkin's bill to restrict textile and clothing imports) would depend on the progress made in GATT "in other areas" in the context of a new round.- This appeared to be a reference to U.S. demands for negotiations on trade in services.- Brazil told the senior officials group that by any reading of the provisions of the general agreement, it was clear that services was outside the competence of GATT.- The subject of services could not be included in any new round without the consent of all CPs, and Brazil expected the CPs to be aware of their "responsibilities" to the general agreement.- The issue of services, the Brazilian delegate contended, should not also be presented as a condition for further liberalisation of trade in goods. The liberalisation of trade in goods was urgent, and could not be blocked by discussions on services.- Chile, while open to the idea of a discussion for an agreement on services, did not want a situation where concessions on issues of interest to the Third World could be secured only in exchange for their making concessions on services.- And while Chile could envisage action on services being taken within GATT, it would oppose incorporating services within the general agreement.- Any future agreement on services should also be a multilateral set of rules, and incorporates more favourable treatment to the Third World countries.- Argentina insisted that the discussions on services could not go beyond the formulations set in the 1982 and 1984 decisions of the GATT Contracting Parties, nor could be there be any prior conditions for negotiations on trade in goods by relating them to services.- India underlined that references to raising standards of living or full employment in the preamble to the general agreement could not be used to bring services within GATT competence.- By that logic almost every economic activity could be the subject of GATT jurisdiction.- The preamble of GATT, in its objectives, went from the general one of raising living standards to the specific one of "expanding production and exchange of goods", and achieving this through the modality of "substantial reduction of tariffs and other barriers to trade".- The provisions of article XXV of GATT for joint actions by CPs could be for giving effect to the provisions of the general agreement or in furtherance of the objectives of trade liberalisation in goods through removal of tariff and non-tariff barriers, but could not be "stretched" to expand the jurisdiction of GATT or widening its scope.- Any such action could only be taken through the rule of unanimity, the Indian delegate insisted.- Egypt in a lengthy presentation on the juridical issue, made the same point about GATT competence.- Also, any actions contemplated under article XXV of the general agreement could not cover services, and in any event could not be taken without the unanimous consent of all Contracting Parties, since it would involve an amendment to part one of the general agreement.- Pakistan clearly saw services as being outside the GATT jurisdiction, but seemed willing to envisage some discussions on the issue in GATT.- Uruguay while open to a dialogue in GATT on this issue, insisted that the priority in the new round should be for trade in goods.- The Uruguayan attitude on services would depend on the responses it got on other issues, specially in areas of great dissatisfaction to Uruguay in the working of the general agreement as in agriculture.- Australia saw any negotiations on services as a lengthy process needing a multi-tiered approach - negotiating first for some general conclusions, and then looking at individual sectors in the area of services.- Australia hence saw little prospects if discussion on trade in goods were to be linked to discussion on services.- New Zealand had no objection to services being dealt with in the Preparatory Committee, provided its primary focus remained on traditional areas of GATT.- Earlier, the European Community spokesman sought to lay the basis for including services in GATT and in a new round on the basis of a paragraph in the 1982 Ministerial declaration that the Contracting Parties should give "continuing consideration to changes in the trading environment so as to ensure that the GATT is responsive to these changes".- In the Community's view this justified discussion in GATT of services and including it on the agenda of a possible Preparatory Committee for launch of a new round.- The Community agreed that GATT rules and provisions as such could not be applied to services.- But the Community in any negotiations would seek to procure "security of knowledge" by requiring transparency of governmental actions and regulations in the services sector, and "security of operation" through specific rules and principles applicable to services.- Many of the regulations were justifiable on domestic policy objectives, and negotiations must identify those serving protectionist purposes and see how they could be liberalised or removed.- While the negotiations should be held in GATT, in the Community’s view it was not necessary for all CPs to join the negotiations, nor was there any question of the rules developed being imposed on everyone.- In a reference to the views of some about the need for "unanimity" in decisions on services, the Community also argued that the consensus rules of GATT should not be used to veto negotiations on services, and suggested that if this was done the Community might refuse to negotiate on agriculture. The U.S. argued that the issue was not whether rules on services could be "imposed" on any CP, but whether they could "consult" on trade in services in a Preparatory Committee for the new round.- In the U.S. view, there were already articles of the general agreement which dealt with some "services" - such as the articles relating to cinematograph films and their screening times, freedom of transit for goods across territories, and other provisions and decisions.- The U.S. could not also accept the claims that it was impossible to frame general rules applicable as such to services, since they were so diverse and disparate activities.- Sweden, on behalf of the Nordics, supported inclusion of services in a new round, on the ground of the intimate connection between services and goods in international trade.- Hungary, and other east European countries appeared to favour discussion on services in the Preparatory Committee.-