Oct 5, 1985

"SERVICES" DIVIDES INDUSTRIAL WORLD TOO.

GENEVA, OCTOBER 3 (IFDA/CHAKRAVARTHI RAGHAVAN)— It is not merely Third World countries who have differences on the issue of services

in the next round of multilateral trade negotiations in GATT, but Industrial countries too are divided, the Brazilian Amb. Paulo Nogueira Batista, told newsmen Thursday.-

He was addressing a press conference along with Osvaldo Lopez Noguerol of Argentina, Mahmoud Abdel-Bari Hamza of Egypt, Shrirang P. Shukla of India, and Ms. Mila Kljajic of Yugoslavia.-

All five underlined that they had been able to join the consensus for a compromise decision at the special session of the GATT CPs Wednesday evening, since it was a procedural decision to set up a senior officials' group, with a clear mandate, and preserved the "integrity" of the 1982 and 1984 decisions on "services".-

The two understandings incorporated in the decision, one on the implementation of the GATT work programme, and the second that the work of the officials group would not "prejudge" the GATT work on services in terms of the 1982 and 1984 decisions, were the main elements that persuaded them to accept the consensus.-

Batista said that Third World countries are interested in discussing issues of "substance" and not of "procedure" at the senior officials group.-

The consensus decision reached Wednesday night at the special session of the Contracting Parties to GATT, Batista added, was "a truce, and not even an armistice agreement".-

"We have agreed to put behind U.S. the 'special session' and talk of majority and minority, and go back to the rule of consensus on which GATT has always operated. We have agreed to the procedure of a senior officials group, with a clearly defined mandate of the GATT, work programme, to consider substantive issues of a new trade round, and we have preserved the separate track, the ‘Jaramillo track’ in GATT on the services issue".-

"Perhaps the truce will last until the November session of the Contracting Parties. But we do not think even then issues of substance will be ripe enough to enable the CPs session to take a decision and set up a Preparatory Committee".-

The only decision in GATT on services, Shukla underlined, was the 1982 decision for interested countries to undertake national studies and exchange information among themselves, and the 1984 decision enabling the chairman, Felipe Jaramillo of Colombia, to organise meetings for this purpose.-

It was for the regular session of the CPs in 1985 to decide, in the light of the "Jaramillo track work", whether multilateral action in services was "desirable or appropriate", and there could be no discussion on the issue of services in a new GATT round before that.-

Batista questioned the view, put forward by the U.S., that the Third World countries were divided on the services issue, and opposition was confined to four or five countries.-

"In fact if you look carefully, there are probably only four or five countries, and that includes some within the European Community, who fully back the U.S. position on services", Batista said.-

"There is more division on this issue among Industrial countries than among developing countries", he added.-

"There are a few countries who have a strong position in favour of services in GATT, and there are a few who have a very strong position against it. Others have different shades of opinion in between, and that includes developing and developed", the Brazilian diplomat said.-

"As more work takes place on exchange of information on national studies, and sectors of services and what the U.S. proposal means, there will be more and more opposition to it, from developing and industrial countries", Hamsa predicted.-

Shukla and Batista disputed the view, that was put forward at one stage by the GATT secretariat and the U.S. during the three-day session, that the launching of a new round was one that could be decided by a simple majority by the contracting parties under article XXV of GATT, and that while it could not compel everyone to negotiate, a few could not prevent others from negotiating.-

Both Batista and Shukla said that negotiations by a few or interested delegations in traditional areas of goods had taken place before.-

But the issue on services was one of negotiations on matters outside the competence of GATT.-

Shukla said that actions under article XXV could be for giving effect to the provisions of the general agreement or furthering its objectives "which refers only to trade in goods".-

But extending the scope of the agreement or enlarging its competence, was not one covered by article XXV or an issue of procedure, but needed amendments to fundamental provisions that could be done only by unanimity under article XXX, the Indian delegate said.-

Shukla rejected any possible linkages between services and trade in goods, or of Third World countries making some concessions on services in return for liberalisation of trade in textiles and clothing.-

"Restrictions in the latter were imposed in violation of GATT, and no one compensated U.S. when they were imposed, and we do not plan to compensate anyone now for removal of illegal restrictions", Shukla added.-

Issues in the area of services involved a number of international organisations with competence in these sectors, and could not be rushed into a decision by GATT, Kljajic underlined.-

Batista said that even within the U.S., there was not that much of support on the issue of services or priority to it in the GATT negotiations, as was being made out.-

From an industry report to the U.S. Trade Representative, it was clear that U.S. industry wanted priority to trade in goods, and for actions to tackle U.S. budget deficits and exchange rate of the dollar which were weakening U.S. exports, Batista said.-

Shukla questioned the view that since services was an important and growing sector, international rules and disciplines were necessary for faster growth and participation in the sector by the Third World countries.-

"Even many economists do not subscribe to this view. In fact absence of disciplines modelled on the GATT may help faster growth", he said.-

"What is being proposed", Batista said, "is regulation of our national economies in the services sector in return for concessions to which we are entitled in any event, namely trade in goods, and to this we cannot agree".-

"And when it comes to international discipline on trade in services, it will be impossible to reach any agreement unless the restrictive business practices in this area are also tackled, and this cannot be done in GATT", Batista declared.-