Oct 12, 1985

NO LETUP ON FIGHT OVER SERVICES AND INVESTMENT ISSUES.

GENEVA, OCTOBER 11 (IFDA/CHAKRAVARTHI RAGHAVAN)— Brazil and India sent the clearest signals Thursday that they were determined to fight U.S. efforts to tie trade in goods to investment and service policies of countries. -

In the GATT Council on Thursday when the U.S.-Israeli bilateral trade agreement came up for consideration, Brazil and India blocked the reference of the agreement for study by a working party, on the ground that the agreement covered areas not within GATT competence, and hence they needed more time to look carefully at the terms of reference.-

Separately, Brazil also brought to the attention of the Council, "investigations" started by the U.S. against Brazil for alleged "unfair trade practices" in relation to the Brazilian informatics law and Brazilian restrictions on imports of informatics goods, services and foreign investments.-

Brazil warned that any unilateral investigations and findings leading to U.S. "retaliation" against Brazil and "goods" imported from brazil into the U.S. would be a violation of GATT and would be raised by Brazil in GATT.-

The U.S.-Israeli agreement is purported to be a "free trade area" agreement and provides for preferential trade in goods, and for U.S. investments in Israel and for U.S. enterprises providing various economic activities that go under the broad category of "services", including the right of "establishment" of enterprises to provide such services.-

The U.S.-Israeli agreement is in pursuance of the 1984 U.S. trade law, and the powers given under it to the administration to negotiate such arrangements.-

The U.S. administration is striving to bring within GATT framework issues relating to foreign investments and service activities, and provide international regulations on permissible level of national policies and restrictions.-

Towards this end, the U.S. has been seeking to launch a new round of multilateral trade negotiations, including negotiations on services and investment issues.-

The U.S. has also announced that if it is unable to get its way in bringing these issues into the GATT framework, it would proceed to achieve its objectives through direct bilateral arrangements.-

The U.S.-Israeli pacts, and the proposed U.S.-Canadian pacts, have been held out as possible precursors of this U.S. move.-

GATT itself enables its signatories to have customs unions and free trade areas, with a view to increasing freedom of trade between constituents, but without raising barriers to trade of other Contracting Parties.-

These agreements, covered by article XXIV of GATT, have to be notified to GATT, and are examined by the Contracting Parties as a whole as to its compliance with the requirements of the article and its implications for others, including whether the interim arrangements would genuinely result in a customs union or a free trade area within "a reasonable length of time".-

Normally, this is done in GATT by the appointment of a working party, and with terms of reference that have become more or less normal for such agreements.-

When the U.S.-Israeli agreement came up before the GATT Council Thursday, and the chairman of the Council, Amb. Kazuo Chiba of Japan, put forward a proposal for the setting up of a working party and its terms of reference, it ran into objections from Brazil and India.-

Both of them underlined that the U.S.-Israeli agreement was not a normal free trade area agreement, but covered issues beyond those within GATT competence, and hence they needed time to carefully look into the terms of reference of the working party before they could agree to the move.-

The U.S. suggested that the terms of reference themselves did not deal with the investment or service issues, and so there could be no objection.-

However, the Council put off action, pending consultations on the terms of reference.-