Nov 28, 1985
BRAZIL AND U.S. SQUARE OFF ON SERVICES.
GENEVA, NOVEMBER 26 (IFDA/CHAKRAVARTHI RAGHAVAN)— Brazil and the U.S. squared off Tuesday over the services issue at the meeting of the GATT Contracting Parties, as informal consultations continued outside among principal protagonists to find a compromise on the issue of a new round of trade negotiations.-A Brazilian speech, setting out its firm opposition on legal and economic grounds to the GATT consideration of "services" and including the issue in the new round, and a U.S. speech insisting on bringing services into GATT, and discussing the issue in a Preparatory Committee, were reported by participants as the highlight of Tuesday’s discussions on the report of the GATT Council.- The informal consultations outside reportedly involved among others the European Communities, the U.S.A., Switzerland, India, Brazil, and South Korea.- The U.S. has been pushing, at this session of the Contracting Parties, for the setting up a Preparatory Committee for the new round, without specifying its mandate, and thus enabling it to consider both the trade in goods issues, as well as the services and other new issues like high technology and protection of intellectual property that the U.S. and others want to bring into the general agreement.- Brazil, India and others on the other hand are insisting that any Preparatory Committee could discuss only issues within GATT competence.- The European Community and others are reportedly trying to work out some compromise for the continuance of the so-called "Jaramillo track" on the services issue, to continue both examination of issues in the light of national studies and also to consider and report on the desirability and appropriateness of multilateral action on services.- The compromise would also reportedly involve the setting up of a Preparatory Committee for a new round, without specifying its mandate.- The U.S. has been applying strong "political pressure" at various capitals - a point underscored by Brazil Tuesday in its speech on services - and this apparently has provoked India sufficiently for its Prime Minister to have recently come out in a public speech against-the U.S. tactics and stand on these issues.- The so-called "Jaramillo track", refers to the meetings of interested Contracting Parties, organised by the chairman, Felipe Jaramillo of Colombia, which has been involved in the exchange of information on issues in the services sector, on the basis of national studies by interested Contracting Parties and information made available by UN and other intergovernmental organisations.- During the discussion on Jaramillo’s report, on this exchange of information, Brazil's Gilberto Ferreira Martins said that while Brazil would be agreeable to the continuance of the process of exchange of information, Brazil would be negative to any determination on the appropriateness and desirability of multilateral action on services in GATT.- For the United States, Michael Smith, the Deputy Trade Representative insisted that the Contracting Parties could, under article XXVI decide to launch negotiations or undertake consultations on regulating trade in services, though they could not impose any obligations on those not agreeable to it, and that the only question now was whether they could consult on this issue within a Preparatory Committee.- Martins said the report of Jaramillo did not give enough elements to take a final decision, positive or negative, on services.- The report showed that there were difficulties in defining the term services, in defining trade in services as opposed to investment, that statistics on services activities were far from satisfactory, and that there were not even vaguely accepted parameters for establishing what "obstacle to trade in services is".- Despite these "identified difficulties", some delegations seem prepared to conclude even now that multilateral action on services was appropriate, that GATT was the form for negotiations, and that these should be carried out in the context of the proposed new round.- But in Brazil's view this would completely prejudge the issue.- "In the already long debate on the question of services, the only point of convergence is that the matter is not now within the competence of the general agreement" the Brazilian delegate underlined.- Brazil would not dispute the right of any contracting party to propose changes in the general agreement to extend its coverage, and eventually amending GATT.- But such a process implied a formal amendment of the general agreement, requiring a certain sequence culminating in the adoption of an amendment and subsequent individual decisions by each CP on whether the amendment was acceptable to it.- And under article XXVI any amendment involving part one of GATT would be effective only on acceptance of the amendment by all Contracting Parties, while amendment of other articles would require the acceptance by two-thirds of Contracting Parties.- Even if it was to be agreed that multilateral action on services was desirable and appropriate, and that it should be in GATT, this would not mean that the issue should be automatically included as a subject for negotiations in the new round without a prior amendment of the general agreement, the Brazilian delegate declared.- "The proposal for accepting to negotiate under GATT auspices on matters alien to its jurisdiction before any agreed rules to govern such matters are devised is unacceptable since it would completely ignore the proper sequence and procedures for amendment of the general agreement", the Brazilian delegate declared.- GATT, he noted, was now faced with the difficulty of handling the enormous backlog of unfinished business due to the demand that for this work to process, there should be agreement to include services as an issue for negotiations in the new round.- Such a demand on services in the new round of MTNs was in effect "a precondition for liberalisation and strengthening of the multilateral trading system through a new round of negotiations", the Brazilian delegate affirmed.- In this whole process, legal issues were being dismissed as "obtrusive", and "political pressure" was being exerted to obtain agreement on services, when persuasion has failed that negotiation on services would be to the advantage of all Contracting Parties.- For Brazil, negotiation in GATT on services raised legal issues, and the proposals were not also in Brazil's "overall economic interests", since it would not contribute to Brazil's development or growth, but present the serious risk of increasing its dependence on more industrial economies and diminish the opportunities for its nationals.- Refuting the U.S. orchestrated media campaign that the opposition to services was confined to India and Brazil, martins pointed out that Brazil's opposition to services in GATT was shared also by other Latin American countries, as seen in the document of the SELA presented to GATT, while Third World countries from other regions too had voiced their opposition.- Differences on the desirability and appropriateness of multilateral action had not at all been narrowed down as a result of the exchange of information organised by Jaramillo, and a case for multilateral action by GATT Contracting Parties had not been established.- Brazil would be prepared to agree that the exchange of information be continued for an extended period, but would reply in the negative if it was asked now on the issue of appropriateness and desirability of GATT action.- If no decision was taken to prolong the exercise on exchange of information, there would be no legal basis for continuing to discuss in GATT the question of appropriateness and desirability of multilateral action, the Brazilian delegate added.- Smith said that just as Brazil considered it was not in its economic interest to discuss or negotiate services in GATT, the U.S. considered it to be in its economic interest.- GATT could undoubtedly not impose any new obligation on unwilling governments, nor was the issue one of how the GATT framework could address trade in services issues.- The only question was whether GATT Contracting Parties could "consult" on services in a Preparatory Committee to launch a new round.- Smith repeated the U.S. view that in line with the preamble of the general agreement, such a decision could be taken under article XXV. Though he did not specifically say so, he left the impression that in the U.S. view this could be done by a simple majority of the Contracting Parties.- In the U.S. view, Smith said, the Contracting Parties could legally decide this issue, and politically no one would lose by a GATT negotiation since international law prevented any group of CPs from imposing new obligations on unwilling parties.-