FLEXIBILITY WITHOUT AN OPEN MIND !

7:56 AM Oct 7, 1993

FLEXIBILITY WITHOUT AN OPEN MIND !
Geneva 6 Oct (Chakravarthi Raghavan) -- The pace of negotiations at the GATT on market access issues -- in bilateral and plurilateral meetings -- is still to gain any momentum and developing countries are finding themselves increasingly frustrated in not getting any "responses" from the major industrial trading partners to the "offers" and "requests" tabled by them.

Meanwhile, the United States has made clear that it is not prepared to accept a Multilateral Trade Organization as an institutional framework for the post-Uruguay Round multilateral trade system.

In reiterating this position at the informal group under Amb. Julio Lacarte-Muro which is looking at 'institutional questions', the US is reported to have said that while it wanted to be constructive and flexible, it doesn't have "a completely open mind."

The US position was set out by its acting chief of mission to the GATT, Andy Stohler and later copy of his 'informal notes' for the intervention was made available by his mission to other participants.

Since the Clinton administration took over in January, the post of ambassador to the GATT has remained vacant. This itself, some sources said, provided a message of its own to other participants on the new US priorities.

The US has blamed its stance on the MTO (in contrast to its own position in the consultations and negotiations in 1991 when in a very small group it in fact agreed ad referendum to the MTO text) to its complaint that the results in the market access package are not so attractive as to make the MTO look "a mere icing on the cake."

Third World delegates said that in the negotiations as a whole they were feeling completely frustrated. As one of them put it: "We are getting nowhere in the market access negotiations, with neither the EC nor the US seriously negotiating on our 'offers' and 'requests'. The consultations being conducted by the GATT chief or his nominees have all become totally 'fragmented' -- with individual delegations being called in and pressured to yield to the US and EC demands -- and the real US-EC negotiations taking place elsewhere".

"If we don't tie up the market access negotiations over the next couple of weeks, it will be impossible to meet the target of putting in schedules by mid-November. And with so many other issues up in the air, the 15 December deadline can't be met, and the blame for this would rest squarely with the US and EC and, to the extent he has acquiesced in their processes, on Sutherland himself," a delegate commented.

The entire negotiations, another participant said, are now subterranean and have gone underground -- with the US and EC talking to each other, elsewhere than in Geneva, on agriculture and other issues as well as market access issues -- while their bilateral talks with other trading partners particularly from the developing world have become merely a case of going through the motions.

Even the EC is finding the situation frustrating in the market access negotiations, one EC source said. The EC at Tokyo agreed to the US zero-to-zero approach in some sectors, believing that in return it was getting US commitment to cutting peaks. But the US has not so far delivered on this, the source said.

Developing countries, and the majors among them, confess privately also to a feeling of worry over the wider consultations processes at the GATT which, they say, have become very fragmented and non-transparent, despite all the talk of increased transparency.

While the previous 'green room consultations' were limited and not open to everyone, atleast all the key players were involved in plurilaterally looking at issues and even though it was limited the developing countries had to be reckoned with.

Under the old 'green room process' there had been the problem that those not invited to the green room felt left out, but most of them anyway don't attend even open-ended negotiating groups nor take positions against major trading partners. But any country with a serious negotiating position was ultimately brought into the consultation process.

Now under the Sutherland process, under the guise of ensuring 'transparency' for all in the TNC, in fact the consultations and negotiations are being conducted between the two and the others are being manoeuvred into a position of either accepting the outcome or being blamed for failure.

Several of the developing countries already appear to be concerned over the situation and the Chairman of the group, Haroon Siraj of Malaysia, is reported to be consulting with key delegations and is likely to take up the question further at a meeting of the group to explore ways and means of ensuring developing countries being fully in the picture.

Both the US and EC are trying to shift the onus on to others -- by asking for example the Asian countries, and the Asean in particular, to be "more forthcoming" and improve their offers.

The GATT chief is on a trip to Asia that takes him to Singapore where he is due to meet the Asean ministers (and is expected to press on them the view of the major trading partners that the Asean must do more on initial commitments in services including financial services) and in market access offers, and to Japan to press that country over the rice issue.

Asean delegates who met Sutherland this week before his trip, made clear to him that the responsibility for the deadlocks lay with the majors and that the Asean had put forward their best offers, subject only to the conclusion of the Round, and it was the majors who were holding back and not negotiating.

The US views on the MTO were reportedly put forward this week at the Lacarte group's informal consultations. Though open to any one interested, the participants from the developing world have been limited.

The Lacarte group has been asked to look into the institutional questions -- the draft text for an agreement on Multilateral Trade Organization and the draft text of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the socalled Integrated Dispute Settlement Mechanism) -- in the draft text tabled by the previous GATT Director-General Arthur Dunkel in Dec 1991, taking the issue forward from the point where the legal drafting group had left the issues in May-June 1992.

There are some serious differences on the exact mandate of the group -- with the US wanting to use the group to address substantive questions and its demands for changes on both the issues, and several others including Brazil, Egypt and India insisting that only legal and drafting and technical questions could be considered and any questions about substantive changes would have to be addressed at the TNC and the 'track four' process for this established by the TNC in Feb 1992.

At the TNC meeting on 30 September, this view of the limited role of the Lacarte group was endorsed by the entire informal group of developing countries in the GATT and was reflected in the statement made on behalf of the group by Amb. Siraj Haroon of Malaysia, and supported by Mounir Zahran of Egypt on behalf of the African group.

Subsequently, as the US continued to raise in the Lacarte group the substantive questions -- and these have been listed, though separately by Lacarte as among the issues identified -- the developing countries' opposition to the consideration or discussion of the substantive questions in the Lacarte group (in isolation from consideration of changes sought by others in other texts) and their view that this was contrary to the mandate of the group as set by the TNC has again been conveyed to GATT Director-General and TNC Chair, Peter Sutherland by Siraj Haroon on behalf of the developing countries.

Stohler reportedly told the Lacarte group that the US fully supported the notion of the Uruguay Round as a single undertaking, of providing an institutional framework for services, Trips and the goods agreement under one roof, facilitating the introduction of the integrated dispute settlement system and putting an end to the 'free riders' in the system -- a reference to the argument that developing countries have been getting the benefits of the system partners without making any tariff concessions of their own.

Though this socalled 'free rider' concept is alien to the entire thesis of free trade and a multilateral system, and the major suppliers to developing country markets have been the exporters of industrialized countries who have benefited by the developing countries accepting GATT obligations like MFN etc (in terms of goods, technology imports), this pejorative slogan of 'free riding' has been coined and popularised by the World Bank etc as part of the attempts to pressure developing countries to open up their economies to TNC suppliers as against domestic industrialization processes.

Given the array of discriminatory restrictions imposed on developing countries as soon as they become competitive (textiles, footwear etc), it is the US and other industrial countries who have been having a 'free ride' in the multilateral system, accepting obligations when it suited them and forcing derogations when it did not, some critics have contended.

Stohler told the Lacarte group that while the three US objectives would be met through the MTO, they could also be met through a legally binding single protocol (the GATT-II approach of the US put forward in December last year).

The US, he claimed, had taken the position that an MTO agreement could be acceptable only if two conditions were met:

* the global results of the Round need to be so attractive, including results of the market access negotiations, that the MTO is seen as the icing on the cake and not a substitute for real trade liberalization;

* the MTO agreement must not crate problems for the negotiations or post-negotiations implementation additional to those problems raised in the texts of the substantive agreements negotiated in the rest of the Draft Final Act.

At this point of time, he added, neither of these conditions has been satisfied and as a result the US could not now accept that the proposed MTO would be a better way to realise its objectives rather than a single protocol.

While it was not the job of the Lacarte group to negotiate the global package necessary (to make the MTO the icing on the cake), the US was prepared to work with the group on a "conditional 'what if' basis."

In this view the Lacarte group should ensure that the second US condition was met and to this end satisfactorily resolve all negotiating and implementation issues before the US could consider whether it might support the MTO.

The issues to be resolved in the MTO text (for the US) included the issues of amendment and waiver. The US could not accept what it viewed as a negation of the current contractual obligations in the GATT.

The draft MTO text provides for amendments to be proposed by the Ministerial Conference of the MTO, only by consensus and would need two-thirds majority for adoption. Once adopted it would bind all.

The US wants the same approach as in the GATT, a provisional treaty among governments, namely, that the amendment would bind only those accepting it, but that if the amendment be of such a nature as to upset the balance of rights and obligations, those not accepting could be invited to quit.

The US was also not agreeable to the global waiver provision that would enable governments to seek waivers from their obligations under agreements that do not provide for waivers.

It was not also ready to accept a non-application rule that would make it possible for members to invoke it on Trips or services in respect of each other while preventing such invoking in the goods sector.

In the goods sector under the GATT (which would be carried into the new GATT), the non-application could not be invoked by any party as a way of getting more concessions in negotiations, but only if two contracting parties had not entered into tariff negotiations with each other, and either of the parties, at the time either becomes a contracting party, does not consent to such application.

In the Uruguay Round negotiations, the US had sought a provision by which it could withhold benefits through a non-application clause whenever it was not satisfied with the outcome of such negotiations with any contracting party.

The US also did not like the provision in the MTO for voting rather than the established consensus process.

After referring to, but without mentioning, other issues and technical points to be resolved, the US delegate then reportedly added that the US wanted to be "constructive" and, "where appropriate, flexible" in the negotiations. "But we need to be honest with all of you and tell you up front that we do not have a completely open mind on these issues. There are some things in this proposal which we will just not accept, and that need to be fixed."

In listing the items to be considered, on the basis of a first reading to the present MTO text, two sets of issues have been drawn up. One set of issues listed above a line are the purely technical and legal questions of the texts. A second list, below the line, are those raised by the US involving substantive questions (which some others have refused to discuss in the Lacarte group). These issues have been specified as: Preamble; Legally distinct GATT (the 1947 GATT and the post-Uruguay Round one); the tasks of the Ministerial Conference; Trade and Environment; Non-Application; Acceptance, entry into force and deposit.