7:07 AM Nov 17, 1993

MTO VS GAT WILL GO TO MARAKESH MINISTERIAL MEETING

Geneva 17 Nov (Chakravarthi Raghavan) -- The United States is expected to put forward its proposals on post-Uruguay Round institutional issues as an alternative to the proposed Multilateral Trade Organization and the linked Comprehensive Dispute Settlement system at an informal meeting of the TNC at the level of heads of delegations on Thursday evening, according to participants.

The Thursday meeting of heads of delegations, and discussion there of the outcome of the informal group under Julio Lacarte of Uruguay that looked into institutional issues and the linked questions of dispute settlement, was agreed to Tuesday night at the first of a planned series of informal meetings at heads of delegations level of the TNC.

But several participants said they did not expect any serious negotiations at the Thursday meetings either, but only expect the US putting forward its 'draft' alternative for a GAT and a ministerial declaration.

The MTO issue would not be decided here, but would go right up to the Marakesh meeting of Ministers (set for mid-April), a key negotiator said Wednesday.

In the Lacarte group, the US was unable to get any discussion on its own alternative and adopted a 'constructive' approach to seek compromises, but all the while was engaged in getting compromises that it could incorporate into its own protocol approach for a GAT, one of the participants said, adding that to the extent the US would be able to put forward its alternative, incorporating the agreed compromises in the Lacarte group, it would be a distinct gain for the US in forcing Ministers to choose among alternatives.

The US is also expected, after the conclusion of substantive negotiations on 15 December, to use the period thereafter -- officially to be used to draft a Ministerial declaration -- to pursue its alternative approach to the MTO, and for 'side agreements' on environment, labour and other matters (just as Clinton did over NAFTA) in the hope and belief that most countries are so anxious to conclude the Round that they would give in, just as Mexico did.

The US is also trying to exploit and mobilise the environment NGOs, pointing to the fact that the MTO draft now has the references to environment and sustainable development in the preamble in square brackets as also the proposal for a MTO Committee on Environment.

But developing countries who have taken a strong stand on this, say that they are not objecting to the environment reference in the preamble, but to the issue being settled now in the Uruguay Round -- with a committee on environment to be incorporated into the MTO, a ministerial declaration setting up a work programme, and their being forced again to negotiate on the North's issues.

After the Uruguay Round and the MTO, future negotiations have to embrace the interests of both the North and the South, and cant be all one-sided, some of them say. "What we object to is this US salami tactic, of getting a concession from us at one stage, and then using it to gain more."

In its alternative to an MTO, through a contractual arrangement among governments via a protocol, the US has the support of some like Switzerland (who don't to face a referendum on public initiative over the Uruguay Round) and the Nordics and one or two among developing countries, but faces strong opposition from the EC, Canada, Brazil, India and a few other key Third World countries.

Meanwhile, most negotiators are taking care to have a low profile and provide little or no vibes out of the GATT, pending the NAFTA vote where they feel the odds have shifted towards acceptance, but a negative vote would kill the Round.

They expect serious negotiations on Uruguay Round in Geneva only from next mid-week -- after the NAFTA vote, the APEC summit at Seattle (where the US and its supporters like Australia are trying to create a lobby against the EC and threaten to form a trade-bloc, but will be running into opposition from Japan, Asean and others who need both US and EC markets) and the meeting of USTR Mickey Kantor and EC Trade Commissioner Sir Leon Brittan set for 22 November.

The GATT chief, Peter Sutherland has summoned another press conference for Thursday where, according to a GATT press office announcement, he would comment "on the outcome of the US Congressional vote on NAFTA, on the forthcoming APEC Conference in Seattle, and give a detailed presentation on the current state of the Uruguay Round negotiations".

There is a view among some key negotiators that while a negative vote on Nafta would virtually kill or atleast put the Uruguay Round talks on ice for a prolonged period, even a Clinton win may not help the Round in the fight at the Congress.

The forces inside the US that have mobilized against NAFTA have done so as a warm-up to their more important goals against the Uruguay Round and the GATT whose public profile, and thus visibility as a target, has been considerably increased over the last few months.

However, these negotiators say that this is a problem after the conclusion of the negotiations -- for the governments and ministers of major entities in the North and the South and at the moment they are concerned with the negotiations till 15 December.

There are those who think the US is likely to try to repeat the history of the Havana Charter and the GATT, which was brought into being as a provisional treaty under the protocol of provisional application.

However, some EC sources say that it would not be possible to repeat history and that the MTO and a definitive treaty that would curb US unilateralism and S.301 is very important for some major EC countries like France and Germany, and without that the Uruguay Round would collapse.

In 1947 the Havana Charter was not too widely known, and the GATT which was put in place as a provisional arrangement pending entry into force of the Havana Charter, was even less known. The GATT was thus able to survive under the provisional protocol as a contract among governments, and flourish even after the rejection of the Havana Charter by the US Senate (it was never voted on, but the President withdrew the request to the Senate for advice and consent).

But things have become more difficult now and others are not ready to repeat that history.

In his efforts to put political pressure on governments and conclude the Round, the GATT chief, Peter Sutherland -- in his five months in office has probably given more press conferences and press interviews at the GATT than all his predecessors put together and has used all the techniques of media management -- has given GATT a high profile.

His predecessor, Arthur Dunkel, used to talk of GATT's real constituents being the world's traders and business -- and this is still the reality -- though Sutherland has also been trying to get consumer groups behind him.

But all this high profile, and attempts to shake the trees in Geneva (a phrase used by Sutherland before he took office), now seems likely to boomerang.

Just as 'foreigners', particularly those with a darker skin, are being identified in Europe and United States with somehow being responsible for high unemployment and fall in living standards of natives, foreign trade and the GATT and Uruguay Round are beginning to be similarly identified.

But the post-Uruguay Round system (whether an MTO, or a GATT-II or a GAT or whatever name it acquires) -- intruding over a wider area of economic relations of production, distribution, technology, investment, consumption and other issues so far seen as in the realm of autonomous domestic economic relations and decision-making -- is seen as furthering the interests of transnational corporations and mega-capital.

This may not matter too much when world economy is growing fast, and there is a bigger cake to share. But currently, unless the world economy quickly comes out of its present malaise and by a miracle gets into a high-growth path, GATT will become the target. It will become identified with the 'foreigner' and meet the same resistance as the IMF and the Bank are in the developing world.

The heads of delegations meeting on Tuesday evening, the first under the process set by the Trade Negotiations Committee last week to look into the major outstanding areas and issues, agreed to meet twice a week, with critical issues handled in open-ended informal groups under 'friends of the chair'.

These 'friends' are to be Germain Denis of Canada (already handling market access and related issues on agriculture and textiles in the Draft Final Act text, David Hawes of Australia on Services, Julio Lacarte Muro of Uruguay who just finished the work in the informal group on institutional issues, and former Hong Kong Representative, Cartland who is expected to be asked to handle some of the 'rules' issues like anti-dumping and countervailing.

Before the meeting began, EC Ambassador, Tran Van-Thinh, told newsmen that he expected the MTO issue to become the most difficult in the negotiations. Agriculture is not the only issue, he told newsmen.

After the meeting, as participants came out, they said that it had been more procedural than substance, with focus on how and when to conduct the evaluation of the outcome in terms of its benefits for the developing countries, as well as on procedures to address outstanding questions.

The US Uruguay Round coordinator, John Schmidt, said that it was for Sutherland to identify the outstanding issues to be dealt with, but as far as the US was concerned these included the questions about the MTO and Comprehensive Dispute Settlement, questions relating to anti-dumping and countervail rules and a few other areas in the rules, the issues relating to the services questions and the audio-visual sector.

Other delegates, who did not want to be quoted, said there were also other issues that one or the other of the participant have already flagged, but that the issues have not been formally identified, listed or collated so far under the Sutherland process.

Most agreed that there was little time to deal with this huge backlog, but expect that the negotiations in small groups in and out of the GATT would start in right earnest from next week.

On the evaluation question, while the Punta del Este mandate requires an evaluation of all issues in the 'goods sector' to be undertaken by the Group of Negotiations on Goods (GNG), the Asean nations and Egypt wanted the evaluation also to include the Services and for this to be done at the TNC.

Some of the developing countries Tuesday also pressed for the evaluation to be taken immediately -- so that in the area of goods and the market access, an evaluation could be made in time so that, as envisaged by the Punta del Este mandate, corrective actions could be undertaken.

The idea of an evaluation of the services outcome, not envisaged in the Punta mandate, along with the goods met with some reserves from the European Community.

Some developing countries feel that in any event with no data available about flows on trade in services, and statistical work on these yet to really begin on national and international scales, any evaluation could only be speculative and of a random quality -- namely to see who had put what sector and subsector and how in terms of commitments without any judgement possible on the actual results in economic terms.

When this is the case in a known area, like goods, and even here 'evaluation' is going to be difficult, evaluation in services would be more difficult, but merely help the industrialized countries to cloud the issues by suggesting they have done more than the developing and thus have satisfied the special and differential treatment concepts.

"The evaluation in Services would be as useful, and meaningless, at this stage as the projected benefits of the Uruguay Round liberalisation in agriculture and tariff cuts," another said.

The Paris-based OECD secretariat has now joined its voice to that of the World Bank and the OECD development centre projections about the Uruguay Round gains. The OECD secretariat has now come up with a $270 billion estimated gain to world income in 2002.

But this OECD projection has to be seen in the experience of its own recent record in short-term projections. The OECD has been involved in the much easier six-monthly projections of OECD percentage growths over an 18-month horizon. These forecasts, as those of other forecasters, have been consistently proved wrong, with the revised estimates and actuals from 1990 turning out to be much lower than projected.

Various explanations, relating to the behaviour of households and firms turning out to be different from what models project, have been provided. But these forecasting failures have also contributed to governments becoming "tone deaf" to the risks of a major recession, as the 1993 Trade and Development Report put it.

While explanations (of OECD, IMF etc) for failures in short-term projections could be reasonable, they show that projections are difficult and unreliable excepting as a trend. And when they are based on consumer behaviour, price-elasticities and supply/demand responses and other such, projections over a ten-year period are difficult and unreliable except as perhaps a trend, subject to many caveats.

Critics say that by pointing to these purported gains of two hundred and above billion dollar gains of the Round after ten years, forecasters have encouraged governments inertia on macro-economic growth policies.