SOUTH HAS FARED POORLY IN NEGOTIATIONS

6:39 AM Dec 6, 1993

SOUTH HAS FARED POORLY IN NEGOTIATIONS
Geneva 3 Dec (Chakravarthi Raghavan) -- Developing countries complained Friday at the Uruguay Round Trade Negotiations Committee that they have been treated badly by the industrial world in market access concessions.

The TNC was undertaking an evaluation of the results, from the perspective of the implementation of the Punta del Este mandate's promises of special and differential treatment and market access benefits to developing countries by developed countries without seeking any reciprocity.

A number of speakers brought out that the weighted average of tariff cuts for developing country exports was below the one-third average tariff cuts agreed upon at mid-term review and that it was much less than for developed country exports.

While the developing countries had not received any of the promised special and differential treatment, they had made tariff concessions and tariff bindings, according to their ability in terms of their development and trade needs. They had also undertaken greater obligations in the rules areas and new obligations such as in TRIPs and Services and agreed to the North's continued maintenance of high levels of protection in agriculture, but without any reciprocal benefits.

A number of countries ranging from Bangladesh for the least developed, Egypt for Africa to Brazil in Latin America expressed their bitterness over the likely outcome, with several stressing that their governments may even turn down the overall package if the meagre promised benefits, in the form of secure rules and market access, were hacked away in the final stages.

Africa had benefited the least, it not becoming losers, Egypt's Amb. Mounir Zahran said, while Bangladesh's Syed Jamaluddin, speaking for the 18 least developed country participants in the negotiations said "...LDCs are clear losers and there is no indication about possible corrective action for a group of countries who are being marginalised..." While the tariff reductions offered a potential opportunity, LDCs would not be able top benefit because of limited number of exportable items of production.

"There is a deep imbalance in the exchange of concessions in areas of interest to developing countries...in textiles and agricultural products, and the only countries that have received special and differential treatment have been the developed countries," India's Ambassador Balkrishan Zutshi told journalists outside the TNC. In a reference to the attempts to accommodate changes in the package sought by the US and EC to meet their domestic political difficulties, while ignoring concerns of others, Zutshi warned: "Nations, like human beings, if pushed to the wall can act irrationally".

Brazil's Amb. Luis Felipe Lampreia warned that if the present very delicate balance of the package were to be further diluted by weakening of the rules or insufficient market access or both, his "government was willing to modify or even withdraw our offers".

In summing up the discussions, TNC Chair Peter Sutherland stressed the need for 'extra-efforts' on the part of industrial countries in respect of their offers on textiles and clothing, leather and products, and fish and products. He also referred to the complaints of Africans and LDCs, as well as need for assistance to the net food importing countries. In short, Sutherland said, the message to the industrial countries was: "improve your offers for developing countries and don't weaken the disciplines in the rules area thus upsetting the existing balance".

Earlier, the EC's Amb. Tran Van-Thinh stressed the need for the majors through liberalisation of market access -- he mentioned textiles and rice in this regard -- to fully bring on board their developing country partners as otherwise some governments would refuse to implement the agreement.

But John Schmidt, the US chief negotiator, shrugged off the call for liberalisation in textiles and clothing by arguing that if the MFA phaseout was taken into account, the benefits were substantial. He also thought that the US-EC deal to come out of the current Brussels talks would include significantly large market access package, including in areas of interest to the developing world.

The GATT secretariat's document, based on the tariff and service offers on the table as of mid-November, had brought out that the trade weighted average of tariff cuts and the reduction in peak tariffs or tariff escalations have been less for products of export interest to the developing world than on those of interest to the developed world. This was most glaring in textiles and clothing, fish and fish products, and leather and leather products.

However, the secretariat had tried to balance this in terms of the overall benefits -- of a possible $750 billion dollar addition to world trade in 10 years, and a $250 billion welfare and income gains to world GDP and that the overall cake was big enough to benefit everyone with spillover effects.

The evaluation and the imbalance and inadequacies, Pakistan's Ambassador Ahmad Kamal said in his intervention in the TNC, faced the real danger of being submerged "under a sea of statistics" which could be "manipulated to produce the results suited to the analyst's taste".

Malaysia's Amb. Haroon Siraj, speaking for the informal group of developing countries at the TNC, noted "some good signs" in the goods sector of market access, but insisted that over the next days a number of product groups of particular interest to developing countries should be favourably dealt with.

The developing countries, he said, had been prepared to undertake significant new obligations in the areas of TRIPs, services and investments. Having done so, they wanted to benefit from a more stable and predictable environment for world trade. He expressed the alarm of developing countries in proposals for changes (by the US) in the antidumping rules and the two-tier approach to financial services. "The developing countries don't want to be presented with a 'take-it-or-leave-it' package at the last moment," he warned.

Egypt's Amb. D. Mounir Zahran, speaking for the African group, said the evaluation should not be a 'collective reading and an end in itself', but must result in corrective measures and the exercise should continue till the end of the negotiations.

The secretariat's analysis, he complained, had covered such broad categories of goods and in such general terms that it was very for specific regional groups of developing countries to fully grasp the implications of the results and calculate the costs and benefits. It had also failed to address the issue of preferential benefits enjoyed now and the erosion of those benefits in terms of the market access package (MFN tariff reductions and bindings).

Preliminary studies he said had shown that losses of preferential margins for African countries in the US alone would amount to 32% in weighted average and 40% in simple average. The losses were even higher in the European Union, and the same was also true in the markets of Japan, Canada, the Nordics etc.

"The impact of the market access looks quite bleak, given the modest export capabilities of the African continent," he said.

The secretariat study had brought out that the prices of basic foodstuffs would increase, and African countries, including Egypt, as net food importers would lose and should be compensated by operationalizing the 'best endeavour' clause in the declaration in the agriculture agreement.

The results in trade in services disfavoured the African countries, since the major commitment on movement of personnel was restricted to managers and executives. The secretariat's overview of the initial commitments was "misleading, and did not reflect the real degree of liberalisation, with most of the gains going to the developed countries".

It was disheartening that Africa benefited the least, if not a "net loser" from the Round as the impact of its outcome on import and export side was negative. While the secretariat study implicitly recognized it, Zahran added, "it goes on saying the 'cake' is so big for the others....that we shall not fail to get "the crumbs" or the "spill overs".

"This trickle down, hypothetical argument the Secretariat tries to bring about, can hardly be considered in a serious evaluation of the implications of the Round on the African continent...such a hypothetical and indirect way of analysing the Round alluding to positive by-products, is more of a kind of aspirations rather than concrete and factual analysis of the Round, which is supposed to be a 'Single Undertaking (with) a balanced quantified outcome'," Zahran said.

It was not that African countries were against the multilateral system and they firmly believed that the only protection for smaller trading nations was a strong system. "In this area, the agreements in the DFA reflected S & D only in terms of longer time frames to assume obligations"

Zahran also objected to the attempts to include environment "at this late hour of negotiations" -- a reference to the attempts of the US and some other industrialized countries to adopt a Ministerial decision/declaration along with the Uruguay Round package to consider and legitimise such concepts as trade restrictions based on "process/product measures" for purported protection of environment. Zahran said this could not but raise their suspicion and fear about the "real objectives behind such persistence, especially in the light of the understanding reached, that imposing environment on the Round at this late stage would lead to a further imbalance. Environment, however, may be among the others of the main post-Uruguay Round topics".

Mexico, for the Latin American and Caribbean Group, said that while developing countries had made major contributions, the offers they had received was far below the objectives of the mid-term review in areas of interest to them including tropical products, natural-resource based products and textiles and clothing.

India's Zutshi noted the "glaring transformation" in the scene, particularly since 1990 -- "with developing countries who were first reluctant now in the forefront of liberalisation and making concessions and others who had sought the Round reluctantly being dragged along". While India's offers in goods amounted to a trade-weighted average of 55%, the offers available to it were around 34%, and rather less from two of the largest trading partners -- 18% from the US and 22% from the EC.

In the textiles and clothing sector -- where the secretariat had said developing countries would gain by the MFA phase-out -- in the first seven years very little of the import quota restrictions would be removed and it would be very difficult to meet the commitment that at the end of the 10-year period the very large number of sensitive quotas would disappear.

The trade gains or the income/welfare gains were not the real issue, when the rules were being sought to be distorted not only to target countries but even enterprises within countries.

In services, the real benefits were for the developed world. There were very significant offers on the table from the developing countries, but lack of offers from the industrialized countries with respect to movement of personnel. They were also seeking major derogations and exemptions inconsistent with the agreement, and as a result of the attitude of one participant, the outcome would be a reversal of trade liberalisation than would have been possible otherwise.

Zutshi also complained that for the last two years in the negotiations, the political problems of one or two were being addressed (a reference to the EC's problems in agriculture and the US problems over MTO, anti-dumping etc), while no opportunity was being provided to address that of others, such as that of India where changes were being sought through clarifications, without changing the basic thrust.

"Nations, like human beings, when driven to the wall, could act irrationally", Zutshi warned, but would not elaborate on it when newsmen asked him about it later.

Lampreia noted that Brazil had made a substantial contribution by offering to bind its tariffs at a maximum of 35% and had offered substantial reductions in its actual tariffs and had now made a substantially improved offer. But the response had been poor.

In Textiles, the trade weighted average reductions amounted to 20% by EC, 12% by the US and 33% by Japan. In leather and footwear, it was a 45% cut offer by EC, 1.6% by the US and 3% by Japan. On all items, it was a 37% reduction by EC, 23.6% by the US and 46% by Japan.

"If the balance of the package is upset -- either by dilution of rules or by insufficient market access or both", Lampreia said that his government was fully prepared to modify or even withdraw its offers.

Pakistan noted the 'most intensive participation' by developing countries in the Round and consistent with development, financial and trade needs, countries like Pakistan had made substantial contributions: in scope of tariff bindings, substantial reductions in tariff protection, significant and substantial commitments in services, willingness to concede maintenance of extremely high levels of protection in agriculture by the developed countries, readiness to accept obligations of far-reaching consequence in TRIPs.

As against this, the secretariat analysis clearly revealed that trade weighted reductions for developing countries were lower than for the developed. A cursory glance of the tables showed that there were substantially lower reductions in products of particular interest to developing countries -- in textiles and clothing, leather products and fish and fish products.

While the tariff reductions for all products imported from developing countries stood at 34% as against 38% for imports from all sources, reductions for textiles and clothing from developing countries was only 21%,, for leather and footwear 19% and fish and fish products 22%.

In Textiles and Clothing, which accounts for the largest sector of export earnings by developing countries, the post Uruguay Round tariffs would remain at the highest: 48% of their trade being liable to tariffs over 10% and 19% of their trade to tariffs over 15%.

Also, the difference between tariffs on raw materials and processed products would be four or five times.

Referring to the secretariat assertion counting the phasing out of the MFA as a benefit to the developing world, Kamal said the MFA restrictions and other grey area measures had been either a derogation from GATT or were downright inconsistent with GATT obligations.

"Should elimination of illegal measures be counted on the credit side?" Kamal asked. "After all, these restrictions have unfairly deprived developing countries of their rightfully due benefits. And the elimination of MFA restrictions, after 40 years of existence, would be a lame justification for maintaining post-Uruguay Round tariffs at the highest.

"The cold fact is that tariffs on developing country products, such as textiles and clothing and leather and leather products would remain substantially higher than general average tariffs. There would be tariff escalation as well. Surely, this is not the true spirit of special and differential treatment..."

In terms of benefits to Pakistan, the trade weighted average reduction from the EC offers was only 22%, while from the US it was just 17%. This, coupled with the agreements on textiles and agriculture was a matter of extreme concern to and needed corrective action from major trading partners to make it possible for its authorities to offer their blessings to the final package, Kamal said.

For the EC, Amb. Tran Van-Thinh while seeing grounds for optimism in that the negotiations were close to a successful conclusion, warned that unless the major trading entities brought their developing partners fully on board in the liberalisation process, some of these governments might refuse to implement the decisions taken in Geneva. He specifically mentioned in this connection some improvements in offers on textiles and clothing and long-grain rice imports.

Indian basmati (long-grain) rice exporters have been in Geneva this week to complain about the EC tariffication for imports. The EC's variable levies under CAP which have been tariffied, they complained, was intended to protect Italian grown rice, three of whose varieties had been classified as long-grain, though they were not according to international standards, and on that basis a high tariff, with Indian basmati made the costliest by the high tariffs. Basmati rice exports were being hit though there was no EC comparable product that was being protected, they said.

The EC since 1986 has been giving a CAP levy concession of 25% for a tariff quota of 10,000 tonnes each of Basmati from India and Pakistan -- as against 125,000 tonne tariff quota at 50% concession for imports from ACP countries and 32000 tariff quota at 25% for imports from Egypt. Other long-grain suppliers to the EC market are the US and Thailand. But the basmati variety from India and Pakistan is a upmarket, high-priced rice with a special fragrance unlike other long-grain varieties, but hit severely by the EC's tariffication of its existing quota restrictions,