10:51 AM Dec 7, 1993

GATT GETS THE BLUES, BUT HOPES NOT DEAD

Geneva 7 Dec (Chakravarthi Raghavan) -- Eight days to the wire, the GATT got the blues Tuesday morning as the Uruguay Round process faced a crisis -- after reports from Brussels that the United States and the European Community bilateral talks had not produced an overall deal between the two and there were still some major differences that could block the conclusion of the Round.

GATT Director-General Peter Sutherland issued a press statement urging both USTR Mickey Kantor and EC Trade Commissioner Leon Brittan to come to Geneva and hold multilateral discussions.

Kantor and Brittan were due in Geneva Tuesday afternoon -- the former in time for a luncheon-meeting with Sutherland, and Brittan later in the afternoon to meet Sutherland.

Later, in the afternoon, ministers present in Geneva -- Kantor, Brittan and Ministers from Canada, Australia, and Brazil -- are to meet informally with Sutherland.

As of noon, Kantor was due to go back to Washington, and Brittan to Brussels, after their talks with Sutherland and perhaps some negotiators from other key countries supporting one or the other.

Negotiators from several key countries were voicing their worry that all this last minute brinkmanship and deals might result in their being faced with a US-EC-Sutherland cooked deal and asked to accept it as a fait accompli to their short-, medium- and long-term detriment.

But with most of the countries, ad nauseum at every opportunity, and from highest levels, having made appeals to the two to help conclude the negotiations, the danger of their saying 'no' is not weighing much with the GATT or the two majors.

But though the outlook seemed grim, it was apparent that the two sides have reached accords over a wide range of issues, and agreed on supporting each other in areas where the rules would need changes and multilateral agreement has to be obtained.

These would include areas like anti-dumping where the US has taken a public position to change the rules to conform with its own laws (but where the EC has no particular problem, since the EC too uses antidumping as a protective instrument), subsidies code etc.

On agriculture, while the French were still holding out on the US-EC Commission deal, this was seen more as an internal EC matter where the French were trying to get better terms from inside from other trading partners -- including a possible future lowering of the internal price (which is now high to support the more inefficient German farmers) to enable the French to sell more within the EC.

(A later report from Brussels quoted French Foreign Minister Alain Juppe as saying that the French had agreed to the agriculture deal, but seeking compensation from their EC partners.)

The audio-visual and aircraft subsidy problems still dividing the US and EC are essentially bilateral questions to be resolved between them and there would time almost till 14-15 December on them.

Earlier Tuesday morning, on hearing of the Brussels talks ending without an accord, GATT Director-General Peter Sutherland issued a press statement that he was calling Kantor and Brittan to come to Geneva immediately and complete their negotiations and that he was ready to provide them with such assistance as might be necessary.

"It is now vitally important to press ahead with the negotiations at a multilateral level so as to provide a basis for a clear and final decision by all participants before the deadline of 15 December," he said. adding that he had asked Belgian Foreign Minister Willy Claes (who chairs the EC Council of Ministers) to inform the Council of Sutherland's "considered view" that no further time should be lost in the internal European Union debate and that the overriding imperative was for the EU negotiators to return to Geneva immediately.

The US Trade Representative Mickey Kantor left Brussels for Geneva after the talks with EC Trade Commissioner Leon Brittan ended without an overall agreement. He was due to meet the GATT Director-General Peter Sutherland and brief him and discuss the situation.

Brittan, soon after the 23-hours of talks ended, went into a meeting of the EC Commission to report on the outcome and later into a meeting of the EC Council of Ministers. EC Commission President, Jacques Delors was quoted as saying, before going into the EC Council meeting, that the situation was not good.

At a press conference at Brussels, Kantor said that he was still confident of a world trade accord before 15 December, provided problems in the audio-visual sector and aircraft subsidies were resolved.

The US Trade Representative Mickey Kantor and EC Trade Commissioner Leon Brittan, along with their top aides met in Brussels all of Monday, and continued through the night till the talks ended Tuesday morning.

On Monday, meanwhile, the United States appeared about ready to give some ground on its intention of taking an across-the-board reservation, on both the MFN and national treatment requirements, over the tax treatment for foreign service providers.

According to sources close to the talks, the US seemed ready to compromise with some additional footnotes or elaboration of existing ones to give an illustrative list of the kind of differentiated tax treatment measures that authorities could put in place as between residents and non-residents.

The US was also seeking a provision to ensure that its differences with countries arising out of bilateral tax treaties and its market-opening service commitments with them are not dragged to the multilateral fora for arbitration or adjudication.

One source said that "with every tax authority in every country wanting to make sure that they are above the multilateral law", a compromise is likely.

However, on the other problem, namely, the US two-tier approach to financial services -- an MFN commitment guaranteeing existing access to those foreign financial services providers already having a presence in the US territory, and non-MFN treatment to those either immediately liberalising or committing themselves to do so over the next few years.

On Tuesday, after a meeting of the Group of Negotiations on Services, some participants said that the latest US "offer" and "schedule" on the services, had made no change in its two-tier approach position.

The original US proposal, unveiled in October, brought an outcry with the US ranged against the rest. But there have been reports that some like the Nordics and other Europeans, as well as Japan and a few others might be ready to cut a deal, provided they are be included in the second non-MFN tier.

While some NICs, fearing bilateral retaliations on trade or other fronts from the US, might still keep their current, limited, "offers" on financial services on the table, some others (who have no hopes, now or in the future, of entering the US market or being in a position to compete) might just take back their offers.