May 31, 1985

NICARAGUA: U.S. PRETTY MUCH ISOLATED ON EMBARGO ISSUE.

GENEVA, MAY 29 (IFDA/CHAKRAVARTHI RAGHAVAN)— The U.S. came in for considerable criticism Wednesday at a meeting of the GATT Council over its trade embargo against Nicaragua.

The United States took the position that it had acted under its rights under article XXI of the general agreement, and the complaint being one involving political and security issues, should not be considered by the GATT Council.

The GATT council meeting had been convened at Nicaragua’s request to consider its complaint over the U.S. trade embargo, announced on May 3 and effective from May 7.

Article XXI of the general agreement, cited by the U.S. in defence of its actions, enables countries to take specific actions provided in it on grounds of national security interests, and provides that the general GATT obligations would not apply to such actions.

While a few of the industrial countries conceded U.S. rights under article XXI, most of the others, from the Third World and Socialist countries, strongly questioned the applicability of article XXI itself to this issue.

Even those who conceded U.S. right to invoke article XXI, seemed to disagree with the actual U.S. actions.

Of the more than 30 countries who spoke at the GATT Council session, there was no country that came out explicitly in support of the U.S., while over a score gave full support to Nicaragua and called for revocation of the U.S. embargo.

Other countries, especially from the OECD group, while adopting varying nuances to concede the right of a country to invoke "national security interests" and take actions under article XXI in contravention of other GATT obligations, said that nevertheless any country invoking article XXI had an obligation to act with prudence and care.

A large number of speakers contended also that wide-ranging trade sanctions and embargoes could be imposed only in pursuance of obligations of countries under the UN charter.

A GATT spokesman said that a large number of countries spoke in support of Nicaragua, while there were some nuances in the remarks of a number of others.

"No country came out explicitly in support of the U.S., though there were some 'neutral statements' that the U.S. had a right to act under article XXI of the general agreement", spokesman David Wood told newsmen.

The Council meeting, which began Wednesday morning, heard the Nicaraguan complaint, the U.S. reply and other interventions.

It met in the afternoon to hear the Nicaraguan reply and then "suspended" the meeting, while informal consultations went on over how to deal with the situation.

Earlier, before the Council adopted the agenda for the meeting, Nicaragua complained over the draft agenda (prepared by the secretariat), which had included not only the Nicaraguan complaint but several other issues that would have been normally included on the agenda of the regular meeting set for June 6.

The interpretation by the GATT secretariat of procedures for convening the meeting, and setting the agenda, were inappropriate, the Nicaraguan delegate contended.

The issue raised by Nicaragua had deserved the immediate scrutiny of the Council, and an extraordinary meeting of the Council could have been held at the request of any Contracting Party or on a decision of the chairman of the Council.

In view of another GATT Council meeting set for June 6, the secretariat should not have placed other items on the agenda of this extraordinary meeting.

The Council adopted the agenda, but ultimately the entire day was occupied with the Nicaraguan complaint. After it was disposed of, two other items were just taken up procedurally, but not dealt with substantively.

Nicaragua’s Vice-Minister for External Trade, Orlando Solorzano, in presenting his country's case asked the Council to take step to have the U.S. actions revoked, in line with U.S. obligations under the general agreement.

The U.S. actions, he said, was an effort at political coercion aimed at undermining the right of Nicaragua to exist as a sovereign country.

Solorzano placed the U.S. trade embargo against the general background of hostile U.S. actions against Nicaragua - the mining of Nicaraguan ports, efforts at steady economic strangulation of Nicaragua, U.S. refusal to talk with Nicaragua, rejection by U.S. of international juridical norms, U.S. boycott of the Contadora place initiatives, and U.S. claim that the internattonal court of justice at the Hague had no competence to deal with U.S. actions against Nicaragua.

Solorzano also referred to the U.S. cut in 1983 of the Nicaraguan sugar quota to the U.S. market by 90 percent, and its refusal to abide by the GATT Council ruling against it.

After the sugar quota cut, some 13 percent of Nicaraguan exports went to the U.S. market - with meat, bananas, tobacco, and coffee among the main exports.

Also, 20 percent of Nicaragua’s imports came from the U.S., and some of these were crucial to Nicaragua’s agriculture, industry and transport, and thus for its economy.

About 60 percent of Nicaragua’s agricultural and industrial production were in private hands, and the U.S. action was thus against the mixed economy.

The U.S. embargo also had a wider impact on and damaged Nicaragua’s trade and economic relationships elsewhere, and particularly its regional trade arrangements in Latin America, and in the Central American common market.

The U.S. action potentially affected all Third World countries.

How could Third World countries have faith in international institutions, and in particular how could they have trust in the new round of trade negotiations proposed by the U.S.?, Solorzano asked.

"What value would there by in any new undertakings of that new round?", Solorzano further asked.

The U.S. actions, he underlined, was in violation of the UN General Assembly and Security Council resolutions, and of the charter of the organisation of American States.

It was also violative of U.S. obligations under several articles of the general agreement - of article one (most-favoured-nation clause), article two (tariff undertakings), article V (freedom of transit), article XI (general prohibition of quantitative restrictions), article XIII (non-discriminatory application of quantitative restrictions), and the provisions of part IV (providing special rights for the Third World countries and stipulating obligations for industrial countries in this behalf).

The U.S. Amb. to GATT Peter Murphy, argued that the U.S. actions had been taken for national security reasons and thus covered by the security exceptions in article XXI.

In this view, Murphy further contended, the issue was a political one and not one to be addressed in GATT, since there was no protectionist motivation behind the U.S. actions.

GATT, Murphy said, could not approve or disapprove of the U.S. judgements of its national security interests, and had no competence to make judgements on such matters.

In the debate that ensued some 29 GATT Contracting Parties (Cuba, Argentina, Peru, Colombia, Brazil, Poland, Chile, Uruguay, Hungary, Spain, Austria, Sweden, Czechoslovakia, Dominican Republic, India, Finland, Switzerland, Trinidad and Tobago, Romania, Egypt, Yugoslavia, Canada, Australia, the European Community, Norway, Iceland, Jamaica, Japan, and Portugal), and three observers (Mexico, china and Costa Rica) spoke.

The Latin American countries, and several others Third World countries spoke, took a clear position, basically supportive of Nicaragua and calling for the revocation of the trade embargo.

These countries contended that the provisions of the general agreement had been clearly violated.

They noted that though claiming to act under article XXI, the U.S. had not proven its case or justified the use of this article.

They also rejected the view that the issue should not be dealt with in GATT, and said that GATT had indeed competence to discuss trade aspects of the embargo.

Several of these countries also made the point that the political effect of the U.S. action was to undermine the efforts of the Contadora group to find a peaceful solution to the problems of Central America.

Many of the other speakers, who were not so explicit in their support to Nicaragua, presented some nuances in positions.

GATT, some of them agreed, was not the forum to solve political disputes, and the issue was no doubt essentially political.

Any Contracting Party (CP) under the general agreement had a right to invoke article XXI, and it would be for each CP to define its national security interests, and this needed no approval from GATT.

But while taking this view, most of the countries who spoke in this vein also insisted that the CP invoking article XXI had a heavy responsibility to act "in a prudent and careful manner", particularly in the light of the need not to undermine the trading system, and hence to exercise care.

Several of the countries who took this line, however said they were not convinced that in this particular case, the necessary prudence and care had been shown.

The European Community (which had invoked article XXI against Argentina during the Malvinas war to impose trade and financial sanctions), agreed that GATT had no role in disputes falling in the area of national security or political differences. Article XXI was an exception to a country's GATT obligations, and it was for each country to decide its international security interests.

However, in the Community's view, any invoking of the rights under article XXI should be done with discretion and not in an arbitrary manner.

The Community spokesman, Tran Van-Thin, in putting forth this view, however, expressed the hope that the tensions in Central America, would be alleviated "without dangerous repercussions on the international trading system".

Among the other industrial countries, Spain’s Alfonso De La Serna, said the U.S. actions ran contrary to its specific obligations under the agreement, and were not covered by the article XXI security exceptions.

De La Serna made a strong plea for support for the Contadora initiative in Central America.

Austria said it did not believe that economic measures were an adequate means of achieving political ends, and could be imposed only when sanctioned under the UN charter obligations.

Nordic countries took more or less a similar line, namely that article XXI should be used, and national security interests "interpreted", in a prudent manner, and did not believe such prudence had been shown in this particular case.

India expressed its deep concern at the trade embargo, and did not consider any emergency situation existed within the terms of article XXI.

Any country invoking the rights under that article, India contended, must demonstrate a genuine nexus between its security interests and the economic actions taken.

That nexus had not been established in this case, and the U.S. actions being contrary to its GATT obligations, should be revoked.

China’s Liu Xianming, speaking as an observer, said china was opposed to the U.S. practices of economic pressures against Nicaragua. The U.S. actions violated the provisions of GATT and prejudiced the development of international economic relations.

It was China's hope that the U.S. would act in support of the efforts of the Contadora group to bring peace to Central America, the Chinese delegate added.