GATT COUNCIL ADMITS ALGERIA AS OBSERVER.

Jul 14, 1984

GATT COUNCIL ADMITS ALGERIA AS OBSERVER.

GENEVA, JULY 12 (IFDA/CHAKRAVARTHI RAGHAVAN) — The Council of the General Agreement on Tariffs and Trade agreed Tuesday to grant Algeria observer status in GATT, while postponing to the autumn an examination of the "substantial" issue of guidelines for grant of such a status to countries.-

A decision on Algeria’s application had been put off at the June meeting of the Council at U.S. instance.-

At the Council meeting Tuesday, the United States, supported by the EEC and Israel, said that "observer" status had been given in the past on the basis that this would help in enabling the countries concerned to accede to GATT.-

But in recent years, the U.S. complained, there had been a series of "ad hoc decisions", as a result of which the original purpose of granting observer status had been lost sight of. This issue should be re-examined.-

On other issues before the Council, the chairman, Felipe Jaramillo of Colombia, reported on the status of efforts to reach "a comprehensive understanding on safeguards".-

The problem of safeguards, or protective actions that countries could take under article XIX of GATT under certain defined circumstances, had been before GATT since the Tokyo Round negotiations were launched in 1973.-

The Tokyo Round was unable to solve the issue in the face of efforts of the Industrial countries to use the opportunity to secure a right to impose "selective" safeguards against imports from particular countries, whereas GATT provisions enable this to be done only on a non-discriminatory basis.-

Subsequent efforts to pursue the issue also failed.-

At the 1982 GATT Ministerial meeting, the Ministers had mandated such an understanding being reached by the 1983 annual GATT Contracting Parties (CPs) meeting.-

But formal and informal negotiations in the GATT Council after the Ministerial declarations and at the level of Contracting Parties, failed to produce an agreement, and the CPs asked the GATT Council to pursue efforts and make recommendations in time for the 1984 annual session in November this year.-

Jaramillo said Tuesday that it had not been possible by the efforts at informal discussions "to substantially narrow down differences which exist on the main issues".-

These relate to transparency, product and geographical coverage, objective criteria for action, the temporary nature of such actions and hence need for degressivity and structural adjustment, compensation, and mechanisms for monitoring the application of the safeguards provisions.-

Jaramillo said that there had been some "recent indications" that there was "a will" on the part of a number of countries to put together proposals, and on this basis he had "reopened" the informal discussions.-

While Jaramillo did not spell out the latest ideas, it was understood to relate to some U.S. ideas.-

The U.S. in effect, is understood to be suggesting that the understanding should provide that when countries take safeguard actions, it should only be in the form of an increase in tariffs, and not quotas, and that these should be time-bound.-

There should be no question of "compensating" other trading partners for such safeguards actions, as GATT now requires, but the actions should be "degressive" over all agreed time-frame.-

However, the U.S. proposals would put both the Industrial and Third World countries on the same footing.-

This, like the earlier "selective" or "consensual" safeguards approach, has run into trouble with the Third World countries, many of whom refuse to accept this "equality" in the conditions of total asymmetry in the current world trading system vis-a-vis the Third World.-

On another issue, namely the U.S. actions curbing Nicaraguan sugar exports to the U.S.A., where the Council had accepted a panel ruling against the U.S.A. but which the U.S.A. had so far refused to implement, Jaramillo read out to the Council a communication from the Nicaraguan Minister for Foreign Trade.-

In the letter, the Nicaraguan Minister had asked the Council to urge the U.S.A. to promptly notify the CPs of the measures it intends to take to comply with the recommendations of the panel for restoration of Nicaragua’s sugar quota, and whether the U.S. allocations to Nicaragua in the U.S. global sugar quota for 1984-85 would be consistent with the panel recommendations.-

Jaramillo said he proposed to discuss this matter with the U.S. and Nicaraguan delegations, and would in due course inform the Council of the outcome.-

There was no further discussion in the Council on the issue.-

The next meeting of the Council is expected to be field in September.-

This year Peru refinanced about one billion dollars in debt payments, which were due in 1984.-

But such rescheduling is only a stop-gap measure, since between 1985 and 1989, Peru owes about 20 billion dollars, half of it in interest charges and half in principal payments.-

The country cannot meet those payments, according to Central Bank President Richard Webb and other officials, since it would eat up more than 60 per cent of Peru’s export earnings - foreign exchange which is needed to pay for food, industrial raw material and equipment imports.-

The solution proposed by the Central Bank Presidents who is in hot water with the administration for having made public figures on the country's financial situation, is to find a way to avoid the interest payments in 1985-89.-

Webb has not explained how those charges night be postponed. Economy Minister Jose Benavidez Munoz and his top foreign debt adviser Rodrigo Cepeda, indicated in remarks to IPS that the interest rate issues is at the heart of Peru's new debt repayment strategy.-

"The most serious problem, because we cannot manage it, is that of the unilateral decisions to raise interest rates, taken by the U.S. banks", said Benavidez.-

The Economy Minister hinted that in an upcoming debtors' Conference in Argentina, Peru will propose that the Latin America nations demand that the United States assume the difference between the current U.S. prime interest rate and the "historic rate".-

"A permanent solution will be to reduce interest rates to their historic level", adviser Cepeda noted, "and the extraordinary solution (would be) that the creditor governments pay the difference ... because if they don’t, they would be forcing the undeveloped countries to finance the U.S. budget deficit, which we did not create".-

"The rise in the U.S. bank interest rate is being used to finance the arms build-up", he added, "which is the Reagan administration's basic pillar for reactivating the U.S. economy".-

"But that is dangerous, because the world cannot continue inflating permanently", Cepeda warned. "It will explode, affecting not only the debtors, but also the ceditors".-