Nov 13, 1984

U.S. WAIVER REQUEST FOR CARIBBEAN TO BE VOTED IN GATT.

GENEVA, NOVEMBER 9 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The U.S. request for a "conditional waiver" of its obligations under GATT in respect of the trade provisions of its Caribbean Basin Economic Recovery Act (CBERA) is to go before the Contracting Parties for a vote at their annual meeting on November 26-29.-

The waiver, under article XXV of the General Agreement, requires approval by vote of two-thirds majority of the votes cast and the affirmative vote of one-half of GATT’s 91 Contracting Parties.-

At its meeting Thursday night, the GATT Council discussed the report of the working party on the U.S. request, and decided to forward the report and the request for waiver to the meeting of the Contracting Parties (CPs).-

The CBERA provides for duty-free imports of some products into the U.S. from the Caribbean basin countries designated as "beneficiaries" by the U.S. president.-

The U.S. request for "waiver" was in respect of its obligations under article one of GATT, the fundamental most-favoured-nation (MFN) principle of the General Agreement.-

The report of the working party, and the discussions in the Council, showed a sharp division of opinion, involving both Industrial and Third World countries, insofar as the CBERA benefits would exclude certain central American and Caribbean countries, as also its "regional" approach and political motivations, and the harm it could cause to the trade interests of other countries.-

The proposed waiver, to be voted upon by the CPs, is t be till September 30, 1995 (the duration of the U.S. law), to the extent necessary to enable the U.S. to provide duty-free treatment to eligible import of beneficiary Caribbean basin countries, without the U.S. being required to provide the same duty-free treatment to imports of like products from any other Contracting Party.-

The waiver is subject to several conditions:

-- The duty free treatment shall not raise barriers or create undue difficulties for the trade of other CPs.-

-- The U.S. shall promptly notify GATT of any trade-related measures taken, including changes in the designation of beneficiary countries as well modifications in the list of eligible products for duty free treatment.-

-- The U.S. shall consult on the modification of the eligible products with any interested CP whose trade interests might be affected, to examine possible action for a satisfactory adjustment of the matter.-

-- Any CP that considers the CBERA provisions were being applied inconsistently with the waiver or whose benefits under the General Agreement were being "unduly impaired" by the CBERA could bring the matter before the Contracting Parties for examination and appropriate recommendations.-

-- The waiver shall not also preclude the right of affected CPs to have recourse to article XXIII of GATT - the GATT provision for compensation and authorised retaliation in case of nullification or impairment of rights of GATT members under the General Agreement.-

-- The conditional waiver also requires that the U.S. would not use it to contravene the principle of non-discriminatory allocation of sugar quotas, and would promptly consult with any affected country that considers its sugar import rights have been affected.-

-- If these consultations do not yield results, the affected country could also bring the issue before the Contracting Parties for their joint consideration and appropriate action, including termination of the waiver in respect of sugar imports.-

In the discussions in the Council, Nicaragua noted its own exclusion, and asked how the economic and political stability of the region, the purported objective of the CBERA, could be promoted when it discriminated among the countries of the region.-

The report of the working party showed that while there was "a large measure of support and understanding" on the objectives, there were several detailed objections from countries and groups of them over the trade impact of the CBERA.-

Several members were concerned over the possibility of trade diversion, and expected the U.S. to take remedial actions.-

Several were worried that the CBERA provisions for sugar import could place third country suppliers at an additional disadvantage vis-a-vis beneficiary countries.-

Concern was also expressed on the effect of CBERA on other countries exporting cut flowers, instant-coffee, tobacco and the provision of certain touristic services by non-beneficiary countries.-

Several others said they favoured the strengthening of the Generalised System of Preferences (GSP) as the best way of promoting the trade of the Third World countries. Some others reaffirmed their attachment to the MFN principle.-

Some members said the exclusion of several Caribbean countries from CBERA benefits was not compatible with the GATT MFN clause and part IV of the General Agreement for promoting the trade and development of all Third World countries.-

The introduction of "certain non-commercial criteria" as a pre-requisite for the grant of trade benefits by a Contracting Party (as in the CBERA) could have far-reaching consequences for GATT.-

While in the working party, the CBERA was sought to be compared to the European Community's Lome pact, others including the Community questioned this, pointing out that Lome was a contractual arrangement whereas the CBERA was a unilateral U.S. law, which vested the U.S. president with "broad discretionary powers".-

The European Community noting its preference for the contractual approach of the Lome pact, covering 13 of the 27 Caribbean countries, underlined both its direct interest in the U.S. market and the contractual links under the Lome by which some of the Caribbean countries were obliged to grant the Community MFN treatment.-

Several saw the CBERA as politically motivated and discriminating against some third World countries of the regions and thus "incompatible" with article XXXVI of part IV of the General Agreement.-

There were also "certain inconsistencies" in the U.S. position in that the promotion of economic and political stability in the Caribbean through the special arrangements was considered a desirable objective, while this was not viewed as sufficient justification by other Contracting Parties in other regions of the world.-

This was presumably a reference to U.S. objections to some of the preferential arrangements of the EEC under the Lome pact, and with some of the countries of the Mediterranean region.-

On the U.S. view that its special preferences under the CBERA was also covered by the GATT "enabling clause" about special and differential treatment to the Third World countries, a GATT secretariat note suggested that the authority under the enabling clause covered only specific arrangements laid down in it and not those envisaged under CBERA.-

While the enabling clause itself envisaged that there could be other situations where the preferences would not be so covered and would need actions by the CPs, this could not be under part IV of GATT but only the general GATT provisions for waivers to be granted by the CPs.-

The working party report also brought out a view that while the Lome pact might be a "contractual arrangement" among signatories, it had no such character from the viewpoint of the general agreement.-

But a waiver, with terms and conditions defined by the Contracting Parties, established a "contractual link" between the donor country and the Contracting Parties of GATT.-_