Oct 4, 1985

CONSENSUS ON PROCEDURE POSTPONES FIGHT ON SUBSTANCE.

GENEVA, OCTOBER 2 (IFDA/CHAKRAVARTHI RAGHAVAN)— The special session of the GATT Contracting Parties agreed by consensus Wednesday night to a procedure for further consideration of a new round of multilateral trade negotiations (MTNs), but in effect postponed the major fight on the substance.-

After the adoption of the consensus decision on further work, and the creation of senior officials group to consider it, all the protagonists conceded that the main issue of dispute over of "services", and whether or not it could be brought into GATT, had not been decided or solved, and was wide open.-

The services issue, and the U.S. efforts to evolve an overall umbrella framework for this, and have separate codes in individual sectors, has been at the centre of the controversy over the new round, and dominated the GATT debate over the last several weeks.-

Though put as "trade in services", it is widely acknowledged even by industrial countries, that this is the major issue of economic negotiations, that would shape the future of the world markets well into the next century, and decide who would dominate and share these markets.-

Under the guise of "trade liberalisation" in services, the U.S. in effect is trying to create an international order that would ensure that its TNCs, who have the lead in many sectors, would be able to establish themselves in the Third World, and control and shape the future direction of their economy.-

A few of the major countries of the Third World, like India and Brazil, who have become aware of this, have been determined to resist this.-

But the U.S. has been trying to isolate them, by getting other Third World countries to agree to services.-

Only as a result of the current debate, some of the other countries are becoming more aware, and as further work on services is continued, their implied support to the U.S. may be less.-

The compromise Wednesday merely ducked the services issue, and put it off to November.-

As GATT director-general, Arthur Dunkel put it to newsmen:

"No problem has been solved. We have merely agreed on a way to start to tackle the problems concretely".-

"The very controversial and difficult question of services has not been solved, but there is a clear indication of how governments are going to tackle it".-

The chairman of the CPs, Felipe Jaramillo said that the senior officials group would discuss the various issues, including submissions of various Contracting Parties.-

Some of these submissions have said that services should be included in the negotiations, while others had said they should not, and both sides would present their positions at the officials group, Jaramillo noted.-

But the separate track agreed to in 1982 and 1984, namely for exchange of information in national studies through meetings organised by the chairman of the CPs, would go on, and the work of the officials group would not prejudge or prejudice this work.-

Under the 1982 and 1984 decisions, it would be for the 1985 regular session of the CPs to decide whether any "multilateral action is desirable or necessary".-

The November session of the CPs would have the report of the senior officials, and the outcome of the separate track on services, and in the light of all these, it will take a decision on the establishment of a Preparatory Committee to prepare the basis for the launching of a new round, Jaramillo added.-

Other delegations underlined that the only decision now was to take a decision, and not that in fact a Preparatory Committee would be set up in November for launching a new round.-

Though at one stage in the proceedings wednesday, and particularly in the corridors, there was talk of getting a decision on procedure by vote, ultimately a compromise formulation was evolved that met the viewpoints of the major protagonists, and enabled consensus to be reached.-

By the compromise, the Contracting Parties agreed that:

-- A preparatory process on the proposed new round of MTNs has been initiated,

-- To further this process, a group of senior officials, open to all CPs, is established and will meet for the first time on October 14, 1985,

-- The group of senior officials would report to the CPs at their November session, and

-- At that session, "a decision will be taken on the establishment of a Preparatory Committee to prepare the basis for the launching of a new round".-

The consensus decision also incorporated two "understandings", namely, that

-- The senior officials group will examine the subject matter and modalities of the proposed negotiations in the light of the GATT work programme and priorities for the 1980’s as contained in the Ministerial declaration of 1982 and the continuing consideration of changes in the trading environment so as to ensure that the GATT is responsive to these change, and

-- The work of the senior officials group will not prejudice the ongoing work of the GATT in terms of the 1982 work programme, and will not prejudge the work on services in terms of the 1982 and 1984 decisions and agreed conclusions of the Contracting Parties. The November session of the CPs will also receive reports on this ongoing work.-

Much of the prolonged negotiations wednesday related to this last one, specially in view of the declared position of India, brazil and a few others that they could not agree, but would object to anything that went beyond the 1982 and 1984 decisions on services.-

The decision Wednesday would perhaps enable the U.S. administration to fell the U.S. Congress that preparations for a new round were under way, and that Congress should hence grant the president authority to negotiate.-

Whether this would enable the administration to prevent further protectionist actions by the U.S. Congress remains to be seen.-

The U.S. Deputy Trade Representative, Mike Smith, would not hazard a guess as to how Congress would view the outcome.-

Shrirang P. Shukla of India and Paulo Nogueira Batista of Brazil, both of whom had taken a strong position on services, and had refused to go along with earlier formulations of the compromise, told newsmen after the meeting that they had agreed to the compromise, since it preserved "the integrity of the 1982 and 1984 decisions of the CPs on the services".-

Also, whether or not there would be a Preparatory Committee would be decided when the time came.-

The compromise had also provided a clear mandate to the officials, namely the GATT work programme.-

Even the use of the words "the continuing consideration of changes in the trading environment so as to ensure that the GATT is responsive to these changes", words that were being interpreted to mean a commitment over new themes, Shukla underlined came out of the 1982 Ministerial declaration, and thus was not new or beyond the work programme.-

In his talk with newsmen, Smith said that the decision on a Preparatory Committee would not depend on the report of the officials group.-

While the U.S. had been ready to set up a Preparatory Committee, others had been unwilling, but the U.S. hoped that in November such a decision would be taken.-

On services, he conceded, that nothing had been decided and the positions of both sides had been reflected in the compromise.-

Earlier in the day, in informal consultations at level of heads of delegations, the industrial countries and several from the Third World were willing to go along with a procedural decision put forward by Jaramillo, but some others wanted some changes in the wording.-

There were also a smaller number of countries who had basic problems over the proposed text, particularly in regard to the mandate of the official group, as well as in relation to the services issue.-

A large number of Third World countries among the 90 strong GATT membership, have neither expressed themselves in the session nor on the Jaramillo draft decision so far. Some of the delegates said that they were under "terrible pressure" in their capitals from the U.S. and EEC to ensure that they kept mum even if they did not agree.-

While the countries objecting to the services issue specifically - India, Brazil, Yugoslavia, Argentina, Egypt and a few others - are "an handful" as the U.S. has been insisting, it is their domestic markets that are being sought to be liberalised for U.S. "service industries", and hence their non participation in the consensus on services or voting against any GATT negotiations on services cannot be brushed aside as unimportant or dismissed on the ground that these countries account for very little weight in total world trade.-

While the U.S., and some of the industrial countries were talking Wednesday morning of proceeding to take decisions by a vote, GATT spokesman said that the chairman of the Contracting Parties and the GATT director-general, were continuing their informal consultations to find a consensus formulation that would be acceptable to all, or at least one to which no one would object.-

The spokesman suggested that since the decision would be essentially "procedural", if it was to be decided by a vote, a simple majority would suffice.-

However on Tuesday, India had said that any effort to extend GATT jurisdiction to new areas like "services" would not be a matter of procedure, but one of law, and thus would need unanimous consent of the CPs.-

Egypt had also made a similar point.-

The EEC’s Paul Luyten, had earlier told a press conference that the EEC did not favour any decision by vote, and nor was one necessary, since it would be possible to find a compromise wording acceptable to all.-

Rejecting the view that for "liberalisation of trade", the consensus rule in the GATT system could be breached, Luyten said: "if you vote now, the same procedure" can be used by the developing countries, who are in a majority in GATT, to turn it against the industrial countries at a future time".-