May 3, 1985

GATT COUNCIL PUTS OFF ACTION ON TWO PANEL RULINGS.

GENEVA, MAY 1 (IFDA/CHAKRAVARTHI RAGHAVAN) – The Council of the General Agreement on Tariffs and Trade has again put off action on two panel rulings involving disputes between the U.S. and the European Community.-

The panel reports had come before the Council at its meeting in March, when action had to be put off.-

The issue again came up before the Council at its meeting which ended Wednesday.-

In one dispute relating to EEC domestic aids for production of some canned products (like peaches), the panel had ruled in favour of the U.S., excepting in respect of dried grapes, and had said that the Community’s production subsidy actions had impaired U.S. tariff concessions and benefits.

The U.S. has sought adoption by the Council of the panel report, but the EEC has opposed it.-

In what was described as lengthy legal arguments, the EEC has cited an apparent GATT panel ruling of the 50's, relating to government production aids for canned sardines, to contend

that the panel rulings now went against GATT precedent.-

The U.S. delegate, Peter Murphy complained that if the EEC was thus going to "open up a Pandora’s box" the U.S. saw little use in setting up panels and getting their ruling.-

In the second case, involving the EEC' s preferential tariff rates for imports of citrus fruits and products from the Mediterranean countries, with whom the EEC has a preferential trading arrangement, the panel had ruled against the EEC.-

The dispute goes back to 1982.-

The panel itself had sidestepped the issue of validity under GATT of the EEC’s preferential trading arrangements with the Mediterranean countries (Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Spain, Tunisia and Turkey).-

The panel had however found that in the case of fresh oranges and lemons, the U.S. had suffered commercial damage because the preferential duty favouring the Mediterranean countries, and had recommended that the EEC take action to limit the adverse effects to the U.S. by reducing the most-favoured-nation tariffs applied by the Community to these products.-

As at previous Council meetings, Peter Murphy for the U.S., again demanded adoption by the Council of the panel report, or at least its taking note of it and asking the EEC to find an "economic solution" through bilateral consultations.-

Tran Van-Thin for the Community however opposed adoption of the panel’s ruling, because of its implications for the preferences enjoyed by the Mediterranean countries, and the economic losses they would suffer by losing the preferential tariffs.

Several of the Third World countries enjoying this or similar preferential arrangements with the Community supported the EEC stand, while a number of Latin American countries, who enjoy no such advantage in the EEC, supported the U.S. position.-

The Council finally put off actions on these two panel reports till its next meeting in June.-

On other issues, there was a large measure of support in the Council, for a Colombian-Chilean proposal, that Third World countries facing a potential Balance of Payments (BOP) difficulty, should be able to have prior consultations in GATT in its BOP Committee for positive measures to help them.-

Under the GATT provisions, Third World countries facing BOP problems could impose import restrictions and justify it before the BOP Committee.-

It has been a general Third World complaint that while the IMF forced the Third World "to liberalise imports" as part of a stand-by agreement, no reciprocal actions were taken by GATT, in asking the industrial countries to open up their markets.-

The Colombian and Chilean proposal suggested that the prior consultations should enable the BOP Committee to look for possibilities of trade liberalisation in the markets of their industrial trading partners, rather than allow an actual BOP problem to arise and for the affected countries to impose import restrictions.-

There was considerable support among the Contracting Parties for this view, and the idea is to be pursued in future in the BOP Committee.-

On Japanese leather import restrictions, on which a panel had ruled against Japan and had called for actions to liberalise imports, and where Japan has announced some measures, the U.S. said these actions were enough, and Japan should do more and advise the Council of the actions it proposed to take further in this matter.-

Japan’s Minoru Endo however said his authorities had gone as far as they could, and hey were still looking on what further could be done in regard to finished leather. But he held out little hopes of further liberalisation, arguing that actions taken had already increased Japanese leather imports from about 16 million dollars in 1983 to about 29 million in 1984.-

A number of delegations, including Uruguay, Argentina and the EEC, however found the Japanese stand "not satisfactory".-

On a separate issue, the Japanese delegate outlined some of the recent measures taken by his government to liberalise imports and open up Japanese markets to foreign goods.-

Japanese measures, taken and announced in April, followed pressures from the U.S. administration and threats of actions by the U.S. Senate and Congress.-

Endo said the actions had been taken not only to respond to criticisms, but also to enable Japan to play its due part in maintaining and strengthening the open trading system.-

Tran for the EEC, and Murphy for the U.S.A., both welcomed the Japanese actions, while Third World countries complained of Japan’s failure to take actions to benefit them.-

Tran however underlined that the effects of the Japanese actions were "still uncertain", and Japan had "a long road to cover".-

Murphy, while welcoming Prime Minister Nakasone's action in appealing to Japanese public to buy imported goods, stressed that "the temperature in the U.S.A." on this issue was still "at a danger level", and the U.S. remained ready to negotiate further concessions.-

A number of Third World countries (including south Korea, Yugoslavia, Malaysia, Philippines, Thailand and Indonesia), intervened to make the point that the issue of liberalisation was not merely one involving Japan, U.S.A. and the EEC.-

Third World countries needed liberalisation of accesses to Japanese markets for their manufactures, and Japan should bear this in mind, they added.-

Both the U.S. and Israel also reported orally to the Council about the free trade agreement between the two countries, signed on April 22, to be effective after the necessary legislation in the two countries.-

GATT, they said, would be notified of the details, as required under article 24 of the General Agreement, which deals with customs unions and free trade areas.-

While both Israel and U.S. claim that their agreement is thus sanctioned by GATT, a number of GATT members question this, and see it as a violation of the GATT’s most-favoured-nation treatment provision in article one, and thus impairing their own rights.-

When the actual notifications from Israel and U.S. come, the issue is expected to go before a working party in GATT for detailed examination.-