Oct 24, 1985

RBPS GREATER OBSTACLE THAN GOVERNMENT RESTRICTIONS.

GENEVA, OCTOBER (IFDA/CHAKRAVARTHI RAGHAVAN)— The increased resort to Restrictive Business Practices (RBPs) on a wide scale in international trade is threatening the functioning of the international trading system, according to the UN Conference on Trade and Development.-

In a report, the UNCTAD secretariat underlines that the adverse effects of the RBPs are especially damaging to the Third World countries, and for some of them these practices are becoming "a more important obstacle" to trade than the more "traditional" types of restrictions applied by governments such as tariff and non-tariff barriers.-

The UNCTAD report is for the forthcoming UN Conference to review all aspects of "the set of multilaterally agreed equitable principles and rules for the control of restrictive business practices" or "the set" as it is commonly known.-

The Havana charter of 1948, had envisaged the creation of an International Trade Organisation (ITO), for trade liberalisation, and envisaged the ITO addressing not only governmental restrictions in the forms of tariff and non-tariff barriers, but also use of RBPs by private enterprises.-

But the Havana charter never came into force, since the U.S. declined to ratify it, and only portions of it relating to governmental actions in the area of tariffs and trade, which had been put into force provisionally, survived as the GATT and for nearly three decades, only governmental restrictions on trade were dealt with internationally, while those flowing from the actions of the private sector were ignored.-

It was only after UNCTAD came into being in 1964 that the issue was taken up, and the RBP code or the set was negotiated in UNCTAD, and adopted as a non-mandatory and voluntary set of guidelines by the UN General Assembly in 1980.-

But while voluntary, the set describes the actions to be taken by governments to ensure more effective control and elimination of RBPs, and set up an intergovernmental group of experts to monitor its implementation.-

The UNCTAD report notes that it is now generally agreed that there has been "inadequate implementation" of the set during the five years of its operation.-

The "repeated concern" of the intergovernmental group of experts about the continued resort to RBPs in international transactions, UNCTAD underlines, "is a reflection of the intensification of projectionist trends in many countries".-

"The surge in recent years in the use of Voluntary Export Restraints (VERs) and of the so-called Orderly Marketing Arrangements (OMAs) is an important component of this trend".-

These frequently involve arrangements, between enterprises in importing and exporting countries, aimed at limiting the amount, and often raising the prices of exported goods.-

"When these arrangements run the risk of being challenged in the importing country under national RBP legislation, they are usually directly sanctioned by governments through specific authorisation", the UNCTAD report points out.-

The increasing resort to anti-dumping and counter-vailing duty cases, and the manner in which a large number of such cases are settled, have also resulted "in an increased use" of RBPs.-

Actions in importing countries in such cases, UNCTAD points out, are frequently settled when exporters undertake to raise the price of the goods exported and/or agree to limit the volume of such exports.-

"In all such arrangements there is one common element: the establishment of an ‘acceptable’ level of prices for specific imports by domestic enterprises, along or in conjunction with the government of the importing country".-All countries permit the use of RBPs in exports, though under certain conditions, and in the five years since the adoption of the set, there has been no apparent move to curtail such practices.-

Not only that, in the U.S. new legislation has been adopted to limit the scope of application of its anti-trust laws to export transactions.-

The increased resort to RBPs on a wide scale in international trade transactions, UNCTAD warns, is threatening the functioning of the international trading system.-

Most of the trade restraints are not official, and there is little transparency on their use or effects.-

They usually involve country-specific actions, and therefore are discriminatory and violative of the fundamental principle of the GATT.-

Due to its inadequate implementation, the main objective of the set, namely ensuring that RBPs do not impede or negate the benefits of liberalisation of tariff and non-tariff barriers affecting world trade, has not been fulfilled, UNCTAD notes.-

In the last five years, RBPs have become "an increasingly important component of international trade policy".-

This is the result of "a serious dichotomy" in government policy which, on the one hand advocates free market forces in international trade while, on the other, submits to strong protectionist pressure resulting in an intricate network of marketing arrangement restraining trade, and inevitably involving RBPs among enterprises in both the exporting and importing countries.-

"Full implementation by all states of their commitment to the set of principles and rules would undoubtedly have averted this negative trend. Hence the requests from a number of states, and in particular from the developing countries, for a mandatory or legally binding set of principles and rules".-

Though not a mandatory or legally binding international treaty, the unanimous adoption of the set by the UN General Assembly, UNCTAD underlines, "clearly involves a morally binding commitment", and could be cited in national and international proceedings.-

The fulfilment of the commitments accepted, largely depends on the willingness of states, and in particular the principal trading countries, to respect the set "and not to search for ways and means to circumvent them".-While there may be no need at this stage to change the provisions of the set, the UN review conference should decide that states should take "concrete measures" to promote and enhance the application of the set.-

There should be an agreed declaration that five years after the adoption of the set, RBPs have become "one of the main barriers to international trade transactions".-"Far from being controlled or eliminated from the international trading system, RBPs have been increasingly used as an instrument of protectionism in the face of efforts to reduce more traditional types of government restrictions to trade such as tariffs and non-tariff barriers", UNCTAD adds.-

The Conference should hence urge states to avoid entering into arrangements in restraint of trade through use of RBPs "as a palliative to governmental measures" covered under GATT.-

Also, concrete steps should be taken towards implementation of the set. These should include in particular:-- Establishment or improvement of notification procedures for enterprises on use of RBPs in import and export transactions, and making such information public;-- Strengthening of notification procedures so that when it comes to the notice of a state that an RBP would have adverse impact on international trade, and particularly the trade and development of Third World countries, the state or states concerned should be promptly notified;-- Industrial countries should make voluntary financial and other contributions for technical assistance, advisory and training programmes on RBPs as called for in the set;-- Establishment of a special committee on RBPs in UNCTAD in place of the existing intergovernmental group of experts; and-- Calling for a review conference on RBPs to be convened in 1990 by the UN General Assembly.-