Mar 3, 1984

THE AGENDA OF GATT DISCUSSIONS ON "SAFEGUARDS".

GENEVA, MARCH 1 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The issues of discrimination and compensation in "safeguard" actions remain central to the discussions in the General Agreement on Tariffs and Trade on drawing up a "comprehensive understanding" on article XIX of GATT, according to the UN Conference on Trade and Development.-

An UNCTAD secretariat report to the trade and development board notes that a review of "safeguard" actions under article XIX, and the surrogate or "grey-area" actions outside it, suggest that some of the major trading countries apparently wish to change the two elements of the system.-

These countries wish to change the requirement that actions under article XIX should be on the most-favoured-nation (MFN) principle, and that the importing country taking such restrictive actions must pay compensation for its actions or face retaliatory actions.-

The simple calculations of power between large and small trading suppliers is itself a powerful argument for maintaining the MFN principle, whether in article XIX or for permissive discrimination as "consensual selectivity", UNCTAD emphasises.-

This is apart from the fact that selective action may merely divert the trade of the most competitive supplier to some unrestricted supplier, and may turn out to be ineffective for the importing country.-

Also in terms of domestic political considerations, the possibility of the exporting country withdrawing substantially equivalent concessions or the importing country having to provide compensatory concessions, have been an important element of discipline limiting recourse to article XIX.-

The need to offer compensation acts as a real limitation in any specific proposal to deal with import competition through restricting imports.-

That was why, UNCTAD notes, in the closing stages of the Tokyo Round it was proposed (by some major trading partners) that the exporting countries should be expected "in the normal case" to waive their right to compensation if the criteria and conditions of article XIX were met.-

This would mean that the exporting countries should surrender their GATT rights to compensation to "reward" the importing countries for their adherence to GATT obligations and not acting under article XIX.-

The issues of discrimination and compensation thus remain central.-

Discussions on other aspects of the safeguard system, UNCTAD says, involve second-order issues, and can well have the effect of drawing negotiating energies and resources away from these two key-issues, and from other over-riding issues that the major trading countries appear reluctant to address.-

The small exporting countries have to ask themselves whether any other adjustments in the article XIX system are worthwhile or adequate as compensation for agreeing to concessions on these two basic issues.-

This is part from the issue of adjustment which goes beyond the article XIX issue, says UNCTAD.-

The 1982 Ministerial declaration implied that the "grey area" measures, now outside the purview of article XIX but having the same effect, should be brought within the ambit of a revised provision.-

This, UNCTAD notes, has always been the thrust of the United States.-

In the U.S.A., Canada and some other countries, the Voluntary Export Restraints (VERs), and other orderly marketing arrangements, are invariably a matter of public record, and result of public procedures.-

But in some other countries, comparable arrangements are less transparent and well-known.-

Also, it is often possible for private sector bodies to reach understandings on export levels with industry representatives in exporting countries. If formalised, such arrangements would attract the competition laws in various countries.-

Many such arrangements are made with the knowledge and even tacit consent of governments.-

For countries where such alternatives do not exist, there is concern that these techniques do not involve the conditions and discipline of article XIX.-

Hence their proposals that such actions should be subject to the notification requirement to GATT, and that a Surveillance Committee under article XIX should scrutiny these actions too.-

Such notification and surveillance are not technically complex, and both importers and exporters should be obliged to notify, says UNCTAD.-

But "what is at issue is the willingness of governments to submit to multilateral surveillance all such arrangements to which they have tacitly or otherwise consented".-

Another very relevant issue in connection with article XIX actions, relate to the issue of "adjustment" by producers seeking such protective actions.-

It should be agreed that governments should satisfy themselves that firms seeking relief under article XIX have addressed the issue of "adjustment" in terms of specific and practicable proposals, and not simple statements of intent.-

The issue of assistance should be addressed separately from the requirement imposed on firms as a condition for relief.-

Whether or not governments wish to facilitate such adjustment by direct financial assistance, or general or specific tax measures, or by general or specific labour redeployment or retraining and support programmes are issues of general and fiscal and social policy.-

"What is at issue is not the nature or kind of adjustment assistance programme, but the desirability of building into domestic procedures, and thus into multilateral surveillance, an "adjustment option".-

"Where governments have had in their domestic legislation the facility to choose adjustment rather than import relief, it has been demonstrated that this flexibility makes it possible to maintain a greater stability of concessions and has minimised the burdens that are placed on producers in other countries".-

On the issue of surveillance and transparency, UNCTAD suggests that the prime consideration is the transparency of domestic procedures, where every interested party could have his "day in court.-

Effective multilateral surveillance is likely to be after the fact and would depend on the transparency of domestic procedures.-

Also, desirable as multilateral surveillance may be, they can be only as effective as the signatories wish to make it. It cannot be conducted under the more detailed and rigorous rules of domestic procedures.-

In this connection, UNCTAD suggests that a GATT precedent that an exporting country should prove that there has been no injury to the domestic producer, should be reversed.-

This precedent was due to the wrong conclusion drawn that the government of an importing country it best placed to decide whether or not there is injury, and that GATT signatories do in fact meet their obligations.-

In all article XIX actions, including "grey area" actions, the importing countries should have to positively justify their actions. This, it says, would not be difficult for countries with fully "transparent" domestic procedures.-

This, along with bringing the surrogate measures under the scope of domestic procedures, as well as within the ambit of multilateral surveillance body could, over time, radically improve the detailed adherence to rules, it adds.-