PREPCOM DISCUSSES POSSIBLE RECOMMENDATIONS ON NEW ROUND.

Jun 17, 1986

PREPCOM DISCUSSES POSSIBLE RECOMMENDATIONS ON NEW ROUND.

GENEVA, JUNE 13 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The GATT Preparatory Committee for a proposed new round of trade negotiations ended a week of formal and informal sessions here Thursday, when discussions focused mainly on various drafts and formulations on individual negotiating issues, according to GATT sources.

Discussions this week have reportedly been able to cover only part of the ground, and the committee is to resume on June 23.

The Preparatory Committee has been asked to submit by July 15, its recommendations for the Ministerial Meeting, set for September 15 at Punta del Este, Uruguay.

Some of the more controversial questions and new issues not now covered by the general agreement, including services and investment, and on which the U.S. has now proposed formal drafts, are yet to be discussed.

At previous meetings of the Preparatory Committee, some of the third world countries like Brazil and India have insisted that the committee could only deal with issues within the competence of GATT, and the issue of services could only be pursued in the parallel discussions on exchange of information on services.

Investment issues, they have said in a recent speech in UNCTAD, can by looked at only in the context of mobilisation of domestic and foreign resources for development, and the policies and decisions on investment regulations are entirely within the sovereign jurisdictions of governments and not amenable to international regulations.

Apart from various tentative drafts on various possible items on the negotiating agenda, put forward by individual Contracting Parties, a draft Ministerial declaration is also reported to have been put forward as a "non-paper" on behalf of some nine industrial countries.

Though on behalf of these nine - Australia, New Zealand, Canada, Austria, Finland, Iceland, Norway, Sweden and Switzerland - the "non-paper" itself is reported to have been evolved after discussions involving the EEC and U.S.

According to some third world sources in many places the paper uses language similar to those used by U.S. or EEC at the Preparatory Committee, and the earlier senior officials group.

The non-paper is reported to have been briefly discussed at informal meeting Thursday at the instance of the EEC, but with most of the third world countries reserving their comments for a later occasion, after they have had time to study it.

While distancing itself officially from the "non-paper", the EEC itself is reported to have first spoken of its "neutrality" and then moving on to describe its position as one of "benevolent" and "sympathetic" neutrality.

Australia, which reportedly introduced and explained the contents of the "non-paper", would appear to have suggested that it took into account the concerns of all "key participants".

But some third world delegates suggested that perhaps the third world nations are not seen as "key participants" in GATT, since none of their concerns or viewpoints have been reflected or taken into account.

Among the few third world countries that made preliminary comments, South Korea is reported to have underscored this point, and suggested that the approach appeared to be one of putting pressures on the third world to open up its markets, and in effect "add a new chapter V to GATT - specifying industrial country demands on the third world".

This was an apparent reference to the so far virtually non-implemented part IV of GATT, containing provisions for special treatment to third world and commitments of industrial countries to ensure greater access to their markets to enable expanded exports and earnings for third world countries.

Some third world delegates later said that the draft appeared to be basically what the U.S. and EEC have been trying to "encourage" the GATT Director-General to put forward as a "compromise", but which he has apparently hesitating to do, in view of its certain rejection by leading third world countries for touching on issues not within the jurisdiction and competence of the general agreement.

Another third world delegate suggested that the non-paper showed that the smaller industrial countries are trying to satisfy the U.S. and EEC and reach compromises with them "at the cost of the third world".

This assessment, he said, is borne out by the efforts to accommodate the U.S. through inclusion of "services", "investment", "intellectual property rights", and governmental measures for "counter-trade" on the agenda.

Even on agriculture, an issue that Australia and New Zealand have been pursuing with vigour, the document has two alternative formulations, including one clearly reflecting the EEC view.

Even the objectives of the new round has references to all the current pet ideas of industrial world, but conspicuously absent is any reference to "development".

This, on third world source said, presumably is in consonance with the viewpoint of the U.S., which frowns on any talk of "development".

At the last GATT meeting for Exchange of Information on Services, the U.S. delegate is reported to have remarked that any international organisations focusing for talking about "development" show their "bias", and only GATT (which does not) is "balanced".

From the talk in 1982 Ministerial Declaration of bringing about "changes in the world trading environment", the emphasis now is on "structural changes in the world economy", and of negotiations to bring about "increased competitiveness" and "economic flexibility".

These, the source noted, are the terms being used by the U.S. and other industrial countries in UNCTAD now, in their efforts to reverse the two decade old thrust in north-south dialogue for reforms in the international systems to promote of development, and instead direct actions to "open up" third world economies for TNCS and their foreign direct investment.

The effort in the non-paper, the sources said, would appear to be to bring the whole gamut of national economic policies of the third world under scrutiny and control in GATT and its laissez-faire economic theories, and turning GATT from an institution concerned with some trade matters into an institution dealing with wider economic issues, now within the sovereign ken of governments.

The "non-paper", a copy of which had been obtained by IFDA, has formulations on "standstill and rollback" similar to the language in an EEC paper.

Third world countries want under standstill a firm commitment not to introduce any restrictive trade import measures "unless they are in strict conformity with the general agreement", and specifically includes within the scope of such a standstill the trade in the textiles and clothing sector.

The non-paper would permit restrictions based on provisions of the "GATT system", thus legitimising future restrictions on the third world based on such departures and derogations from GATT like the Multifibre Arrangements, negotiated under GATT auspices.

And while there is talk in one part of the non-paper of negotiations aiming at phasing out over a 10-year period agricultural subsidies, there is no such talk of "phasing-out" the MFA, but only of "modalities for liberalisation of trade in textiles and clothing".

Again, though there is talk of efforts at reduction and elimination of non-tariff barriers "including quantitative restrictions, especially those of a discriminatory nature" in the trade in other sectors, the specific formulations about textiles and clothing would imply perpetuation of the MFA and its discriminatory quota restrictions against imports from the third world.

Under a broad heading about negotiations for "strengthening the GATT system" the non-paper has sought to bring in services, investment, intellectual property, and so-called counter-trade issues.

Some of the issues of immediate concern to the third world, including some that were supposed to be addressed in the Tokyo round "as a special and priority sector" (like tropical products), are relegated to issues of "liberalizing and improving market access", where attention is to be given to "reduction or elimination of barriers to trade in tropical products".

The formulations on tropical products is particularly interesting, since this has been on the agenda of GATT from the late 1950's, with constant promises of action in successive MTNS that have remained mere promises.

The non-paper seeks to reaffirm, as a negotiating principle, the concept of special and differential treatment to the third world countries embodied in part IV of GATT and the enabling clause of 1979.

While it recognises that contributions by third world countries (to the negotiations) "should not harm their development, financial and trade needs", nevertheless it recognises that "this should not prevent solutions to particular problems being found on a genuinely multilateral basis that will be of maximum benefit to all countries".

The focus on third world needs in the approach of the non-paper to the proposed new round is in sharp contrast to the 1973 Tokyo Declaration which put as a principal negotiating aim:

--The securing of additional benefits for the international trade of third world countries "so as to achieve a substantial increase in their foreign exchange earnings, diversification of their exports, acceleration of the rate of growth of their trade, taking into account their development needs...a substantial improvement in the conditions of access for the products of interest to the developing countries and, wherever appropriate, measures designed to attain stable, equitable and remunerative prices for primary products".

On services, the "non-paper" puts as an aim of the negotiations establishment of "a multilateral framework of principles and rules for the conduct of trade in services and to ensure improved opportunities for trade by negotiations within the framework of GATT, while taking into account the requirements of regulatory principles directed towards achieving policy objectives that are commonly considered to be legitimate".

Unlike the GATT provisions for trade in goods, the services framework within GATT is to cast an obligation on governments not only to provide for the needs of their own citizens, but also trade opportunities of citizens and transnational enterprises located elsewhere.

Even sovereign rights of countries to determine their own policy objectives is to be circumscribed by objectives that are "commonly considered legitimate".

The U.S. formal paper on services tabled at the Preparatory Committee this week has said that the negotiations on services should make international trade in services "as open as possible" though a multilateral agreement that would establish disciplines governing services trade, taking into account "legitimate objectives of national laws and regulations applying to services", and addressing "specific trade barriers and unfair trade practices" encountered by particular services sectors.

The U.S. has now sought to bring all Foreign Direct Investment (FDI) issues within GATT, and has said the negotiations should address "the means to increase discipline over government investment measures which divert investment flows or distort trade flows", and that such government measures "should be controlled and reduced" in the light of specific articles of GATT as well as its "overall objectives".

The "non-paper" of the nine wants the new round to address "investment related trade measures", and should examine "in a balanced manner, the adequacy of existing GATT rules relating to the trade restrictive and distorting effects of investment related trade measures".

On "counter-trade", another area not covered by GATT, the "non-paper" wants examination of scope for application of GATT rules and disciplines to counter-trade practices "with a view to coordinated reduction or elimination of government mandated counter-trade transactions".

This would leave untouched the counter-trade measures practised by transnational corporations, whose intra-firm transactions (where branches and subsidiaries are required to purchase or sell to each other and the principal) who now account for 30-40 percent of the world's nearly two trillion dollars of trade.

Third world countries have been insisting in GATT, that to ask governments not to mandate counter-trade transactions is essential to secure a free hand for TNCS and their restrictive business practices and oligopolistic market structures that prevent access to third world exports.