LIBERALISATION TALK, PROTECTIONIST ACTIONS.

Jun 20, 1986

LIBERALISATION TALK, PROTECTIONIST ACTIONS.

GENEVA, JUNE 18 (IFDA/CHAKRAVARTHI RAGHAVAN) -- Despite talk of trade liberalisation, and repeated commitments at highest levels to resist protectionism, restrictive trade measures of industrial countries, often outside GATT, have been proliferating and increasing, according to a GATT Secretariat Report.

The report of trade policy actions and developments covering October 1, 985 to March 31, 1986. With an overview from the Secretariat, was presented to the special session of the GATT Council Tuesday.

Like most other GATT documents, the overview and detailed review of actions in each country, is a confidential document not officially available to the media.

After the special session, where delegates commented on the report and gave their own assessments, the Council also held a regular meeting, where among other thins, India reserved its rights on the status of Hong Kong (now a British Crown Colony) as a separate GATT Contracting Party after July 1, 1997, when the sovereignty over Hong Kong is to pass to the People's Republic of China.

Brazil presented to the Council proposals on the elements that should constitute a decision by the GATT Contracting Parties on the selection of the Director-General of GATT, when the just-renewed term of the present incumbent expires in September 1989, as also the standards and criterial to be (...) in selecting any individual to the post.

While renewing the term of the incumbent, Arthur Dunkel, for a further three years, the GATT Council had agreed that the procedures and criteria for selection of the GATT Director-General should be drawn up by the regular session of the GATT Contracting Parties in 1986, and that consultations on these issues should be taken up before that.

In this overview of trade policy developments, the GATT Secretariat said protectionist pressures have shown no signs of abating, and there has been no slackening of pressures for additional measures of protection for uncompetitive industries in industrial countries.

There has also been a proliferation of "grey area" measures -Voluntary Export Restraints (VERS), orderly marketing arrangements, and the like.

Paradoxically, the Secretariat says, many protectionist measures and actions are directed against the very same countries from whom a better debt servicing is expected, thus reinforcing a trend in third world countries to adjust to debt problem through "import substitution at expense of export expansion".

During the period under review, the Secretariat Paper brings out, governments have resorted to bilateral and sectoral arrangements to solve trade problems, with no fewer than 17 export restraint arrangements, introduced, renewed or modified.

Without counting the MFA (sanctioning VER arrangements in textiles and clothing trade, in derogation of GATT rules), the Secretariat notes there are some 120 other grey area arrangements in place known to the Secretariat.

All such measures, it notes, are "by and large inconsistent" with various GATT provisions, in particular articles XI, XIII and XIX.

The trade coverage of these measures have remained unchanged, but with the addition of semi-conductors to the category.

More and more sectors of trade are also coming under voluntary and involuntary quotas, written or tacit gentlemen's understandings, intra-industry association agreements, as well as unilateral restraints and bilaterally negotiated agreements "as a way of avoiding threatened anti-dumping or countervailing duty investigations or actions".

While counter-trade (which the Secretariat frowns upon without going into the underlying basic causes) is on the wane insofar as petroleum is involved, "but continued unabated in commodities other than oil".

On the expansion of the EEC with the addition of Spain and Portugal, the Secretariat notes that this has led to "serious differences of view" between the U.S. and the EEC.

Policies in agricultural trade also continue "to generate serious problems" for the trading system, and moves to influence trade patterns in temperate zone products, largely cereals and dairy, have given rise to "increasing concern".

Policies of selling agricultural products at subsidised rates on certain markets continue, while export assistance programmes have been introduced even by some third world countries.

Bilateral agreements, "with varying degrees of transparency, are a major vehicle for this trade, against a background of depressed prices and uncertain market access".

On textiles and clothing, where negotiations over the future of the MFA-III are under way, the Secretariat notes that "in the meantime, evidence points to a tightening of many existing bilateral agreements under the current arrangement".

GATT hopes that the negotiations over the future of the MFA would make "a positive contribution to a successful launching for the forthcoming round of multilateral trade negotiations".

The major indebted countries continue to face many trade restrictions, the Secretariat notes.

Exports of South Korea, Brazil and a number of other indebted countries are restricted, under bilateral export restraint arrangements that limit their access to U.S. and EEC markets.

Trade barriers on beef and veal, maintained by the EEC and Japan, continue to limit export earnings of countries such as Argentina.

The trade policies on sugar of the U.S., EEC and Japan continue to affect exports of sugar from a number of indebted countries.

Citing the World Bank's estimated that in 1983 import restrictions on third world exports of beef and sugar alone amounted to half of the aid programme of all industrialised countries, GATT adds: "there is little reason to think that the situation has improved since".

Several of the industrial countries who spoke in the special session, while underlining the gravity of the situation, used it to underscore their call for a new trade round.

South Korea's Yung Sun Drew attention to the problem of grey area measures and suggested that on the eve of the launching of a new round, the importing countries must think again over these measures (forced on the weaker exporting countries), and ponder on how they planned to contribute to progress on the new round.

India's Parampreet Singh Randhawa said the report showed that no effective standstill and rollback were in place, "despite commitments at the 1982 GATT Ministerial Meeting, and elsewhere".

He drew attention to U.S. measures affecting imports of rice and cotton, and the large number of Anti-Dumping and Counter-Vailing duty (AD/CF) investigations launched in the U.S.A.

There has been "a very significant increase" in such investigations in the U.S., and whether they were successful or not, these resulted in trade harassment on a pairly important scale, the Indian delegate complained.

Finland's Amb. Olli Mannander, speaking for the Nordic countries, also expressed considerable concern on the grey area measures, but said these illustrated the need for "new initiatives" in international trade policy and a new round, and "a firm standstill commitment" in that context.

Jamaica's Anthony Hill suggested that GATT reports should not merely focus on major markets, but should also take note of actions of several third world countries who were trying to make their trade policies more consistent with their GATT obligations.

The EEC representative, Tran Van Thinnh, in what a GATT spokesman described as "a political rather than an economic argument", referred to the Secretariat comments on trade problems arising out accession of Spain and Portugal to the EEC, to suggest that this enlargement and integration of western Europe was in the political interests of the U.S.

The U.S. should keep this in mind, and not allow trade disputes, which were not very important in the overwhelming areas of commerce, "to endanger european integration".

Presumably also referring to complaints of others about adverse effects on their own exports, Tran said that a united Europe provided "the only counter-weight" to the world's other major trade entity, the U.S., and that this counter-balance was importance not only for Europe but many smaller industrial countries and the third world countries.

Japan's Monoro Endo agreed on the political and economic important of a united Europe, but said the EEC efforts to liberalise its internal markets should be complemented by external trade liberalisation.

The U.S. delegate, Michael Samuels, said while U.S. continued to support european integration, the problems arising out of this, as in U.S. agricultural exports to the EEC, should be solved.

Canada's Brian Morissey referred to pending legislation in the U.S. Congress and its likely adverse serious effects on Canada's trade, and "encouraged" the U.S. administration to continue to resist such measures that would violate U.S. GATT obligations.

Later at the regular session of the Council, the Canadian delegate complained of the U.S. action in instituting investigations over Canadian exports of lumber and other wood products, and called them "trade harassment".

Similar complaints in 1983 had been investigated and resulted in a negative determination, and yet new complaints had been instituted, he complained.

The U.S. delegate sought to explain this as a "preliminary investigation" because of "new evidence" presented, and expected a preliminary determination by july, which would result in dismissal or a more formal and extensive investigation in the event of a determination of subsidised Canadian exports.

Brazil, in raising the issue of procedures for election of a GATT Director-General, noted that at the special Council meeting to appoint Dunkel for a new four-year term, it had been agreed that criteria for such appointments should be laid down, and that consultations would take place on how to proceed on this matter.

But so far no consultations had taken place.

In putting forward in a paper some of the elements that should be included in the criteria to be set, Brazil suggested that a candidate should satisfy the standards of high efficiency and technical competence, and should be impartial and not amenable to the views and influences of individual governments.

The Director-General should be appointed by the GATT Contracting Parties for a term of four years, with the stipulation that no person should hold office for more than two terms.

The deputies should be appointed by the GATT Council, on the recommendation of the Director-General.

In making all these appointments, the principles of equitable geographical representation and rotation should be borne in mind.

On the Hong Kong issue, India referred to the notification from U.K. that Hong Kong (so far represented through the U.K. in GATT) would new become an independent Contracting Party, and the separate notification by the People's Republic of China that the status of Hong Kong as a separate customs territory after July 1, 1997, would be maintained.

At the Council meeting Tuesday, the Indian representative said the Indian authorities had since examined the legal position and recognised Hong Kong as a separate Contracting Party on the basis of the British notification.

However, the legal situation after July 1997 was not clear, and the People's Republic of China's notification about the status after 1997, was by a country which was not now a Contracting Party.

India therefore reserved its position and rights about the status of Hong Kong as a separate Contracting Party after July 1, 1997.

Earlier at the special session, China, as an observer, said that it wanted to "resume its membership in GATT", and that the necessary steps in this direction would be taken.

China was a GATT CP from inception, but in early 1950's (when China was represented by the Kuomintang Delegation), it withdrew from GATT.

Appealing from support from others from resumption of its membership, the Chinese Representative said that meanwhile China would like to attend the GATT Ministerial Meeting at Punta del Este and participate in the new trade round.