EC TOLD TO DEVELOP TRADE POLICIES CONSISTENT WITH GATT.

Apr 18, 1991

EC TOLD TO DEVELOP TRADE POLICIES CONSISTENT WITH GATT.

GENEVA, APRIL 16 (TWN) – The European Community's internal trade policy reforms should be a catalyst for current efforts to strengthen the multilateral trading system and in framing its trade policies EC should ensure their consistency basic GATT principles, the GATT Council concluded Tuesday.

The conclusion, in the form of a summing up by the GATT Council Chairman, Amb. Lars Anell of Sweden, came at the end of a two-day review of the trade policies of the European Community and its 12-member States under GATT's TPRM exercise.

"The complex pressures operating on policy formulation in the Communities", it was suggested in the Council discussions, "made highly-desirable the establishment of an independent review body to assess the impact of trade policy measures as a whole. This would permit the concerns of the EC's trading partners to be taken into account before decisions are taken". Though the summing up, as stated by Anell, was on his own responsibility (and does not commit either the EC or the other CPs), such texts are informally negotiated or cleared.

The reports (by the GATT secretariat and the EC), and the discussions in the Council and the summing up would be published by the GATT secretariat later and would be available to the public.

In the discussions in the Council, according to the summing up, members stressed the important role of the EC in the multilateral trading system, both as a market and source for internationally traded goods, and as a "trend-setter" in trade policy, which called for an effective leadership by EC.

The need for transparency in the EC policies, both because of the importance of the EC and its "complex and multi-layered process" of trade policy formulation and implementation was also stressed by the Council members.

The EC trade regime, it was noted, was undergoing rapid transformation due to a variety of initiatives - the Uruguay Round, the Single Market programme, negotiations on an European Economic Area (EEA) and association agreements with central and east European countries. Its regional liberalisation efforts should be conceived as a step towards freer trade at global level, and internal liberalisation should hence go hand in hand with external liberalisation.

On the positive side, members welcomed the EC's full support for further developing and strengthening the multilateral trading system and bring the Uruguay Round to a successful conclusion, its high-level of bindings and relatively low tariffs on a wide range of industrial productions, its positive attitude in avoiding unilateral approaches to dispute settlement, and a number of recent policy changes for increased transparency and improved market access and the lifting of some trade restrictions (including elimination of unilateral quotas),conflicting with the GATT rules.

While regulatory changes in the internal market context could have market-opening effects, there was need to ensure that harmonising EC laws or regulations should not be at most restrictive levels among its member-States. While there has been no increase in protection in the move for a Single Market, there were concerns about possible future developments inter alia in area of standardisation.

Many Council members questioned whether, as one of the key players in the GATT system, the EC's reform efforts, some linked to its contribution to the Uruguay Round, in the traditionally highly protected sectors were "far-reaching enough". Concerns were expressed in relation to agriculture, coal, textiles and clothing, steel, automobiles and some high-tech industries.

The reforms in the EC's CAP needed a structural change in policies, and it was hoped that the present reform proposals would remove many of these distortions and pave the way for a successful conclusion of the Uruguay Round.

It was pointed out that the average level of tariffs on agricultural products were substantially higher than on manufactures and though many tropical products entered the EC duty free, national revenue taxes (such as on coffee and cocoa) denied exporters the benefit of low or zero tariffs and restriction consumption. Some of them had even been increased recently.

(According to the GATT, in 1988 the ad valorem equivalent of the German tax on raw coffee was 70 percent of the average import price while from 1 January 1991, Italy had increased its taxes on coffee and cocoa by four to seven times). Widespread tariff escalation on natural resource-based products made it particularly difficult for Third World countries and others to diversify into higher value-added activities, while the numerous non-tariff measures reduced the value of tariff bindings.

Participants also highlighted the EC propensity to respond to structural adjustment problems by sector-specific approaches, its minimal use of safeguard actions under Art. XIX as compared to the large number of selective restraint arrangements and anti-dumping measures, the lack of transparency and discrimination in the EC's export restraint arrangements, usually targeted against the most competitive third-country suppliers.

This last was seen by many as "a particularly worrying feature" of EC trade policies. Smaller trading partners, it was noted, were in an unequal bargaining position in dealing with demands for restraints from a trading power like the EC.

The EC's frequent recourse to anti-dumping procedures, their lack of transparency, the EC's arbitrary methods in determining injury and calculating anti-dumping margins and the excessive time taken for investigations, were viewed with concern.

Several participants saw the procedures as being used as an elastic instrument of industrial policy rather than a legitimate defence against dumping.

"The low share of trade affected by definitive anti-dumping duties did not reflect the real impact of the policies on individual trading partners, including the uncertainties and disruption generated by the threat of investigation", Anell's summing up said.

"Anti-dumping procedures had apparently been a factor in the proliferation of grey-area measures".

On the complex hierarchy of preferential trade agreements and trade schemes of the EC, many members of the Council noted the increase in proportion of the EC external trade covered by such arrangements, and the "considerable degree of differentiation" in the treatment meted out to different suppliers in various schemes.

This they said would be accentuated with the new arrangements for the EEA and the association of central and east Europeans.

Some members (east Europeans) however emphasised the value of comprehensive regional trade liberalisation in assisting the transition of their economies towards a market system, while some others (Lome countries) stressed the contribution of EC's regional arrangements to development and diversification of their economies.

In its response, the EC spokesman, Roderic Abbot, disposed off several of the complaints with remarks like "premature", "exaggerated", "unfounded".

The EC spoke of the "unique" nature of the EC process of integration, its state of "rapid change" and its leading to a "more streamlined and liberal" trade regime.

Since the negotiations on the EEA were still under way, the EC spokesman said, it would be premature to comment on it. As for the on-going negotiations with central and east Europe, it would make a "major contribution to European political stability", implying presumably that to that extent inconsistency or damage to GATT rules should take secondary role.

As for-agriculture, the internal efforts at reforming the CAP had "no direct link" with the Uruguay Round, but the possibilities for internal reform included a "rethinking" of the objectives of agricultural policies.

While the EC accepted its responsibilities resulting from the interdependence of agricultural markets worldwide, traditional elements of price and output control would continue to have a central role, the EC representative Roderic Abbot said.

"But more emphasis would be put on direct aid and income aid. In cereals, the objective would be to reduce prices to level of competitive imports, compensation up to certain limits paid to farmers for income losses".

This approach would also be applied to other products. The present quotas on dairy products would be through a case-by-case approach, to balance supply and demand. For sugar, tobacco and livestock, reforms of a "comparable" nature would be envisaged "in the near future" and the "agrimonetary system" in the light of the EC movement towards monetary and political union.

On the complaints about EC export restraint arrangements and the grey area measures, the EC spokesman said the EC policy in is area was related to the "long-standing discussion of article XIX reform" (where the EC wants the article to be amended to permit selective safeguards). The EC would agree to phasing out grey area measures if the Uruguay Round led to a "satisfactory new safeguard agreement".

As for anti-dumping measures, the complaints of non-transparency were "exaggerated", amount of trade affected remained "limited" and the "uncertainty created was not altogether unrelated to the objective factors".

With the conclusion of the TPRM review of the EC, the trade policies of the four major trading partners have been reviewed in the two-year cycle.

But questions about its utility and cost effectiveness would remain if the entire exercise proves to be a mere closed door debate - the GATT spokesman unlike earlier did not even brief the press over the two days as to what the major comments were or what particular delegates said, but merely gave out at the end the Chairman's summing up - with the proceedings published long afterwards as a GATT sales document, and the major trading partners continue with their own policies, ignoring the rules when it does not suit them (as the EC does in applying grey area measures on the ground that it has difficulty in the GATT rules on "safeguards").