11:58 AM Jun 12, 1997

BOP CONSULTATIONS WITH INDIA 'SUSPENDED'

Geneva, 11 June (Chakravarthi Raghavan) -- The WTO 'consultations' with India over its balance-of-payments restrictions have been 'suspended' till 30 June -- to give time for 'reflection' to both sides, trade officials said Wednesday evening.

India had presented a plan on 10 June for a phase-out over a nine-year period of the import restrictions it was maintaining under Art XVIII:B (balance of payments provisions) of GATT 1994.

But the industrialized nations, in particular the United States, the European Communities, had wanted a faster phase-out, in two or three years. Several of them want India to eliminate restrictions quickly on big-ticket items of export interest to them: cars, television and other consumer electronics and other luxury imports, agricultural products etc.

Intense bilateral talks appear to have reached a stalemate, and the talks were suspended to give the two sides time for reflection.

Under the GATT 1994 provisions on BOP, and the Uruguay Round "understanding" on this, members having BOP restrictions, have to enter into periodic consultations with the BOP committee, which is to report to the General Council, on the conclusions of such consultations, and proposals presented with a time-schedule for removing them. The General Council us empowered to recommend that in adhering to such a schedule, the Member shall be deemed to be in compliance with the GATT obligations.

A footnote to the understanding says that it does not in any way affect the rights and obligations of members under the BOP provisions, nor the provisions of Art. XXII and XXIII of the GATT (for consultations and dispute settlement for nullification and impairment).

This means that any member could raise a dispute against another restricting imports on BOP grounds. While a General Council affirmation of a time-schedule for removal would not prevent disputes being raised, it would also discourage them.

During the Uruguay Round, India was the leading opponent of the moves of the US and others to virtually end the BOP provisions, and the understanding was the result. It was presented by Indian negotiators at that time as virtually preserving the developing country rights on this inside the GATT and the WTO.

The outcome of the consultations thus would have implications for the renewed debates in India (and elsewhere) on the WTO system and rules.

This issue has not figured at the WTO itself, but the need for a thorough review of the various provisions of the Uruguay Round that are weighted against developing countries, and need to bring this issue to the fore for the 1998 Ministerial meeting has begun to figure at other fora, official and non-official.