ONE YEAR COHABITATION OF WTO, GATT 1947

10:55 PM Dec 6, 1994

ONE YEAR COHABITATION OF WTO, GATT 1947
Geneva 5 Dec (Chakravarthi Raghavan) -- The United States appears to have indicated its willingness to accept an year 'cohabitation' between the GATT 1947 and the WTO when it enters into force on 1 January, 1995, according to GATT sources.

The US reportedly wants, as a cohabitation price, the understanding that as between the US and other members of the WTO, only the rights and obligations of the WTO would prevail or be invoked.

The transition question has been identified as one of the important questions to be resolved before the Uruguay Round implementation conference, at its meeting on 8 December, sets a date for entry into force of the WTO.

The issue of transition or co-habitation of the WTO and the Tokyo Round agreements, particularly anti-dumping agreement, is still the subject of consultations and yet to be resolved, the sources said.

The consultations are being conducted by Amb. Kesavapani of Singapore who heads the Institutional, Procedural and Legal Sub-Committee of the WTO Preparatory Committee.

Some of the outstanding issues relating to the Appellate body have been resolved, but consultations on the code of ethical conduct for WTO panel members and those of the Appellate body are to be continued and settled by the WTO bodies when it comes into being.

Consultations are also continuing, and have to be completed in time before the implementation conference, on the question of the composition of the Textiles Monitoring Body under the Agreement on Textiles and Clothing.

Several of the other issues raised in one or the other of the Preparatory Committee bodies, and for which no solutions or decisions are needed to be in place on 1 January, have all been put off until entry into force of the WTO, the sources said.

These include issues in the agriculture area where Cairns group of exporting countries want the formats for notification (about observance of imports, domestic subsidy and export subsidy disciplines and requirements) to be given in sufficient detail to enable ex-ante monitoring.

On the Tokyo Round agreements and the anti-dumping code, the US reportedly wants, as a price for continued US adherence to these codes during a transition period, an assurance from others that no new disputes would be raised under those agreements, and only the existing ones settled.

Japan and a few others whose enterprises are subject of anti-dumping investigations that have been initiated have an interest in ensuring that the US actions are subject to some discipline and recourse to dispute settlement mechanisms.

At one stage, when it announced to the Prepcom members that the US would withdraw simultaneously with its accession to the WTO, from GATT 1947 and the Tokyo Round codes, the US mission's number two, Andy Stohler was quoted in the Wall Street Journal as saying that with the withdrawal all the pending disputes would "go up in smoke".

But several experts on GATT law and practice suggest that while there will be some uncertainty, the US will not be free of problems either.

They argue that when the US makes a determination of dumping (after entry into force of the WTO) and imposes an anti-dumping duty -- usually against the imports from a particular enterprise of a particular country into the US market -- it might act in terms of its domestic jurisdiction on its anti-dumping law, but that would not be enough when it is challenged in the WTO.

Any such duty would be running against the US bound rate in its market access schedule and/or be discriminatory in terms of the higher levy on a particular source from a particular country.

In any dispute, such a violation would be sought to be justified in terms of Art VI of the GATT (1947) and the Tokyo Round anti-dumping code.

If the US does not continue to be member of the Anti-dumping code, and seeks to merely use the Article Vi cover of GATT 1947, it will still have to extend the 'injury' test required by that article.

Until the Tokyo Round agreements, the US, in refusing to use the 'injury' test but merely going by the test of whether or not it finds a product to have been 'dumped', had always claimed 'grand-father' privileges for its anti-dumping law.

After the Tokyo Round, in 1981, the US revised and enacted a new law in this area -- providing for an enquiry process to determine the fact and margin of 'dumping' and then application of the 'injury test' for those GATT CPs who were members of the Code to determine whether any domestic producers had suffered 'injury' because of the 'dumped' product, but retaining all the provisions of the old law for others.

But in enacting a new law, the US lost its grandfather privilege.

In 1981 when it levied anti-dumping duties against some imports from India -- it had earlier exercised the non-application clause against India over the Tokyo Round Code unless India was agreeable to undertaking more commitments than required under the Code -- in a dispute with India and the latter challenged it, the US quickly compromised and settled the case with India lest it go for adjudication. It agreed to extend the code benefits to India in return for India not pressing the case.

The US reached the compromise when it became clear to the US in the 'consultations', that in any dispute the US 'grandfathering' privilege claim for the anti-dumping law would be challenged and the challenge would be upheld by any panel and the US as a general rule would find itself forced to extend the injury test to everyone, irrespective of their membership of the Code.

If there is a GATT-WTO cohabitation, after the WTO enters into force, and US anti-dumping actions take place, without the cover of the Tokyo Round code in matters where investigations have been started, the duty levied would be hit by the GATT 1947 requirements still.

If the US withdraws from the GATT 1947 too, while the anti-dumping agreement of the WTO may not be cited by complainants, the US won't be able to use it, and would have to find justification for its violation of its tariff bindings under Art.II and the non-discrimination requirements of Art I.

But in all such matters, the dispute could result in material injury to the exporters and exporting countries over the short-run and the US attempts to procrastinate proceedings in procedural objections.

Hence the attempts of several of its trading partners to find solutions now.