AGENDA AND PAPER FOR THE OCTOBER 31 COUNCIL MEETING

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90G01353R000400410003-4
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 21
• Document Creation Date: December 27, 2016
• Document Release Date: August 12, 2013
• Sequence Number: 3
• Publication Date: October 27, 1988
• Content Type: MEMO

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J.J.LA 00
THE WHITE HOUSE
WASHINGTON
1?41%
CABINET AFFAIRS STAFFING MEMORANDUM
Date: 10/28/88 Number: 490,778
Subject: EPC Meeting on the Uruguay Round
Due By:
Action FYI
ALL CABINET MEMBERS 0 0
Vice President 0 Va'
State Er 0
Treasury ce a
Defense ir 0
Justice 0 0
Interior 0 0
Agriculture[eir_ 0
Commerce- Ld 0
Labor fl;K 0
HHS 0 0
HUD 0 0
Transportation lir 0
Energy 0 0
Education 0 0
Chief of Staff C.J 0
OMB ik4 0
UN 0 0
USTR lir 0
EPA
GSA
NASA
OPM
SBA
VA
CEA
CEQ
OSTP
Action FYI
ffr 0
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Crippen
Bauer
Dawson (For WH Staffing)
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Executive Secretary for:
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REMARKS:
Attached is the Agenda and Paper for the October 31 Council Meeting
at 2:00 p.m. in the Roosevelt Room
RETURN TO:
o Nancy J. Risque
Cabinet Secretary
456-2823
(Ground Floor, West Wing)
0 Associate Director
Office of Cabinet Affairs
456-2800
(Room 235,0E0B)
,RCEO'
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THE WHITE HOUSE
WASHINGTON
October 27, 1988
MEMORANDUM FOR THE ECONOMIC POLICY COUNCIL
FROM: WILLIAM J. MARONI
SUBJECT: Agenda and Paper for the October 31 Council
Meeting
The Economic Policy Council will meet on Monday, October 31, 1988
at 2:00 p.m. in the Roosevelt Room. The single agenda item is a
presentation by Ambassador Clayton Yeutter on current preparations
for the Mid-term Review of the Uruguay Round trade negotiations.
The Mid-term Review meeting, which is scheduled for December
5 - 8 in Montreal, Canada, is a ministerial-level negotiating
session to assess the progress on specific issues and to seek
continued agreements.
Ambassador Yeutter will report on the results of the recent trade
ministers meeting in Islamabad, Pakistan and will explain:
1) controversial issues likely to require high-level action;
2) provisional agreements likely to result from the Mid-term
Review meeting in December; 3) negotiating mandate for all issues
from 1989 - 1990; and 4) reports on the progress of the
negotiating groups. An outline of Ambassador Yeutter's
presentation is attached.
The Mid-term Review meeting will be the last major international
economic event in the Reagan Administration and the conclusion of
the Uruguay Round in 1990 will be one of the most important
accomplishments of the next administration. Between 1985 and
1987 the Economic Policy Council met five times on the subject of
the Uruguay Round and the preparations for the September 1986
Ministerial meeting in Punta del Este. The last time the Council
discussed U.S. objectives for the Uruguay Round was in July 1987.
Because most of the progress on these negotiations has occurred
since that time and several new members have joined the Council
in recent months, I have provided the attached background papers.
These materials, which are a compilation of reports from the
Department of Commerce's "Uruguay Round Update" publication,
explain the history of the Round, the objectives of the 15
negotiating groups, and the progress that had been made on each
issue prior to the ministerial meeting in Islamabad at the
beginning of this month.
attachments
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I MG IJINI I CIJ J I 01 I C.0 I FIPNI./C ricr-riG.7Gri I MI IV C
Executive Office of the President
Washington, D.C. 205013
October 27, 1988
MEMORANDUM FOR THE ECONOMIC POLICY COUNCIL
FROM: Clayton Yeutte
SUBJECT: October 3 eeting on the Uruguay Round
At Monday's EPC meeting I plan
for the December 5-8 Montreal
Uruguay Round negotiations.
outline of the key issues we
well as a Commerce Department
negotiating group.
Attachment
to review with you our preparations
Ministerial Mid-Term Review of the
I have attached for your use an
will be addressing at Montreal as
summary of the activities of each
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PRESENTATIONAL OUTLINE ON THE URUGUAY ROUND
KEY ISSUES FOR THE MID-REVIEW
MEETING OF TRADE MINISTERS AT MONTREAL
DECEMBER 5-8, 1988
I. Introduction
o Setting for meeting of the Trade Negotiations Committee
Results of the informal meeting of Ministers in Pakistan
U.S. objectives for a mid-term package
Controversial Issues Requiring Action at the Political Level
o Provisional agreements for early implementation
- Agriculture
- Tropical Products
o Agreement on how the negotiations should proceed
- Intellectual Property
- Market Access (Textiles and Tariffs)
- Services
- Trade-related Investment Measures
III. The Montreal Package
o Provisional Agreements
.11,1?10
eMP????
Functioning of the GATT System (FOGS)/Dispute
Settlement
Agriculture
- Short term agreement and long term commitment
- (Review of EC and CAIRNS Positions)
- Scenario for reaching a compromise
Tropical Products
Only item given priority at Punta Del Este
Prospects for reaching early agreements
- Reciprocal vs. unilateral concessions
- LDC expectations
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o Agreement on how negotiations to 1990 should proceed
INEP 11111.
???
Intellectual Property
- Whether MTR can agree to developed countries'
objective to begin substantive negotiations on
standards and enforcement in a comprehensive
agreement
- Degrees of LDC opposition
Tariffs
Non-tariff Measures
Textiles
-- Services
?=1, .?=
- Agreement to key obligations for the framework
Timetable for concluding the agreement/procedures
for agreeing on coverage and liberalization
Trade Related Investment Measures
- Agreement to negotiate eventual disciplines
- Avoid limitations on the scope of the negotiation
o Reports and progress in other negotiating groups
mom mf.
WIN ?MI,
=ID ???
Market Access:
GATT Articles
Safeguards
MTN Agreements
Natural Resources
o Standstill and Rollback
Political Commitment -- need to reaffirm
Attempt by some LDCs to make contractual
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URUGUAY ROUND
PREPARATIONS FOR MID-TERM REVIEW, DECEMBER 5 - 8, 1988
INTRODUCTION
In September 1986, trade ministers from over 92 countries
gathered at Punta del Este, Uruguay; their goal--to launch a new
round of global trade talks. After a week of intensive
discussions, a consensus was reached, and on September 20, the
ministers adopted the Punta del Este Declaration, launching the
Uruguay Round of multilateral trade negotiations.
The Ministerial Declaration adopted at Punta del Este, while
considered a single political undertaking, is divided into two
sections. The first covers negotiations on trade in goods while
the second covers trade in services.
In the area of trade in goods, the ministers agreed that the
negotiations would address the following areas: tariffs,
non-tariff measures, tropical products, natural resource-based
products, textiles and clothing, agriculture, subsidies,
safeguards, trade-related aspects of intellectual property
rights, including trade in counterfeit goods, and trade-related
investment measures. They also agreed to conduct a review of the
articles of the GATT, the dispute settlement mechanism, the codes
negotiated during the Tokyo Round, as well as the overall
functioning of the GATT system itself.
In the area of services, the Declaration envisages the
establishment of a multilateral framework of principles and rules
for trade in services, including the elaboration of specific
rules for individual sectors.
The Uruguay Round is the eighth such negotiating "round" held
under the auspices of the General Agreement on Tariffs and Trade
(GATT) since its creation in 1948. In the GATT context, a round
is a series of continuing negotiations which have lasted anywhere
from several months to several years. The first round actually
led to the establishment of the GATT while the last negotiation,
the Tokyo Round, concluded in 1979.
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While the Uruguay Round was officially launched in September
1986, the actual negotiations did not get underway until the
following February. Since that time, the various negotiating
groups have been meeting on a regular basis in Geneva with each
group establishing its own schedule. The negotiators have been
focusing on specific proposals presented in each negotiating
group since January 1988. Most U.S. negotiating teams are led by
officials from the Office of the United States Trade
Representative (USTR), although certain teams are headed by
officials from the Departments of Treasury, State, and Commerce.
Team members include representatives from these agencies as well
as other departments such as Labor and Justice. Formal sessions
of the negotiating groups are open to all 96 GATT members plus
certain observers and provide a forum in which all views can be
heard. Informal meetings with smaller groups of countries are
also held to allow a more frank and in-depth discussion of the
issues at hand.
Each negotiating group addresses a particular aspect of
international trade. While the subjects are all related to one
another, for practical and sometimes political reasons, GATT
members decided to separate the issues into different categories
for the negotiations. All of the negotiating groups come under
the umbrella of the Group on Negotiations on Goods (GNG), with
the exception of the group dealing with services trade, which
comes under the Group on Negotiations on Services (GNS). The
Trade Negotiating Committee (TNC), which meets two or three times
per year, oversees both the goods and services negotiations and
reviews issues that affect the negotiations as a whole. Another
group established to oversee general trade issues is the
Standstill/Rollback Surveillance Body. At the launching of the
negotiations, GATT members made a commitment not to take new
trade restrictive actions (standstill) and to try to eliminate
those already in place that violate the GATT (rollback). The
Surveillance Body is essentially a forum for bringing to the
attention of others, practices which a country believes violate
this commitment.
While the Uruguay Round negotiations are scheduled to last
through 1990, it is hoped that agreements can be reached earlier
in certain negotiating groups. A mid-term review by trade
ministers of the GATT contracting parties will be held in
Montreal, Canada December 5-8, 1988 to assess progress and
announce any interim results of the negotiations.
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URUGUAY ROUND NEGOTIATING GROUPS
Traditional Trade Issues and Issues Left Unresolved in Past
Negotiations
Tariffs:
While not the major problem of international trade today, tariffs
still impede the flow of trade around the world. Developing
countries, in particular, maintain very high tariff rates on a
broad range of products. High tariff rates also exist on certain
products in the developed countries. The objective of this
negotiating group is to reduce and where possible eliminate these
tariffs.
The primary debate in the Tariffs Negotiating Group has centered
on the selection of procedures for the negotiations. Throughout
this debate, the United States has advocated a request/offer
approach (whereby tariffs on individual items are reduced only by
specific requests or offers), believing that it would foster the
broadest participation and best embrace U.S. priorities.
Virtually every other country, however, has advocated instead
using formula cuts (whereby tariffs are reduced across the board
by an agreed formula).
A group of less developed countries (LDCs) and small developed
countries recently introduced a proposal which has become the
focal point for the tariff discussions. This proposal calls for
formula tariff cuts, broad tariff bindings (ceilings above which
tariffs cannot be raised) by all participants, and special and
differential treatment for LDCs. Various elements of this
approach have attracted wide support from GATT participants.
The United States opposes this proposal due to the emphasis it
places on a formula approach and its ambiguity regarding the
extent of LDC participation in reducing tariff levels.
For the Mid-term Review, the United States is seeking to shift
the focus in the negotiating group away from the question of
methodology, preferring instead to concentrate on the end results
of the negotiations, while allowing each participant to use the
negotiating technique of its choice. If successful, this plan
will preserve U.S. flexibility to use a request/offer methodology
and encourage the broadest LDC participation.
Non-tariff Measures (NTMs):
Less traditional barriers to trade, such as quantitative
restrictions on imports, have become a significant problem in
today's trading system. This group is seeking ways to reduce and
eliminate the use of such protective trade measures.
In the Non-Tariff Measures Negotiating Group, GATT countries aim
to reduce or eliminate non-tariff barriers to trade which are not
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adequately covered by the GATT agreement or the GATT non-tariff
barrier codes. Much of the discussion in the NTMs Negotiating
Group has involved examination of three possible negotiating
techniques. One approach calls for the development of
multilateral rules similar to existing GATT non-tariff barrier
codes, such as the Standards Code. Preshipment inspection
requirements and rules of origin are among several items that
could be addressed by this kind of approach. A formula, or
across the board reductions method has been proposed by Australia
and supported by several small developed and developing
countries. This approach is aimed at the phase-out of
quantifiable NTMs such as quantitative restrictions and
price-based measures. Favored by the United States, the European
Community (EC), and Japan, is a request/offer procedure whereby
countries would exchange concessions on specific NTMs.
In early July, the United States submitted an initial list to the
group indicating the wide range of country and product-specific
NTMs affecting U.S. trade. The EC also submitted an initial list
and Japan suggested several measures for multilateral
consideration. The United States will add to its list, after
consulting with private sector advisors and gathering more
information from overseas posts. Formal request lists are
expected to be presented to the negotiating group next spring.
For the Mid-term Review, the U.S. goal is to reach agreement on
procedures and basic principles which will govern these
negotiations.
Natural Resources:
Because of the special characteristics of trade in natural
resource products, such as non-ferrous metals and minerals,
forest products, and fish, GATT members decided to establish a
separate negotiating group to address trade barriers in this
particular sector. The United States has also proposed that this
group seek to improve GATT rules to deal with such problems as
government ownership of resources, government subsidies, dual
pricing practices and export restrictions associated with natural
resource trade, including energy resource products.
These Natural Resource-Based Products (NRBP) negotiations are
striving to remove trade barriers in areas such as forest
products, fish, non-ferrous minerals, and energy-based products.
Early discussions in this group were characterized by a lack of
agreement on the issues to be discussed and negotiating
procedures. More recently, the group has made modest progress in
at least discussing a wide range of NRBP barriers and agreeing to
a limited work program for the GATT Secretariat. Although this
group has yet to agree on areas for actual negotiation, prospects
appear good for continued useful discussions of problems in the
NRBP area.
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The United States has proposed that the NRBP group focus on
practices that generally confer an artificial trade advantage to
natural resource-rich countries, i.e., natural resource
subsidies, two-tier pricing, restrictive government ownership
practices, and related export controls. The United States
believes that other areas, principally market access or import
issues, can be adequately dealt with in other negotiating groups
such as the Tariffs, Non-Tariff Measures, and Subsidies groups.
The United States has also suggested that the NRBP group discuss
energy-based products, e.g., petrochemicals, oil and gas, in
addition to the traditional GATT-recognized NRBP areas of fish,
forestry, non-ferrous minerals and metals.
Although initially favoring a wider scope of issues for NRBP
negotiations than suggested by the United States, the EC has more
recently argued that negotiations be restricted to the three
traditional NRBP areas. However, a recent EC paper leaves room
for discussion of general problems in natural resources. The EC
wants to use the NRBP group to discuss access to fishing
grounds--a position that is opposed by most other members of the
group.
Tropical Products:
In a similar way, a number of the less developed GATT member
countries believed that trade in tropical products presented
special problems that should be dealt with in a separate
negotiating group. Negotiators in this area are working to
eliminate both tariff and non-tariff barriers to trade in
tropical products, including fruits and vegetables as well as
certain processed products.
Much of the work to date in this group has focused on gathering
information about trade in tropical products. Although this has
been officially completed, many developed countries have
reservations outstanding due to, the dearth of trade information
supplied by the less developed countries. The group has moved on
to take up the discussion of appropriate negotiating procedures.
These discussions are continuing, with particular emphasis by the
LDCs on obtaining an agreed common basis for negotiations.
Because of the importance of trade in tropical products to the
developing nations, the LDCs would like to see some agreement in
this area by the Mid-term Review.
A number of proposals have been submitted, including the U.S.
proposal to eliminate all trade barriers in agricultural tropical
products in conjunction with the U.S. proposal in the Agriculture
Negotiating Group (see page 6).
Textiles:
GATT members agreed to establish a separate negotiating group on
textiles and clothing because of the special sensitivity of this
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sector. Historically, trade in textile products has been
organized under a special trade arrangement established by the
GATT known as the Multifiber Arrangement on International Trade
in Textiles (MFA). This negotiating group has been examining the
role of the MFA in world trade as well as trade practices in
textiles by individual countries.
The Textiles and Clothing Negotiating Group has progressed beyond
an information gathering stage and into discussions on techniques
and procedures. These discussions are aimed at fulfilling the
negotiating group's mandate toward promoting the eventual
integration of world trade in textiles and apparel into the GATT.
This would be based on strengthened GATT rules, thereby
contributing to the objective of further liberalization of trade.
Prominent questions before the group include the Multifiber
Arrangement (a multilateral agreement covering trade in textiles)
and its status within the GATT framework as well as various
restrictive import practices that diminish international textile
and apparel trade. Proposals suggesting a number of techniques
and procedures have been offered and will be discussed in the
upcoming meetings prior to the Mid-term Review. However,
substantive negotiations before the December meeting are
unlikely.
Agriculture:
The GATT, as it is currently written, has major loopholes in the
rules governing international trade in agriculture. At the same
time, domestic farm support policies and advances in farming
technology have caused large increases in production and
intensified international competition. All of this has led to an
increasing subsidization of farm exports and protection of
domestic markets from foreign competition through the use of
import restrictions. The goal of this group is to create GATT
rules that will curtail and eventually eliminate the use of these
trade distorting practices.
The Negotiating Group on Agriculture is attempting to achieve
greater liberalization of trade in agriculture. Toward this end,
the United States has tabled a bold proposal to phase out, over a
ten year period, all trade distorting policies including domestic
subsidies and market access barriers. Several GATT members,
including the EC, Canada, Japan, the Cairns group (a group of
non-subsidizing agricultural exporters including Australia and
New Zealand) and the Nordic countries (Sweden, Norway and
Finland), have also submitted proposals. The EC proposal, in
particular, differs significantly from that of the United States
in its emphasis on short-term measures to reduce supply, such as
price disciplines on cereals and quantity reductions on sugar,
rather than on fundamental long-term agricultural reform as
advocated by the United States.
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In an effort to gain broader support for its proposal, the United
States has submitted several additional papers, including one on
the harmonization of phytosanitary standards, an elaboration of
its proposal to address LDC concerns, a food security paper, and
a paper discussing the determination of an aggregate measure of
trade distorting policies.
Subsidies and Countervailing Measures (S/CM):
Without prohibiting subsidies, the GATT directs governments to
seek to avoid granting them in a way which harms the interests of
other countries. This weak rule and the subjective standard for
determining harm have proven ineffective in limiting the use of
trade-distorting subsidies. Moreover, as mentioned above, the
GATT has largely avoided establishing rules on agricultural
subsidies. This group is seeking ways to improve the current
GATT rules to better address the problems created by government
subsidies.
This negotiating group is grappling with problems that have long
been a major source of friction within the international trading
system. Its mandate relates directly to some of the more
controversial issues before the Agriculture, Natural Resource-
Based Products, and Dispute Settlement Negotiating Groups, to
name only three. The long-term aim of the United States is to
encourage the predominance of market forces in international
trade and to minimize government interference in trade flows. We
have therefore been a leading proponent of strengthened
international subsidies rules.
The Subsidies Code negotiated in the last GATT Round was an
important first step in strengthening international subsidies
disciplines, but it also "papered over" a number of fundamental
policy differences in the subsidies area. The code suffers both
from the fact that there is no real consensus as to the meaning
of certain key subsidies rules and from the lack of an effective
dispute settlement mechanism. In this group, the United States
has called for comprehensive and substantive reform of both the
subsidies rules and the means by which they are to be enforced.
In June, we submitted an extensive paper proposing a number of
new disciplines. The United States faces many obstacles,
however, as the predominant view among other countries is that
countervailing measures (duties levied on an imported good to
offset subsidies to producers or exporters of that good in the
exporting country), and not subsidies, should be the leading
candidate for increased discipline. This view is held both by
developing countries, interested in using subsidies to further
their economic development, and by a number of developed
countries which view subsidies as a "safety net" to ease
industries and regions through economic transition. Thus, the
group must reconcile some serious issues before substantive
negotiations can proceed. Significant progress before the
Mid-term Review is unlikely.
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Safeguards:
The GATT also recognizes the need for governments to protect
domestic industries temporarily from surges in imports. Rules
are laid out which place restraints on the use of such temporary
import restraints, known as safeguard measures. However, as
international competition has become more fierce, governments
have resorted to taking safeguard actions that are outside the
scope to the GATT rules. Negotiators in this group have
attempted to improve the GATT's safeguard provisions in order to
deal more effectively with the broad scope to import protection
actions taken by governments today.
The Safeguards Negotiating Group continues to try to develop a
comprehensive safeguards agreement that would codify and
discipline measures that countries take to protect certain
domestic industries from injurious increases in imports.
Discussions in formal meetings over the last six months have
focused on the various elements of an eventual agreement:
injury, duration, degressivity (progressive liberalization),
compensation/retaliation, and transparency.
In addition, safeguards negotiators have debated two other
important yet contentious issues. First, the group continues to
be split on the question of whether safeguards should be allowed
to be applied on a "selective" basis, against one or a group of
countries, versus whether they must be applied in a non-
discriminatory (Most-Favored-Nation) manner. In the past, some
developed countries have favored the former approach, although
countries' positions are still evolving. LDCs continue to
advocate a strict MFN application of safeguards measures,
believing that selective measures force them into undesirable
bilateral arrangements.
The second major issue of contention is the question of whether
the GATT should have more explicit provisions for structural
adjustment measures. Switzerland, Brazil, Mexico, and Egypt have
called for the inclusion of some form of structural adjustment
measures within a safeguards context. The United States and
certain other countries disagree with this point. Thus, it will
undoubtedly remain a source of discussion in coming months.
Agreement on a set of principles for a safeguards agreement will
be attempted by the Mid-term Review.
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MTN Agreements and Arrangements:
The last GATT negotiation, the Tokyo Round, produced seven
agreements, known as codes, to reduce or eliminate specific types
of non-tariff barriers to trade. Six of the codes cover barriers
in the areas of import licensing, government procurement, product
standards (industrial and agricultural), customs valuation,
antidumping, and subsidies. The seventh establishes new rules on
trade in civil aircraft. While these codes made significant
progress in reducing many existing trade barriers, several years
of experience have revealed that there are problems yet to be
resolved. Also, new types of problems have emerged in those
areas which were not addressed in the Tokyo Round. The goal of
this negotiating group is to seek, where necessary, ways to
improve the effectiveness and update the provisions of the Tokyo
Round Codes.
This negotiating group has focused its attention on three GATT
non-tariff barrier agreements (or codes): Antidumping,
Standards, and Import Licensing. Government procurement and
subsidies code issues are being addressed in the Government
Procurement Code Committee and Subsidies Negotiating Group.
Antidumping Code: Japan and Korea, supported by a number of
"exporting" countries, have proposed various modifications to the
code which would make it more difficult for nations to take
antidumping actions. These proposals are aimed at the United
States and other countries that have strong antidumping laws and
procedures. The United States and other "strong antidumping"
countries have argued that the flexibility of action provided by
the current code is necessary in order to allow countries to take
effective antidumping actions. The United States has suggested
amending the code to increase the ability of countries to take
action against recidivist (repeat) dumping and diversionary
practices.
Standards Code: Most countries support the efforts of the United
States and others to modify the code to increase discipline over
approval, inspection and testing procedures. The United States
has also proposed expanding code coverage to include bilateral
standards agreements and regional standards-setting bodies, and
to cover processes and production methods under the code. The EC
has proposed covering local and non-governmental standards
setting bodies. These proposals have not yet been thoroughly
discussed and may be somewhat controversial.
Import Licensing Code: The United States has proposed
strengthening code rules over the use of non-automatic import
licensing. A number of countries are sympathetic toward U.S.
goals in this area, and a few nations have discussed ways of
improving both the procedures and substance of the code.
However, most countries have not supported substantial new
discipline over import licensing.
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GATT Articles:
GATT members set up a separate negotiating group to address
various aspects of the GATT that were not specifically being
dealt with elsewhere in the negotiations. The GATT Articles
Group is examining GATT provisions on such issues as: 1) trade
restrictive measures taken by countries for balance of payments
purposes; 2) state trading practices; 3) the rights of countries
in tariff renegotiations; and 4) free trade areas.
Three of the major articles are discussed below.
Article XVIII (Balance of Payments): The United States and other
developed countries have expressed concern over the operation of
Article XVIII. This article permits developing countries to
impose quantitative trade restrictions (QRs), such as discrimina-
tory licensing systems, normally a violation of GATT provisions,
when they are confronted with balance of payments (BOP) problems.
LDCs maintain such QRS for extended or indefinite periods of
time. Furthermore, they usually apply such trade restrictions in
a way that protects specific industries, thus tending to
exacerbate the fundamental BOP problem. Therefore, the United
States is seeking means to improve the operation of the BOP
provisions to address these problems. LDCs, while acknowledging
that QRS are not the best solution to the problems they face,
argue that they have few alternatives because of their protracted
balance of payments difficulties. They also argue that
protectionist policies in the developed countries only make the
situation worse. To date, no specific proposals have been
introduced in the negotiating group.
Article XXVIII (Modification of Tariff Schedules): Article
XXVIII allows a country to raise a negotiated tariff or binding
if the affected countries are compensated with lower tariffs in
other areas of commercial interest. A number of smaller
countries have complained that the provisions of Article XXVIII
do not adequately protect their interests in tariff negotiations.
At present, rights are normally derived in terms of import market
share. Smaller countries have suggested that criteria be
expanded to give greater weight to the export significance of the
trade in question. The United States is among those GATT members
who believe that no significant change is necessary in Article
XXVIII. It has also argued that there must be a balance between
tariff rights and obligations.
Several proposals have been made to allocate additional
negotiating rights to the country (or countries) for which export
trade in the affected product has the greatest importance. Each
proposal would relate a supplier country's exports of the product
in question to some criteria such as the country's total exports,
GNP, population, etc. All proposals would tend to treat smaller
country trading interests more generously.
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Article XVII (State Trading): Article XVII sets out guidelines
to ensure that state trading entities (marketing boards,
parastatals, etc.) operate in a non-discriminatory manner and
base their decisions on commercial considerations. In the GATT
Articles Negotiating Group, the United States has argued that
these provisions are both ambiguous and ineffective. In the U.S.
view, there is no clear idea among GATT members of what
constitutes a state trading enterprise for purposes of Article
XVII, nor what obligations governments must accept for these
enterprises. Views differ as to what commercial considerations
and non-discriminatory treatment mean. Related to this is the
uneven fulfillment of reporting requirements to the GATT on the
operation of state trading enterprises. How countertrade, such
as barter trade arrangements, relates to Article XVII is another
question. The United States believes that these issues must be
clarified in the course of the negotiations.
Most countries have acknowledged the importance of clarifying the
state trading provisions, and Chile in particular has been a
strong proponent of reform of Article XVII. However, some
countries have expressed concern about proposed definitions of
the non-discrimination obligation and about countertrade.
New Issues
Services:
International trade in services, such as international banking,
insurance, shipping and tourism, accounts for an increasing
percentage of world trade. Since the GATT was originally
designed to apply only to trade in goods, government practices
affecting trade in services have, until now, fallen outside the
GATT's jurisdiction.
The services negotiations were established to develop rules for
international services transactions to reduce barriers and
facilitate the liberalization of trade in services. The
negotiations continue to focus on what types of disciplines are
appropriate to services. Developed countries are in virtual
agreement on the principles to be included in a multilateral
services agreement, but differ on the procedures required to make
such an agreement an instrument for liberalization. The U.S.
proposal for a services framework agreement, which has been
endorsed by most developed countries, develops the following
concepts for an agreement: transparency, non-discrimination,
national treatment, discipline on state sanctioned monopolies,
discipline on subsidies, non-discriminatory accreditation
procedures, and a consultation and dispute settlement mechanism.
Developing countries are increasingly engaged in working toward
an agreement. However, they are focusing on the inclusion of
provisions relating to development, many of which the United
States would oppose. For example, many LDCs are calling for
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unimpeded immigration as an aspect of services liberalization.
Achievement of a consensus on the outlines of a services
agreement is a U.S. Mid-term Review objective.
Intellectual Property Protection:
Inadequate protection of intellectual property rights can
severely distort and limit trade. Intellectual property rights
includes patents on industrial processes and products, copyrights
on books, and trademarks on consumer products. While certain
international rules governing intellectual property rights now
exist, they are inadequate to prevent abuses of these rights.
Consequently, proponents of stronger protection are seeking to
extend GATT rules to the intellectual property area in an effort
to bolster protection and liberalize trade in the products
affected by these rights.
The United States, the EC, Japan, Switzerland, and the Nordic
countries have worked to build a case in this negotiating group
that deficiencies in intellectual property protection have trade
effects. A number of suggestions have been proposed to resolve
these deficiencies. The United States has proposed a
comprehensive GATT agreement which would include substantive
standards for protection of patents, copyrights, trademarks,
trade secrets, and semiconductor chip layout designs. Standards
must be specified because existing international intellectual
property conventions are silent or inadequate in many respects.
In addition, the agreement would include obligations for
governments to effectively enforce rights at the border and
within national boundaries. Basic GATT principles, such as
dispute settlement, transparency and notification, are also
included.
While the negotiating group has spent much time reviewing
material on standards for protection and the enforcement of
rights, other issues such as the scope of the group's mandate and
the form of the agreement continue to be raised. The U.S. aim
for the Mid-term Review is to reach consensus on the framework
for a GATT intellectual property agreement. Agreement among
major developed countries on this framework is possible by
December.
Investment:
Governments impose regulations and policies on investors that
distort and restrict not only investment flows but the pattern
and levels of trade as well. Some GATT members believe that the
GATT should have rules to discipline all government investment
policies that distort trade flows. Accordingly, this negotiating
group is examining GATT rules to determine the extent to which
they apply to investment measures, and where new rules should be
developed.
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Discussions in the Trade-Related Investment Measures (TRIMs)
Negotiating Group have centered on two topics: the trade effects
of the investment measures identified by members; and the
relationship of GATT articles and principles to those TRIMs and
their effects. The United States, Japan, the EC, and the Nordic
countries have each made submissions that identify the TRIMs they
feel should be disciplined and that also discuss GATT articles
the respective countries feel are relevant. The United States
and Japan have submitted the most ambitious proposals,
identifying the broadest range of TRIMs. LDCs have in general
been opposed to progress on this issue since they consider the
control of investment to be a sovereign right, and since they
consider investment measures to be indispensable tools of
development.
GATT Institutional Issues
Dispute Settlement:
The GATT contains special provisions designed to help countries
resolve trade disputes that arise between them. Unfortunately,
in recent years, these dispute settlement provisions have often
proved cumbersome or ineffective. In order to avoid changing a
particular trade policy, countries have stalled or simply blocked
the process. The aim of these negotiations is to develop
procedures that will strengthen the dispute settlement process.
A very broad range of countries would like to see the functioning
of the GATT dispute settlement mechanism strengthened and
improved. One idea under consideration is a proposal to
eliminate opportunities for delay in the dispute settlement
process. This could include reforms to "close off" debate after
a specified period on the selection of panelists and the terms of
reference for each panel. A second proposal is to provide
alternative avenues for resolving disputes, such as mediation and
arbitration. Another idea is to increase third party rights in
disputes. This could provide increased participation in panel
proceedings for third parties with an interest in a case. Other
proposals focus on enhanced surveillance of the dispute
settlement process by the GATT Council, such as in the monitoring
of the implementation of adopted panel reports. Rapid progress
in this negotiating group appears likely by the Mid-term Review,
given that there is considerable convergence on a number of the
proposals described above.
Functioning of the GATT System (FOGS):
In an effort to strengthen the overall credibility and
effectiveness of the GATT as an institution, negotiators
established a separate negotiating group to examining the
functioning of the GATT system. The FOGS Negotiating Group is
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addressing such issues as how to increase the role of trade
ministers in the GATT, what role the GATT should play in
overseeing member country trade practices, and what relationship
the GATT should have to other international economic
organizations such as the International Monetary Fund and the
World Bank.
This negotiating group was established to agree on ways to make
the GATT a more effective institution. Its work to date has
largely focused on three areas: 1) developing a trade policy
review mechanism (TPRM) to increase GATT surveillance of member
countries' trade policies and practices; 2) increasing
involvement of trade ministers in GATT work; and 3) improving
cooperation between the GATT and the international financial
institutions (IFIs), particularly the IMF and World Bank. Given
the progress made to date, agreements are expected to emerge from
this negotiating group for the Mid-term Review.
The FOGS group has made the most headway so far on developing a
TPRM. Almost all countries have expressed support for periodic
reviews of the trade policies and practices of all GATT members.
The details of these reviews are now being discussed. The United
States hopes that the TPRM is an area for Mid-term Review
agreement, which could be implemented in 1989.
Almost all GATT members have also endorsed the idea of greater
involvement of trade ministers in GATT activities. The United
States supports the establishment of a small group of trade
ministers which would meet two to three times per year in an
advisory capacity. Since many countries are less convinced of
the need to create such a group, debate is expected to continue
during the coming months.
The least progress in the FOGS group has been made on the third
area of work--increased cooperation between the GATT and the
international financial institutions. While the developed
countries support increased contact at the staff level between
the GATT and the IMF and World Bank, many developing countries
have difficulties with this proposal. The LDCs would like to see
more discussion in the FOGS group on the trade/debt link.
Standstill/Rollback Surveillance Body:
Standstill and rollback are political undertakings, entered into
by trade ministers at the outset of the Uruguay Round, to avoid
creating new trade restrictive and distorting measures that are
inconsistent with the GATT (standstill), and to dismantle those
in place during the course of the negotiations (rollback). The
Uruguay Round Standstill/Rollback Surveillance Body, which
reports to the Trade Negotiating Committee, oversees the
implementation of these undertakings.
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There has been much debate in the Surveillance Body over actions
believed to violate standstill. In the course of the Uruguay
Round, over twenty notifications have been made of actions (e.g.,
quantitative restrictions, tariffs, import controls and
prohibitions, subsidies and government procurement practices)
believed by some to violate the standstill commitment. Almost as
many requests for consultations have been made on measures
believed due for rollback.
While it is still difficult to point to any concrete results
emerging from the work of the Surveillance Body, it now appears
that pressure for action is mounting in anticipation of the
Mid-term Review. Nevertheless, the Surveillance Body has been a
useful vehicle for bringing high-level political attention to
trade measures of particular concern. It has not replaced the
GATT dispute settlement process, nor has it prohibited
negotiations in other groups on measures raised in connection
with either standstill or rollback.
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