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PROPOSALS FOR IMPLEMENTATION ACTION BY 1 JAN 2001

by Chakravarthi Raghavan


Geneva, 5 Oct 99 -- A group of developing countries have put forward as implementation issues to be addressed by 1 January 2001 proposals on the agreements on anti-dumping, subsidies, SPS measures, the TBT, TRIMs, TRIPS and Customs valuation agreements.

Other proposals on these and other agreements, seeking decisions at Seattle have also been put forward by the same group of countries.

And at an informal meeting of the Council Tuesday, a range of new proposals have been introduced.

The United States which last week had said it was going to introduce a proposal for a working group to address 'Trade and Living Standards' did not table the proposal.

The proposal, which appears to be aimed at bringing in the workers' rights issues, and meet the viewpoints of the US labour unions, was expected to be 'unveiled' with some fanfare in Washington Wednesday, by the White House and the USTR, before being formally put forward here.

In announcing the US move last week, the US ambassador, Mrs Rita Hayes had spoken of the WTO agreement's reference in the preamble to 'raising living standards' as one of the objectives, and that the US proposal was related to it.

But if 'raising living standards' of people everywhere is the US objective and an important issue to be tackled, in relation to the backlash against globalization, the US (which with Europe and Japan, control the policies of the IMF and the World Bank) are not raising it and addressing it in a forum where trade, macro-economic and development policies forced on the South interact.

The move to raise it in the WTO is perhaps more directly linked to the campaign against the WTO in the US, the presidential campaign of Vice-President Al Gore, and even more the Seattle Ministerial meeting.

As host, the US has a stake in the success of the Seattle meet, in ensuring that the currently limited US agenda of negotiations for further liberalisation in agriculture and services is launched, and more controversial issues pushed into the future.

But the Seattle preparatory process itself now appears to be getting out of hand. Unlike in the past, when the US and EC, colluded to force their will on the other members of the GATT, a range of developing countries have raised and are pressing a number of issues and problems, and demanding solutions at Seattle and as a priority to be settled by negotiations in 2000.

It is perhaps against this scenario that the 'danger' of the US Congress deciding to take the US out of the WTO is being held out by trade officials to "soften" up the developing world into accepting the US demands.

Early this year, at a WTO organized symposium on Trade and Development, the US establishment figure, Fred Bergsten (of the Institute of International Economics) and the World Bank's Director of Development Research, Paul Collier, lectured developing countries that if they did not "liberalise and open up their economies", they would be faced with US protectionism against their existing exports and trade rights.

After the recent visit of the WTO Director-General Mike Moore to Washington (and his meeting there with members of the House Ways and Means Committee, which deals with foreign trade), trade officials have been relaying the exchanges and discussions Moore had with Congressmen and pointing to some questions and comments from the House members about the administration having to provide Congress an assessment of benefits to the US of the WTO (as required by the law enacted in 1994 to give effect to the Uruguay Round agreements), when the Congress by simple resolution could vote to take the US out of the WTO.

This is a real danger, trade officials have been saying to trade diplomats, and the media.

But this has not impressed several trade diplomats from the developing world, who point out that the biggest beneficiary of the WTO has been the US. One of them, who did not want to be identified, said the US, may be the super-power, with a military might that can prevail over any one else, but only to destroy the other. "But to make economic and trade gains for its corporations, and get others to do what the US wants, it needs the 'rule-based' system with its 'enforcement' through the dispute settlement and threat of sanctions... The US needs the WTO more than the developing world, in this sense."

A group of developing countries, known as the 'like-minded group' have tabled two sets of proposals: one on implementation issues to be tackled between now and Seattle and with a Ministerial decision there, and the other on issues in existing agreements to be addressed in the first year of negotiations, i.e. by 1 January 2001.

While the proposals have been formally put forward by Cuba, the Dominican Republic, Egypt, El Salvador, Honduras, India, Indonesia, Malaysia, Pakistan and Uganda (the like-minded group), these have been supported by several others.

Some key developing countries, in the Cairns group of agricultural exporters, for whom agriculture exports is a dominant element in the WTO trade agenda, however are anxious that negotiations are kicked off at Seattle.

And with Europe as their main target, some in Latin America, want to accommodate or placate Europe by wanting to put investment negotiations into the "basket". But they have not been able to "soften" the opposition of others. Judged by some recent interventions at informal meetings at the WTO and elsewhere, Brazil, an important Cairns group member, has been critical of taking up investment issues at the WTO. And even the US, which earlier had been ambivalent, has now come out against putting the subject into the post-Seattle negotiations.

In their paper on implementation to be addressed in the first year, the group have suggested a number of proposals:

Anti-Dumping:  A series of amendments and changes have been suggested. Several of these clarify or address the current language that has enabled importing countries initiating action to abuse the provisions.

1. The provisions of Article 15 of the agreement should be operationalised and made mandatory. This article calls for special regard being given by authorities initiating action about the situation of developing countries, but these have remained as only a 'best-endeavour' clause and Members rarely, if at all have explored the possibility of 'constructive remedies' before applying anti-dumping duties.

2. The existing de minimis dumping margin of 2% of export price, below which no anti-dumping duty can be imposed (under Art.5.8) should be raised to 5% for developing countries, reflecting the inherent advantages that industries in these countries enjoy vis-a-vis comparable production in developed countries.

3. Major users have applied the de minimis rule for newly initiated cases, not in review and refund cases. The margin of 5% should be applied not only to new cases, but refund and review cases.

4. The threshold volume of dumped imports, normally to be regarded as negligible (Art 5.8) should be increased from 3 to 5 percent for imports from developing countries. The stipulation enabling anti-dumping actions to be taken, even if the import volume is below this threshold, provided countries that account individually for less than 5% collectively account for more than 7% of imports, should be deleted. And Art.5.8 should be clarified over the time-frame to be used in determining the volume of dumped imports.

5. The definition of substantial quantities (Fn 5 to Art.2.2.1) is restrictive and permits unreasonable findings of dumping. The substantial quantities (whose sales per unit price at below cost of production, in domestic or third markets, could be ignored as not being in ordinary course of trade) should be increased from 20 to at least 40%.

6. In comparing the export price and normal price (Art. 2.4.1) and exchange rate value (on the date of transaction or forward rate, when the latter is used) is used for conversions, details of dealing with foreign exchange rate fluctuations during the process of dumping should also be provided.

7. The incidence of dumping into developing countries is likely to increase as these countries liberalise their trade and imports. This concern should be addressed since otherwise the import liberalisation momentum in developing countries might suffer.

There should be a provision in the Agreement providing for a presumption of dumping of imports from developed into developing countries, when certain conditions are met.

8. The general standard of review laid down in the WTO dispute settlement mechanism should apply equally to anti-dumping disputes, and Art. 17 should be suitably modified so that the present different and more restrictive standard of review be done away with.

9. The annual review by the Committee on Anti-Dumping on the implementation and operation of the Agreement has remained a pro forma exercise, and has not provided adequate opportunity for members to address the issue of increasing use of such measures and abuse of the agreement to accommodate protectionist pressures. The Article must be amended to make the role of the Committee against possible abuse of the anti-dumping agreement more meaningful.

Subsidies Agreement:

1. Aggregate and generalised rates of duty rate remission should be allowed in case of developing countries even though individual units may not be able to establish the source of their inputs.

2. Developing countries should be able to neutralise, without being termed as subsidies, the escalating effect of taxes collected by government authorities at different levels - taxes on sales, octroi, cess etc, which are not refunded.

3. In the case of developing countries, any subsidy investigation should be immediately terminated where the subsidy provided by a developing country is less than 2.5 % ad valorem (rather than the current 1% applicable to all members).

4. The present de minimis level (in Art.27:11) of 3% below which countervailing duties may not be imposed for developing countries should be increased. Also, no such investigation should be initiated, or if initiated terminated, when imports from developing countries are less than 7% of total imports, irrespective of the cumulative volume of imports of like products from all developing countries.

5. The provisions of Art.27.3, which allowed a developing country to grant subsidy for use of domestic products in preference to imported products, should be clarified to make clear that it is applicable notwithstanding provisions of any other agreement.

While this was the intention of negotiators when they negotiated the agreement, some of the dispute panels have made obligations of the WTO agreements cumulative, so that the dispensation in an agreement is countered to the prejudice of developing countries by provisions of another agreement.

6. The authorization for tax rebates (from indirect taxation schemes) of inputs used in the production process should be expanded to include all inputs, not just physical inputs, that may have contributed to the determination of the final cost price of the exported product.

7. Annex I of the Agreement (on the illustrative list of export subsidies that are prohibited) shall be amended to enable developing countries flexibility to finance their exporters, consistent with their development objectives. The annex shall be clarified so that developing countries are not compelled to conform to any undertaking or arrangements designed for developed countries which proves to be unrealistic given difficulties and constraints confronted by developing countries.

TRIMs: The provisions of Art.5.3 which recognizes the importance of the WTO Goods Council, taking account of the development, financial and trade needs of developing countries, in extending the transition period for developing countries, should be amended and made mandatory.

Developing countries shall be exempted from disciplines on application of domestic content requirements (being considered prohibited TRIMs. An enabling provision for this should be made in Article 2 and 4. )

Customs Valuation agreement:

1. To avoid manipulation of import prices and enable a better approximation of 'transaction value', the Agreement should be amended to provide for the higher value when more than one transaction value of identical or similar goods is found.

2. To address the problem of manipulation through artificially reduced re-invoice prices, mainly under-invoicing and artificial splitting of value, especially when purchases are first made by buying agents and then re-invoiced to the importer, for purposes of Art. 8 of the agreement, buying commissions should be taken into account in the determination of customs value of imported goods as it forms a legitimate component of the landed cost of imported goods.

3. For purposes of valuation of imports by sole agents, sole distributors and sole concessionaries of large corporations, including TNCs, under Art. 15.5 of the Agreement, these persons should automatically be deemed to be 'related'. This will shift the burden of proving that the prices quoted are not influenced by the relationship to the agents, distributors or concessionaries. (SUNS4524)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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