Unravelling of ‘confidence-building’ ?

Geneva, 23 Oct (Chakravarthi Raghavan) - The post-Seattle ‘confidence-building’ process and the special mechanisms of the World Trade Organization to tackle the ‘implementation’ questions and issues raised by developing countries seems in danger of unravelling, judged by the spate of disputes and panel requests coming up before the WTO.

Separately, the special mechanism set up to deal with the implementation issues is also making little progress, with the major industrial nations, negotiating through the secretariat, attempting to deal with some minor questions as ‘easy decisions’ to be agreed to now, and all others put to the future - as part of the agenda for a new round of negotiations. The question of the lack of good faith and unravelling of the confidence building processes has arisen as a result of what appears to be a concerted attempt by the United States and the European Union to raise disputes, and seek panels, on trade policy measures of developing countries on grounds of violation of the Trade-Related Investment Measures (TRIMS) Agreement.

The transition period for developing countries to implement TRIMS came to an end on 31 December 1999.

However, in the aftermath of the Seattle and how to proceed forward, in picking up the pieces after the fiasco there (whether that ministerial had ended, had been ‘suspended’ and what the effect of all this was on the various transition periods in the WTO agreements), the General Council had agreed to a process and procedures on the ‘Followup to the Seattle Ministerial Conference’.

In this regard an issue that arose was the effect of the Seattle meeting and its end on the various transition periods stipulated in the WTO Agreements.  Developing countries had demanded that these should be automatically extended.

In addressing this issue, the Chair of the General Council, Amb. Ali Mchumo, had made a statement on 17 December, to the effect that these issues too would form part of the ‘consultations’ on the followup and that meanwhile members would show restraint and not take any steps that might prejudice the consultations.

On 8 May this year (after some prolonged consultations and informal negotiations), the General Council as a followup and setting up a special process to deal with these and other issues, had agreed that the question of transition periods under TRIMS should be addressed in the Council on Trade in Goods and the General Council.

At the DSB Monday, the European Communities brought up a request for panel against India over its measures relating to the automotive sector. The US has brought up a similar request at the last meeting.

Also brought up Monday, is a US request for panel against the Philippines over its measures in place relating to the automotive sector.

India has been contending that the measures it has in place, requiring automobile manufacturers to sign a Memorandum of Understanding (MoU) as a condition for obtaining licences for import of automotive products now subject to import restrictions were not TRIMS, prohibited or covered by the provisions of that agreement.

Under the MoU, according to the EC complaint, the automobile manufacturers are required to set up “actual production facilities” in India, to make a minimum investment, to achieve a certain level of ‘indigenisation’, and to export a certain amount of automotive products.

India has also been contending that even if these were to be considered as falling under TRIMS, the 17 December chairman’s statement and the 7 May General Council decisions apply, and disputes should not be raised.

In the case of the Philippines, that country had in fact sought an extension of its transition period, in October 1999, and this request was still pending before the CTG, and under the CTG rules, if no consensus was reached on this, the matter should be referred to the General Council. Nevertheless, the US has brought up a dispute and has sought a panel.

When the two cases came up before the DSB Monday, a range of developing countries spoke up critical of the US and EC positions and warning of its likely impact on the entire post-Seattle confidence building process, and insisted on a multilateral solution to these problems.

In addition to the developing countries, Japan suggested that the bilateral consultations among the parties should lead to a mutually satisfactory solution - implying in effect that taking the issue to a panel could have other effects on the WTO process.

For its part, the US insisted however that it would not allow the pendency of TRIMS extensions before the CTG and the CTG processes used to extract concessions!

Over the Indian dispute, apart from raising the questions of its measures not falling within the ambit of TRIMS, and even if they did being covered by the ‘due restraint’ appeals and decisions of 17 December and 8 May, India also warned that the WTO should not create the impression that its disciplines came in the way of development interests of developing countries. The efforts of many developing countries to industrialize were being challenged on the basis of the TRIMS.

Pakistan expressed its concern over the disputes being raised on the TRIMS and other transition provision issues. The Philippines supported India.

In the dispute against the Philippines, that country hoped that an amicable solution could be found, but underlined that procedurally the DSB could not refer the dispute to a panel. The General Council, with the same membership of the DSB, had agreed to a decision on how to deal with the TRIMS issues, and time extensions as those sought by the Philippines, and the rules of procedure of the CTG required that if it was unable to decide, the issue should be referred to the General Council.

The DSB and the General Council had the same membership, and the Council’s decisions should not be allowed to be frustrated by referring the dispute to a panel.

Pakistan, Malaysia, Argentina, India and Indonesia were among those who supported the Philippines, while Japan underscored the DSU provisions about the objective of the DSU being promoting mutually acceptable solutions.

In both the Indian and the Philippines cases, being a request that came up before the DSB for the first time, consensus was refused.

The next meeting of the DSB is set for 17 November.

In other actions, on the US implementation of the ruling on restrictions on imports of shrimps (claimed to be a turtle conservation measure), Malaysia sought the issue of US compliance with the adopted rulings referred under Art.21.5 of the DSU to the original panel.

The US in another dispute sought a reconvened 21.5 panel over Mexico’s implementation of the ruling on the anti-dumping investigations and decisions over import of high-fructose corn syrup from the United States.

Both the Art.21.5 references were accepted, but the parties are to agree on the procedures. .

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