Launching the round

It was not easy to build up intergovernmental consensus to embark upon such an ambitious initiative. The Tokyo Round ended with many unresolved issues . The major outcome of it, the plurilateral codes were negotiated and signed mainly by developed countries (Jackson 2002: 70). The American initiative to incorporate agriculture into the GATT had failed because of European intransigence, which emanated from political sensitivities within the European Community towards protecting the Common Agricultural Policy (CAP) (Jackson 2002: 313-4). The round could not reform the malfunctioning dispute settlement system either as the disputes brought to the GATT made a record in 1980 with thirteen cases, ten of which were in agriculture (Croome 1995: 7). These outstanding issues from the Tokyo Round

constituted the work program of the Consultative Group of Eighteen, which was made by senior trade officials from eighteen developed and developing countries. To take the unfinished business of the Tokyo Round and other systemic concerns of the contracting parties, the Group of Eighteen proposed in June 1981 to convene the next GATT Contracting Parties meeting at ministerial level within the following year.

Organising a GATT ministerial meeting was not a usual practice since the last such gathering was in 1973 to launch the Tokyo Round (Croome 1995: 12). In this regard, the decision signified the political importance attached to the existing problems and the willingness of the contracting parties to discuss possible ways to bring comprehensive solutions to systemic problems. The preparatory meetings for the 1982 Ministerial revealed the fact that the governments had numerous concerns to inject onto the agenda, which had to be handled through a broad action plan. Although the idea of launching a new round was in the air, a political decision and building its mandate had to wait until the 1986 Punta del Este summit.

The United States was the first actor proposing the idea of a new round as a comprehensive initiative to equip the GATT with instruments to respond to systemic and economic problems beyond conventional trade issues. The U.S. trade policy agenda of the early 1980s was set under the pressure of increasing competition from the EC, Japan and newly industrialised economies. As the world’s largest debtor,

losing its technological lead with a growing trade deficit, the U.S. was exploring new strategies to open markets and to tackle the surge of imports in industries incrementally losing competitiveness (Preeg 1995: 50; Mundo 1999: 119-20; Destler 2005: 51-3). Nonetheless, the Reagan administration, which took power in January 1981, adopted a free-market program in tandem with efforts to keep protectionist sentiments at bay, within which the GATT took a cardinal role to open markets to the sectors where the US was advantageous (Cohen et al. 2003: 41-2; Destler 2005: 82-90;

196-7). Thus, the ambitious U.S. agenda for the GATT would include the liberalisation of international trade in agriculture and high technology products as well as dismantling barriers to foreign direct investment and exports of American services (Croome 1995: 11). Initiating a new round also had a political aspect since it would signify the ongoing leadership role of the U.S. in the international realm, now acting to curb international protectionist demands (Preeg 1995: 22, 54). As Preeg contends, the Reagan administration also saw the GATT as an ideological tool to impose neoliberalism as it promoted market-oriented trade policies as the only viable alternative to the import substitution option of the South and the planned economic alternative of the Communist block (Preeg 1995: 18-19). However, a GATT-based initiative required garnering support of other industrialised economies as well as developing countries.

As noted in the previous chapter, Europeans were defensive about the idea of an encompassing initiative at the GATT that would require adjustments to their Common Agricultural Policy and that would lead to the erosion of preferential trade with former colonies (Croome 1995: 11). French President Francois Mitterrand who was a former minister of agriculture, was especially vociferous in opposing any initiative that would bring agriculture under the purview of the GATT (Paemen and Bensch 1995: 32). On the other hand, the U.S. had been a long standing opponent of the EC’s agricultural supports and subsidies distorting international trade, and the Reagan administration was decisive in putting the sector on a GATT round (Yeutter 1998: 64-8).⁷² Meanwhile, transatlantic trade relations were under the stress of transatlantic disputes in pasta, citrus fruit as well as steel (Golt 1988: 15). On the flipside, a GATT round might have created opportunities for the EC to address pressing issues such as the Japanese trade practices and surpluses, as well as the US-Japanese sectoral bilateral arrangements which, arguably, distorted trade flows and world prices in specific commodities important to the EC (Golt 1988: 11, 15). To come to terms with a new round, the EC needed to see clear benefits, especially if farming was to be put on the table. Hence, the EC adopted a discourse of “balance of benefits”

pointing out Japan’s trade practices, but also implicitly targeting NICs, which were

72 The ambition to include agriculture on the agenda of a new round was also related to the desire of the Reagan administration for a market-based domestic self-discipline (Paemen and Bensch 1995: 92).

perceived to benefit the advantages of open markets without granting reciprocal access to the European exporters (Paemen and Bensch 1995: 36-48, 95; Preeg 1995: 4).

The EC warmed up to the idea of integrating “new subjects” into the GATT system only after assessing and identifying an offensive position in the areas of services, investments and intellectual property, but it still favoured a “go-slow” approach (Paemen and Bensch 1995: 35). The transatlantic consensus to launch the round was still a fragile one as French President Mitterrand continued to insist on keeping agriculture out of the forthcoming round at the G-7 summit of Bonn in May 1985 (Preeg 1995: 53).

Problems and expectations in the South were naturally dissimilar. Export interests of developing economies were to a large extent concentrated in labour intensive sectors such as agriculture and textiles. However, both sectors were effectively excluded from GATT disciplines. Textiles and clothing sector was governed by a non-GATT instrument, the Multifibre Arrangement (MFA) since 1974 (Jackson 2002: 207). The expectation of textile exporting developing countries was a betterment of the conditions within the MFA curbing their exports to major markets in the North (Croome 1995: 9). Under such conditions, the American proposal to initiate a multilateral round with new subjects did not receive a warm welcome from the South.

In contrast, the initial American attempt to bring services to the GATT in 1982 was

negatively received by the Group of 77 (G-77), which denounced new subjects as a threat against developing country interests and even detrimental to the efforts to reform the GATT system (Croome 1995: 16). In addition developing economies were also worried about losing their privileged status under the GATT regime which was assured by special and differential (SDT) treatment provisions, allowing them to benefit from MFN access to the Northern markets without granting reciprocal access to their own markets (Croome 1995: 9; Jackson 2002: 164, 323). However, the lack of reciprocity was increasingly perceived as “free-riding” and considered as something

“immoral,” especially by the United States, but also by some other OECD countries (Paemen and Bensch 1995: 115). However, acquiring consent of all developing countries to the agenda of the round would require putting some concessions on the negotiation table. It was especially important to convince the “hardliners” such as India and Brazil who were historical leaders of the G-77. Hence the injection of textiles and agriculture into the negotiation mandate became critical to launch the round (Ricupero 1998: 13-6). Furthermore, developing countries were calling for “standstill”

and “rollback” of the protectionist measures employed by developed countries, standstill signifying a decision to freeze the existing protectionist measures while rollback referred to their gradual elimination (Croome 1995: 34).

The Punta del Este Declaration included a mandate to negotiate new subjects, i.e.

services, trade related investment measures, and intellectual property rights, as well as agriculture and textiles (See the Declaration in Annex 5). Market access talks in goods would focus on tariffs and non-tariff measures, agriculture, textiles and clothing but also tropical products, and natural resource-based products such as fishery goods. The inclusion of agriculture was a crucial success for many developed and developing countries.⁷³ The Declaration contained wording on standstill and rollback, and established a surveillance body to report progress on the level of protectionist measures to the Trade Negotiations Committee (TNC). On the other hand, to reform the GATT system in order to better handle new forms of protectionism, the decision envisaged negotiations on existing GATT articles and codes with the goal of strengthening them. These included the provisions in safeguards, the revision of the plurilateral codes of the Tokyo Round, and multilateral trade negotiations (MTN) agreements, general functioning of the GATT system, and reforming the dispute settlement mechanism.

73 A coalition including agriculture exporters from both the North and the South took form before the Punta del Este summit in August 1986 with the request of creation of GATT disciplines to trade distorting border and domestic measures. The “Cairns Group,” as it was called, has been one of the most persistent coalitions in the GATT/WTO and included Argentina, Australia, Brazil, Canada, Chile, Colombia, Fiji, Hungary, Indonesia, Malaysia, Phillippines, New Zealand, Thailand, Uruguay (Croome 1995: 31).