The club approach to multilateral trade lawmaking.

Author:Lamp, Nicolas
Position:Continuation of III. The Club Approach in the History of Multilateral Trade Lawmaking B. The Self-Perpetuating Club: Participation in GATT Negotiations 3. Who Needs to Agree: Critical Mass Approaches to Lawmaking through IV. Conclusion, with footnotes, p. 149-190

The developed countries' view prevailed by default, as there was no consensus to add the language suggested by the developing countries to the draft codes. As one of the developing countries complained, a "precedent" was "now set for various groups of countries to put up Agreements amongst themselves and to seek the umbrella of the MTN." (175)

The developing countries' second line of defense was directed against the third element of the club approach--the attempt of the developed countries to force the developing countries to join the codes on the formers' terms by limiting the benefits of the codes to code signatories through conditional MFN. The developing countries were, at least partially, successful in this area. (176) On November 28, 1979, the contracting parties adopted a decision entitled "Action by the Contracting Parties on the Multilateral Trade Negotiations," in which they "reaffirm [ed] their intention to ensure the unity and consistency of the GATT system," noted that "existing rights and benefits under the GATT ..., including those derived from Article I" of nonsignatories to the codes, were "not affected" by the codes, and expressed their expectation that nonsignatories would be regularly informed on developments regarding the codes and able to follow the proceedings of the code committees "in an observer capacity." (177) This decision made it clear that, the language of the codes notwithstanding, the contracting parties expected the benefits of the codes to be extended to all contracting parties on the basis of the MFN obligation in GATT Article I. (178) While there was no similar legal basis for the procedural rights of nonsignatories envisaged in the decision, the contracting parties' administrative and budgetary control of the GATT Secretariat provided them with at least some leverage in this regard. (179)

Despite these decisions at the GATT level, the U.S. Congress refused to implement the Subsidies and Government Procurement codes on an MFN basis. (180) In the case of the Subsidies Code, the United States was unwilling to extend the benefits of its new countervailing duty law to those who would not pay for it with increased discipline on their subsidy practices. The United States' implementing legislation denied the Code's benefits not only to nonsignatories of the Code, but also to developing countries that made use of the flexibility provided by Article 14.5 (181) not to eliminate export subsidies on non-primary products. (182) To this end, the United States invoked the "non-application" clause of the agreement against developing countries that did not enter into commitments that the United States found satisfactory. (183)

When the United States subsequently proceeded to impose countervailing duties on industrial fasteners from India without applying an injury test, India requested consultations and eventually the establishment of a panel pursuant to Article XXIII of the GATT. (184) In its panel request, India questioned whether the nonapplication clause could be "validly invoked by any Party with the objective of obtaining concessions from another Party to the Agreement which are not envisaged in the provisions and go beyond the balance of rights and obligations contained in the Agreement." (185) In effect, India argued that the nonapplication clause could not be used to force outsiders to join the Subsidies Code on the insiders' terms. India further argued that the United States' refusal to apply an injury test in the countervailing duty investigation of India's exports violated the MFN principle in Article I of the GATT. (186) To support its argument, India relied inter alia on the contracting parties' above mentioned decision, which had confirmed that the GATT Article I rights of nonsignatories were "not affected" by the codes. (187) Eventually, the United States gave in and agreed to apply the provisions of the Subsidies Code in relation to India. (188)

  1. Who Gets to Be in the Room: From the Bridge Club to the Green Room

    Throughout the history of the GATT, the club approach to trade lawmaking was implemented through exclusive negotiating arrangements. In the first two decades of the GATT's operation, the Tariff or Trade Negotiations Committee (i.e., the GATT body overseeing the negotiations) was an exclusive body whose membership was limited to those contracting parties which engaged in tariff negotiations on a reciprocal basis. Starting in the Kennedy Round, as membership of the Trade Negotiations Committee became more inclusive, the core countries started to use other, more informal meetings to maintain control of the negotiations.

    The question of who could be a member in the Trade Negotiations Committee overseeing a trade negotiation was for the first time openly contested in the Kennedy Round. (189) At the Ministerial Meeting during which the decision to launch the Kennedy Round negotiations was taken, ministers from some developing countries raised the question of "how the membership of the Committee would be decided and whether the less-developed countries would be adequately represented." (190) The Executive Secretary, Eric Wyndham-White, reminded the ministers that "in past negotiations the tariff negotiations committee had been composed solely of the countries which took part in the negotiations" and that " [i] t would be inappropriate to provide for a trade negotiations committee which would include countries not participating in any way in the trade negotiations." (191)

    It was clear to all involved that the kind of "participation" in trade negotiations that had been required in the past to entitle a contracting party to membership in the Trade Negotiations Committee was a readiness to engage in reciprocal tariff reductions. However, this notion was becoming increasingly problematic. Over the years preceding the Kennedy Round, the GATT had been focusing increasingly on the trade problems of the less developed countries, particularly within the framework of the program for the expansion of international trade. One of the principles that had gained increasing acceptance in the run-up to the Kennedy Round was the principle of nonreciprocity for developing countries. In fact, the very resolution that provided for the establishment of the Trade Negotiations Committee and that the ministers were debating at the 1963 Ministerial Meeting announced, as one of the principles of the upcoming negotiations, that "every effort shall be made to reduce barriers to exports of the less-developed countries, but that the developed countries cannot expect to receive reciprocity from the less-developed countries." (192) As a result, it appeared to some developing countries that the notion of "participation" as readiness to engage in reciprocal concessions was becoming increasingly anachronistic. Thus, the Malaysian minister "enquired whether the less-developed countries could be considered as 'negotiating'" since they were not asked to offer reciprocal concessions, and the Indian minister, after noting the manifold ways in which the developing countries had a stake in the upcoming negotiations, stated, "It could not be considered therefore that reciprocal action on tariff cuts would be the only contribution which various parts of the world hoped to make towards the expansion of world trade." (193)

    In order to deal with the tension between the traditional understanding of "participation" in GATT negotiations and the GATT's newfound concern for the trade interests of developing countries, the United States, which had drafted the resolution under discussion, came up with what the Indian minister described as "a somewhat complex procedure," (194) whereby a special committee of the Trade Negotiations Committee would be set up. In this special committee, "the less-developed countries together with the developed countries could discuss and agree upon the terms for participation." (195) As the Executive Secretary noted, "the implications of the word 'negotiating' would be one of the interesting questions" that the committee "might consider." (196) In other words, the committee was to perform a gatekeeping function by setting conditions for the participation of developing countries in the Kennedy Round negotiations. The Executive Secretary attempted to frame the committee as an effort to facilitate the participation of developing countries in the Kennedy Round, noting that

    if these countries were in doubt because they could not form a judgement as to the conditions of such participation, having regard to their development problems, it was at least reasonable to make provision whereby there could be some discussion of the question before they made up their minds whether or not they were going to participate actively in the negotiations, and therefore to seek membership of the Trade Negotiations Committee itself. (197) The obvious alternative would have been not to make participation in the trade negotiations subject to "conditions" that could potentially create difficulties for the developing countries in light of their "development problems." India clearly saw this, and its proposal to delete the reference to the committee from the ministerial resolution, on the basis that "every country which would be participating in the negotiations would be doing so in a way consonant with its economic development needs," (198) was eventually accepted. The preparatory phase of the Kennedy Round, then, saw the last rearguard action to defend the Trade Negotiations Committee as a body "tied to action" (to use the words of the U.S. delegate at the Havana Conference (199)).

    However, that was not the end of the debate over "participation" in the Kennedy Round. The Executive Secretary, who was also Chairman of the Trade Negotiations Committee, continued to express his "understanding" that those contracting parties that had notified their intention to participate in the work of the Trade Negotiations...

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