Section 2. International Trade



1. Present State of International Economy and New GATT Round


As for the state of the international economy in 1986, economic growth was sustained on the whole, reflecting such factors as lower inflation rates and decline of crude oil prices, although protectionist pressure, which has been rising since the second oil crisis in 1978, showed no signs of abating. There is a conspicuous tendency among some developed countries to resort to trade restrictive measures (voluntary export restrictions, retaliatory import curbs) through a bilateral arrangement or a unilateral domestic legislation in response to budget deficit, serious employment situation and the structural deterioration of international balance of payments. In particular, trade imbalances among developed countries widened further in 1986 due to the reduction of domestic currency prices in export countries with appreciating currency, a smaller-than-anticipated drop in the dollar's value in real terms, the J-curve effect, macroeconomic and other factors. Against this background, moves to seek controlled trade as seen in the EC's call for the balance of benefits have emerged. On the other hand, the economies of developing countries have yet to overcome a number of difficulties arising from growing protectionism in developed countries and snowballing debts and still have little choice but to continue many import restrictive measures because of a shortage of foreign currency reserves.

On September 20, 1986, ministers of GATT member countries adopted a declaration in Punta del Este, Uruguay, which formalized the launching of new round of multilateral trade negotiations, for which preparations have been made since 1983. The launch of the new round, made possible by untiring efforts of GATT members concerned, is designed to combat protectionism and to maintain and strengthen the multilateral free trade system. Fifteen negotiating groups corresponding to each negotiating item were established in January 1987 and these groups started substantive negotiations in February and March, but the participating countries have yet to fall into step with each other on ways to proceed with negotiations and priority items. As stated above, no optimism is warranted as to the outlook of the new global trade round, but Japan, which believes the maintenance and strengthening of the multilateral free trading system is indispensable for its prosperity, must reaffirm the need to achieve five goals of the new round trade talks (rebuilding and beefing up the free and nondiscriminate multilateral trade system, further reduction and removal of trade barriers, improvement of developing countries' trade environment, securing of GATT's effective response to the structural change of the world trade, and the strengthening of GATT's functions) and continue fighting protectionism through the newly launched trade negotiations.



2. Inauguration of Uruguay Round (New Round)


As for the new GATT round (new multilateral trade negotiations), a preparatory committee for the new round was inaugurated in January 1986. It had drafted a ministerial declaration and completed its work by the end of July. After that, a GATT ministerial meeting was held for five days from September 19 in Punta del Este, Uruguay, for the launch of the new global trade round, in which Foreign Minister Tadashi Kuranari and International Trade and Industry Minister Hajime Tamura participated. At the meeting, a ministerial declaration for the launching of the new round was adopted unanimously. The new round was named the Uruguay Round after the host country of the ministerial meeting, as being proposed by Foreign Minister Tadashi Kuranari and accepted by ministers of other GATT members.

In Geneva, consultations were then initiated for the formulation of a negotiating plan, and after a rough going an agreement was reached at the end of January, followed by the meeting of each negotiating in February. From Japan, Tomohiko Kobayashi, ambassador for international trade economy, was appointed chairman of the group of the trade-related investment measures.


(1) From Preparatory Committee Meetings to Adoption of Ministerial Declaration

The new round preparatory committee, after its establishment in January 1986, had reviewed individual negotiating item and drafted a ministerial declaration. In the course of debate at the committee, developed countries and hard-liner developing countries (India, Brazil, etc.) were divided over the handling of trade in services, while among developed countries, the EC, and Australia and other exporters of agricultural products were pitted against each other over agricultural problems. The EC, calling for the "balance of benefits," broached the so-called "Japan problem." In these circumstances, the outcome of discussions was open to conjecture. But from early July, some moderates among developing countries (South Korea, ASEAN nations and others) began to be more closely associated with developed countries. As a result, a draft ministerial declaration supported by developed and some moderate developing countries (or the so-called joint group proposal) was formulated. But the preparatory committee completed its mission on July 31 without succeeding in the unification of various draft ministerial declarations in the face of persistent opposition from hard-liner developing countries.

The ministerial meeting to decide on the launching the new round was convened in Punta del Este, Uruguay, for five days from September 15, chaired by Uruguayan Foreign Minister Enrique Iglesias. The debate was conducted on the basis of the joint group proposal but in the face of opposition from hard-liner developing countries, it was agreed in the end that negotiations on goods and those on services will be separated, that the establishment of the "Group for Negotiations on Goods (GNG)" handling the former will be decided at GATT CONTRACTING PARTIES and that a decision on the new round as a whole will be made by ministers of GATT members meeting on the occasion of the Special Session of CONTRACTING PARTIES. After such compromises, a ministerial declaration deciding on the launching of the new round was unanimously adopted on September 20.


(2) Establishment of Organizations for Negotiations

The ministerial declaration only decided on the creation of the Trade Negotiations Committee (TNG) as an organization that will supervise the new round as a whole and the Group for Negotiations on Services (GNS) as its suborganization. Ways to form organizations for negotiations corresponding to individual negotiating items were to be decided on separately by December 19, 1986. But the consultations on negotiating plan failed to produce an agreement by December 19 due to the rekindled conflict of interests of GATT members concerned. But a final agreement was reached at the end of January 1987.


Framework of Uruguay Round Negotiations


As a result, a decision was made on the establishment of 14 negotiating groups under the GNG (tariffs, nontariff measures, natural resource-based products, textiles, agriculture, tropical products, GATT articles, MTN agreements safeguards, subsidies and countervailing measures, intellectual properties, trade-related investment, dispute settlement, and function of GATT and separate surveillance body for standstill and rollback. Each group started activity between February and March (please refer to the attached table). Of them, the first four groups will operate as one group called the market access group for the time being. Similarly, GATT articles and MTN agreements will be treated by a single group for the time being. So will be dispute settlement and GATT functions. Though the ministerial declaration sets the period of the Uruguay Round at four years, it has not precluded the possibility of implementing agreements reached at talks wound up at an earlier date. Therefore, high hopes are placed on the progress of negotiations from now on.



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