RESTRICTED
WORLD TRADE G/C/M/4
28July1995
ORGANIZATION(95-2264)
COUNCIL FOR TRADE INGOODS
3July1995
MINUTES OFMEETING
Held intheCentre William Rappard on3July1995
Chairman: Mr.M.Endo (Japan)
Subjects Discussed Page
1. Market Access Matters 2
(A) Committee onMarket Access 2
- Report oftheCommittee 2
(B) Harmonized System -requests forextensions ofwaivers 2
under Article IXoftheWTO Agreement
(I) Bangladesh 4
(II) Guatemala 4
(III) Israel 4
(IV) Jamaica 4
(V) Morocco 5
(VI) Pakistan 5
(VII) SriLanka 7
(VIII) Trinidad andTobago 7
(C) Senegal -Renegotiation ofSchedule XLIX 8
- Request forExtension ofWaiver
2. Agreement onPreshipment Inspection 10
- Independent Review Entity under Article 4oftheAgreement
3. Rules ofProcedure fortheCouncil forTrade inGoods 10
- Statement bytheChairman
4. Terms ofReference ofWorking Parties onAgreements 11
notified under Article XXIV ofGATT 1947
5. Hungarian agricultural export subsidies 12
6. Taxation ofcertain alcoholic beverages inJapan 13
7. Agreement between US/Japan onautoandautoparts 13
8. Signature ofafreetrade agreement between EFTA andSlovenia 14
9. Tariff Quota oftheEuropean Communities 14
10 Brazil: Provisional Measure N1024 (automobiles) 15G/C/M/4
Page2
TheChairman welcomed delegations tothefourth meeting oftheCouncil forTrade inGoods
which wasconvened byWTO/AIR/120. Henoted thatinaccordance withtheagreement reached at
thelastmeeting oftheCouncil which tookplace on29May1995, thefollowing Organizations had
beeninvited tothismeeting oftheCouncil, namely: UN,UNCTAD, IMF, World Bank, FAO, OECD,
International Textiles andClothing Bureau andtheWorld Customs Organization. Heproposed that
pending theadoption ofcriteria andconditions forobserver status forInternational Intergovernmental
Organizations intheWTO andunless adelegation raised anobjection, those Organizations invited
tothismeeting oftheCouncil forTrade inGoods beinvited alsotoitsnextmeeting.
TheCouncil forTrade inGoods soagreed.
1. Market access matters
(A) Committee onMarket Access
- Report oftheCommittee (G/MA/1)
1.1 Mr.Saint-Jacques, theChairman oftheCommittee onMarket Access stated thatatitsmeeting
of25April 1995, theCommittee onMarket Access haddecided toreconduct theprocedures thathad
beenadopted bytheGATT Committee onTariff Concessions regarding thesubmission offactual
information ontheextension ofwaivers tobeincluded inareport thattheCommittee would submit
totheCouncil forTrade inGoods foritsexamination. Thereport indocument G/MA/SPEC/1 had
beenadopted bytheCommittee atitsmeeting of26June1995; ithadbeenfinalized inlightofthe
proceedings ofthatmeeting andcirculated again indocument G/MA/1. Ascould benoted from the
Annex tothereport, allcountries whose waivers expired attheendofJune1995, except Argentina,
ElSalvadorandMalawi,hadrequestedafurtherextensionofsixmonthsinordertofinalizeconsultations
ornegotiations forthetransposition oftheirpre-Uruguay Round schedules intotheHarmonized System.
Inthiscontext, heinformed theCouncil that,under thenextagenda item, therequests forwaiver
extensions ofBolivia andNicaragua hadbeenwithdrawn fromtheagenda, because thesetwocountries
hadnotyetdeposited theirinstruments ofratification tobecome WTO Members. Furthermore, he
hadcarried outaseries ofinformal consultations onrules ofprocedures, theintroduction ofHS96
changes andestablishment ofloose-leaf schedules, thenotifications related tonon-tariff measures and
quantitative restrictions, andthefuture oftheIntegrated DataBase. Headded thatheintended topursue
these consultations andreport tothenextmeeting oftheCommittee.
1.2 TheCouncil tooknoteofthereport.
(B) Harmonized System -requests forextensions ofwaivers under Article IXoftheWTO
Agreement
1.3 TheChairmandrewtheCouncil'sattentiontothecommunicationsfromBangladesh,Guatemala,
Israel, Jamaica, Morocco, Pakistan, SriLanka andTrinidad andTobago containing requests for
extensions ofwaivers which expired on30June1995. These requests forextension ofwaivers had
beenmade inthecontext ofthetransposition oftheSchedules intotheHarmonized System, andin
accordancewithparagraph1oftheUnderstandinginrespectofWaiversofObligationsundertheGeneral
Agreement onTariffs andTrade 1994. Pursuant toArticle IXoftheWTO Agreement, theserequests
forwaivers werebefore theCouncil forTrade inGoods forconsideration; theCouncil hadaperiod
which should notexceed 90daystoconsider theserequests andtosubmit areport totheGeneral Council.
Draft decisions hadbeencirculated toassist theCouncil initsconsideration ofthese requests.G/C/M/4
Page3
1.4 Therepresentative oftheEuropean Communities stated thathisdelegation hadnoted withsome
concern fromtheinformation provided indocument G/MA/1 thatincertain instances waivers which
hadbeengranted some 18years agowerestillineffect. Acertain automaticity thatseemed toprevail
inthepastregarding theextensions ofthese waivers wasnolonger appropriate under theWorld Trade
Organization. This wasnotaquestion ofchallenging theright ofanyMember, including the
Community 'sownrighttoaskforwaivers, butitdidappear thatgreater discipline wasrequired. His
delegation hoped, therefore, thattheextensions granted would becommensurate withtheperiod needed
toconclude negotiations, forexample, aperiod offourmonths would seem tobeappropriate inthe
caseofPakistan.
1.5 Therepresentative oftheUnited States supported theviewoftherepresentative oftheEuropean
Communities thatgreater discipline wasneeded ingranting waivers. Hepointed outthatfurther work
onthedraftdecisions forgranting waivers wasnecessary. Inparticular, itwasimportant toexplain
ingreater detail the"exceptional circumstances" thatmade these waivers necessary. Hesuggested
thatinformal consultations beheldtofinalize those decisions before themeeting oftheGeneral Council.
1.6 Therepresentative ofCanada, supporting theviews expressed bytherepresentative ofthe
European Communities, stated thattheWTO provided forstricter criteria withrespect totheextension
ofwaivers thandidtheGATT. While ingeneral, hisdelegation hadnoproblem withtheconcept of
waivers forthepurposes ofcompleting theconversion oftariffschedules, Canada would beconcerned
ifMembers concluded thatwaivers should berenewed almost automatically aswasthecaseunder the
GATT. Hisdelegation would bepaying much closer attention tothismatter anditshould notbeassumed
thatwaivers would automatically beextended, especially where theyhadbeeninforceforseveral years.
Inthisrespect, Canada would beprepared todifferentiate between those countries thathadsubmitted
therequired documentation andhadshown progress intheirnegotiations andthose thathadnot.
1.7 TherepresentativeofAustraliastatedthathisdelegationunderstoodthatcomplicatednegotiations
were sometimes required toresolve important trade questions relating tosome ofthese waivers.
However,hefeltitnecessaryatthisstagetopointoutthatwaiverswerefor"exceptionalcircumstances",
andnotintended forthelongterm. Hisdelegation would liketoseestronger efforts made toresolve
thenecessary issues, toallow thewaivers currently before theCouncil forTrade inGoods tobe
terminated inareasonable timeinthefuture.
1.8 Therepresentative ofNorway supported thestatements oftheprevious speakers. Before the
WTO hadentered intoforce, Norway hadraised theproblem ofautomaticity ofextensions ofwaivers.
Hisdelegation understood thedifficulties encountered bysome countries infinalizing thiswork, but
ashadbeenmentioned byothers, waivers should apply in"exceptional circumstances". Hisdelegation
wasgladthattheCommittee onMarket Access hadagreed topursue theprocedures inforce under
theGATT Committee onTariff Concessions, i.e.thatcountries seeking extension ofexisting waivers
would provide factual information onthestatus oftheirwaivers.
1.9 Therepresentative ofNewZealand stated thathisdelegation shared theviews expressed by
previous speakers.
1.10 Therepresentative ofKorea stated thathisdelegation shared theconcerns expressed byother
delegations about pastpractices regarding extensions ofwaivers andwasinfavour ofamore disciplined
approach. Newwaivers andwaiver extensions should begranted pursuant totheletter andspirit of
theWTO Agreement. However, hisdelegation wasalsooftheviewthatanydisciplinary measure
tobetaken should notdiscourage bonafideefforts withregard tothetransposition process. Implications
arising fromanydecision, including thatofnotaccording anextension, hadtobethoroughly studied
andmade wellknown toeachMember before suchadecision wasactually taken.G/C/M/4
Page4
1.11 TheChairman proposed thattheCouncil takeupindividually eachrequest foranextension
ofthewaiver. Healsoproposed tosummarize thesituation asconcerned these requests attheend
ofthediscussion.
1.12 TheCouncil forTrade inGoods soagreed .
- Bangladesh
1.13 TheChairman stated thattherequest fromBangladesh hadbeencirculated indocument G/L/8
andadraftdecision indocuments G/C/W/9 andCorr.1.
1.14 There wasnodiscussion onBangladesh 'srequest.
- Guatemala
1.15 TheChairman stated thattherequest fromGuatemala hadbeencirculated indocument G/L/12
andadraftdecision indocument G/C/W/13. However, Guatemala hadratified theWTO Agreement
on21June1995, andsinceitsmembership hadnotyettaken effect, thisrequest could notbeconsidered
atthepresent meeting andthematter should bepostponed tothenextmeeting oftheCouncil.
1.16 Therepresentative oftheUnited States stated thattheWTO could notprovide awaiver tonon-
Members. These governments didnothave obligations under theWTO andconsequently those
obligations could notbewaived. Therefore hisgovernment wasopposed togranting awaiver to
Guatemala because itsWTO membership would nottakeeffect until21July1995.
- Israel
1.17 TheChairman stated thattherequest fromIsrael hadbeencirculated indocument G/L/14 and
adraftdecision indocuments G/C/W/15 andCorr.1.
1.18 Therepresentative ofIsrael stated thatinaccordance withthedecision oftheCommittee on
Market Access on25April 1995, hisauthorities hadprovided allthenecessary factual information
onIsrael'srequest foranextension ofthewaiver which hadbeengranted inorder toenable Israel
totranspose itsschedule intotheHarmonized System. Thisinformation wasavailable indocument
G/L/14, dated 23June1995. Theproblems encountered withthreedelegations, which hadprevented
Israel fromconcluding thisexercise, weretechnical innature. They concerned theinterpretation and
thetechnical definition ofcertain tariffitems. Since theywerenotsubstantive problems, hisauthorities
haddecided tointroduce thecorrections tothedefinitions asproposed bythethreedelegations. Israel
wasnowawaiting theresponses from thedelegations concerned which hehoped would enable Israel
toconclude thismatter. Having saidthis,hisdelegation believed thatthecomments made byprevious
speakers seemed somewhat exaggerated. Itshould notbeforgotten thattheconclusion ofanexercise
ofthistypewhich wastechnical innature didnotdepend solely onthecountry requesting theextension
ofthewaiver. Israel therefore reiterated itsrequest fortheextension ofthetime-limit ofthewaiver
granted toituntil31December 1995.
1.19 There wasnodiscussion onIsrael'srequest.
- Jamaica
1.20 TheChairman stated thattherequest from Jamaica hadbeencirculated indocument G/L/9
andadraftdecision indocuments G/C/W/10 andCorr.1.G/C/M/4
Page5
1.21 Therepresentative ofJamaica stated thathisdelegation tooknoteofthecomments made by
anumber ofdelegations. Asindicated indocument G/L/9, hisauthorities hadbeenendeavouring to
address adequately thequestion ofthetransposition ofJamaica 'sschedule. However, theyhadbeen
experiencing some technical problems. Jamaica hadhoped tocirculate theschedule priortothemeeting
oftheGeneral Council scheduled laterinJuly, however, asaresult ofrecent developments which
necessitated afurther reassessment, Jamaica intended tocirculate thedocuments bythebeginning of
September. Hisgovernment wasfullyaware oftheimportance oftheprocess andhadforthisreason
sought technical assistance fromtheWTO Secretariat. Therelevant government agencies wereworking
diligently towards concluding theentire process before theendoftheyear.
1.22 Therepresentative oftheUnited States stated thatthecaseofJamaica wassimilar tothatof
Trinidad andTobago towhich hisdelegation 'scomments would equally apply. Hisdelegation had
beeninformed thatthedocumentation wasready andonlyneeded tobeapproved inthecapitals. While
willing toagree tothese waivers, hisdelegation would expect thecountries concerned toprovide the
required documentation toWTO Members by15July1995. Thiswould allow clearprogress inthe
bilateral negotiations inthecoming weeks. Without suchprogress hisdelegation would notbeina
position toagree toafurther extension ofthese waivers. Hisdelegation could support afour-month
extension ofthewaivers.
- Morocco
1.23 TheChairman stated thattherequest fromMorocco hadbeencirculated indocument G/L/11
andadraftdecision indocument G/C/W/12.
1.24 TherepresentativeofMoroccostatedthatMoroccohadbeengrantedawaiverfromitsobligations
under Article IIoftheGATT since July1992 toenable thetransposition ofMorocco 'sschedule to
theHarmonized System. Inorder tocomplete thisexercise inthebestpossible conditions, his
government wasasking foranextension ofthewaiver foranother sixmonths. Therelevant
documentation hadbeencommunicated totheWTO Secretariat andwasavailable toallMembers since
8June1995. Hisauthorities hoped tocomplete thenegotiating process onitsschedule asquickly as
possible andinanycasebefore thedeadline of31December 1995. Herequested delegations toconsider
thisrequest foranextension ofthewaiver favourably.
1.25 There wasnodiscussion onMorocco 'srequest.
- Pakistan
1.26 TheChairman stated thattherequest from Pakistan hadbeencirculated indocument G/L/6
andadraftdecision indocuments G/C/W/7 andCorr.1.
1.27 Therepresentative ofPakistan stated thathewasdeeply conscious ofthelength oftimethat
Pakistan hadbeenunder waiver. Headded thathisauthorities would continue todo,astheyhaddone
inthepast,everything possible tobring thismatter toasatisfactory conclusion. Herecalled thatPakistan
hadcontinued toundertake afundamental liberalisation ofitstraderegime including, averysubstantial
reduction ofitstariffs. Pakistan hadsignificantly improved itstariffbindings asaresult oftheUruguay
Round, andhadalsotriedtoconclude itstransposition negotiations aspartofthatambitious exercise.
Butforreasons wellknown toPakistan 'smajor trading partners, thisexercise hadnotbeensuccessful.
Hewished, however, toassure allCouncil Members thatPakistan remained conscious ofitsobligation
tocomplete thepending exercise. Healsoinformed theCouncil thatPakistan hadbeenintouch with
negotiating partners whohadexpressed aninterest tohaveconsultations ornegotiations withPakistan.
Hisdelegation hadreceived afewweeks agoaresponse from amajor group ofcountries toanoffer
made byPakistan. Theresponse wasunder active consideration byhisauthorities andhehoped toG/C/M/4
Page6
beabletocome backwithappropriate suggestions. Similarly, hisauthorities expected tomake further
proposals toanother major trading partner inrespect ofaveryfewitems thatremained outstanding.
Heassured theCouncil thatPakistan would continue tomake maximum efforts toreach agreement
withitstrading partners, andtherefore requested forunderstanding regarding thegranting ofonefurther
extension ofthewaiver. Hewasconfident thatitwould notbenecessary forPakistan tocome back
totheCouncil foranyfurther extensions.
1.28 Therepresentative oftheUnited States stated thatithadbeenhisgovernment 'sintention to
simply deny afurther extension ofthiswaiver. However, inlightoftheexplicit assurances from
thePakistan government thatanewproposal designed toresolve alltheremaining issues would be
tabled intheverynearfuture, hisgovernment could support athree month extension forPakistan.
1.29 Therepresentative ofIndia stated thathehadtaken thefloor notonlytosupport Pakistan 's
request, butalsotoplead withtheCouncil toadopt amore sympathetic approach tothevarious requests
forwaivers which hadcome upforconsideration inthismeeting. Therepresentative ofPakistan had
pointed outthathisgovernment wasdoing everything possible toexpedite theprocess. Heappreciated
thepoint made earlier byanumber ofspeakers thatwaivers should notbecome aroutine-like ritual
andthatunder theWTO, allgovernments should trytoensure thattime-limits werestrictly adhered
to.IfMembers wanted toadopt anewapproach, theyhadtoensure thatthechange wasmanaged
properly andthatitwasnottoodrastic. Therepresentative ofPakistan hadpointed outthathiscountry
hadundertaken anambitious programme ofliberalization andMembers should notdecide onmeasures
which might adversely affect thisprocess. Thistypeofrequest wasbeing considered forthefirsttime
since theentry intoforce oftheWTO, andmoreover therepresentative ofPakistan hadclearly stated
thatitwasPakistan 'sclearintention tonotrequest anyfurther extensions. Inlightofthis,hisdelegation
wouldstronglyurgetheCounciltoseriouslyconsidertherequestfromPakistanforasix-monthextension
ofitswaiver. Hehadtaken noteofthefactthattheUnited States hadrequested ashorter extension,
butitwould beintheinterest ofthisbodytoaccord thesix-month extension asrequested byPakistan
andatthesame timerequest thatPakistan ensure thatthistime-limit wasstrictly adhered to.Healso
suggested thatinrespect oftheother requests forextensions ofwaivers amore liberal approach might
atleastthistimebeadopted withanindication thatinfuture Members would bemore strict.
1.30 Therepresentative ofEgypt stated thatinlightoftheexplanation provided bytherepresentative
ofPakistan theCouncil should support andgrant thesix-month extension ofthewaiver soastoenable
Pakistan tocontinue andconclude negotiations withtrading partners. Hebelieved indiscipline, but
theOrganization should notbecome rigid; ithadalways beenflexible andthatwashowitshould
continue. With theassurances provided byPakistan, therequest forasix-month extension was
reasonable.
1.31 Therepresentative oftheUnited States stated thathisgovernment wassensitive totherequest
thatwasmade andthesupport thathadcome fromIndia andother delegations. Infact,hisdelegation
hadbeenunder strict instructions from thecapital togrant noextension tothiswaiver. However, in
lightoftheassurance fromPakistan thatanewproposal designed toresolve theremaining issues would
betabled inthenearfuture, ithadbeenpossible toagree tosome extension. Asaresult, hisdelegation
wasabletorecommend athree-month extension forPakistan.G/C/M/4
Page7
- SriLanka
1.32 TheChairman stated thattherequest fromSriLanka hadbeencirculated indocument G/L/10
andadraftdecision indocuments G/C/W/11 andCorr.1.
1.33 Therepresentative ofSriLanka stated thatinthelightofthefactual datapresented inSriLanka 's
status reports aswellasinitsrequest foranextension ofitswaiver, hisgovernment wished toassure
itstrading partners thatSriLanka remained fullycommitted toconclude thisprocess within theperiod
ofextension tobegranted bytheCouncil. Hisgovernment wished tothank SriLanka 'strading partners
fortheirunderstanding.
1.34 There wasnodiscussion onSriLanka 'srequest.
- Trinidad andTobago
1.35 TheChairman stated thattherequest fromTrinidad andTobago hadbeencirculated indocument
G/L/13 andadraftdecision indocuments G/C/W/14 andCorr.1.
1.36 Therepresentative ofTrinidad andTobago stated thatthedraftdecision indocument G/C/W/14
andCorr. 1of3June1995 sought approval foranextension to31December 1995 ofthewaiver to
allow thegovernment ofTrinidad andTobago tocomplete theprocess oftransposing itsschedule into
theHarmonized System tariff nomenclature. Other delegations would beaware, andexperience had
shown thatthisprocess wasneither always simple noreasily accomplished. Inthetwoyears since
thewaiver ofatechnical nature hadbeengranted, hisgovernment hadcontinued toimplement its
programme oftrade liberalization. Asamember oftheCaribbean community, ithadtaken theform
ofsignificant reduction intheregion 'scommon external tariff. Internally, much hadbeendone to
streamline administrative procedures, tofacilitate trade andtoamend andmodernize legislation with
aviewtocreating amore favourable environment forlocalandforeign investors. Thegovernment
hadbeenengaged inaseries ofregional andbilateral tradeexpansion initiatives. Thisperiod ofintense
domestic andregional activity hadalsoseentheconclusion oftheUruguay Round, itsratification and
theestablishmentofmechanismsandproceduresfortheimplementationofthemanyagreementsresulting
therefrom. Agreements which imposed aplethora ofnewobligations. Fulfilling thesemany obligations
insuchalimited time-frame would haveplaced agreat burden oneventhelargest ofadministrations.
Itwould come asnosurprise therefore, andinthisregard hisgovernment wasgrateful tothose
delegations which hadshown understanding, thattheauthorities inTrinidad andTobago hadfound
itdifficult tocomplete thenecessary work inrelation tothiswaiver. Lastyearthefirstdraftofthe
documentation wassentfromthecapital. Unfortunately, several errors inthisdocumentation prevented
circulation oftherelevant tables. Hisauthorities werenowinthefinalstages ofcompleting therevision
ofthesedocuments, which asindicated inTrinidad andTobago 'sletterrequesting thisextension, would
becirculated shortly. Inresponse tosome ofthestatements made earlier hewished toindicate that
Trinidad andTobago hadrequested thecorrected documentation by31July1995 andwereawaiting
confirmation thatthisdeadline would bemet.Hewanted toplaceonrecord hisdelegation 'sappreciation
fortheassistance given bytheSecretariat inthismatter. Trinidad andTobago looked forward tothe
continued co-operation astheprocess oftransposition ofTrinidad andTobago 'sschedule reached its
conclusion. Heappealed toalldelegations tosupport theextension ofthiswaiver bysixmonths.
1.37 Therepresentative oftheUnited States stated thatforthesame reasons asexpressed inthe
caseofJamaica hisgovernment could support afour-month extension ofthewaiver.G/C/M/4
Page8
(C) Senegal -Renegotiation ofSchedule XLIX
1.38 TheChairman drew attention totherequest bySenegal circulated indocument G/L/7 foran
extension ofawaiver granted toitinconnection withtherenegotiation ofitsSchedule, andtoadraft
decision which wascirculated inorder tofacilitate consideration ofthisitemindocument G/C/W/8.
1.39 There wasnodiscussion onSenegal 'srequest.
1.40 Therepresentative ofTrinidad andTobago noted thatforthetwocountries withtheleastnumber
ofrequests forextensions ofwaiver, i.e.Jamaica andhisowncountry, itwasproposed tohaveshorter
periods ofextension. Heappealed totheCouncil inputting forward itsrecommendation, toshow some
degree ofunderstanding forthecomplexities faced bysmall developing countries thatweretrying to
dotheirbestintheshortest period oftimetomeet theirobligations under theWTO. Heappealed
toother delegations togrant thisextension forasix-month period.
1.41 Therepresentative ofPakistan stated thatheappreciated theconcern aswellastheunderstanding
expressed byseveral delegations. Inrelation totheproposal foranextension ofamerethree months,
there wereafewpractical problems. Itwasalready July, andnobody wasavailable inAugust which
meant thatwork would really onlybegin bymid-September, leaving onlyafewweeks tocomplete
theexercise. Ashehadsaidearlier, Pakistan wascommitted tofinding aresolution tothesatisfaction
ofeveryone involved, andcounted onthecontinued understanding oftheMembers forarealistic and
pragmatic time-frame regarding theextension ofthewaiver.
1.42 Therepresentative ofArgentina stated thathiscountry wasconvinced thattheprovisions of
theWTO were made toberespected andthatwaivers should only begranted in"exceptional
circumstances". However, hisdelegation feltthatincertain instances there were technical reasons
linked tothisexercise forharmonization which would sometimes justify deadlines ofwaivers being
extended bymore thanwhatwould apparently seem necessary. Hisdelegation alsohaddifficulty in
understanding thedifferential treatment thatwasbeing given tothevarious requests under discussion.
Thestatement made bytherepresentative ofTrinidad andTobago wasfullyjustified andhisdelegation
didnotseewhyinthecaseofTrinidad andTobago andJamaica onlyfourmonths would begranted,
while inthecaseofother countries thathadspent many more years under thecoverage ofawaiver,
sixmonths wasbeing proposed. Atthesametimehisdelegation wasalsosympathetic tothestatement
made bytherepresentative ofPakistan.
1.43 Therepresentative ofJamaica supported thestatement made bytherepresentative ofTrinidad
andTobago andstrongly recommended thatasix-month extension begiven toTrinidad andTobago
andtoJamaica.
1.44 Therepresentative ofNorway stated thathehadspoken earlier onhisconcern regarding the
automaticity ofextension ofwaivers. Inspiteofthat,hefeltthatwhen looking attheindividual requests
forwaivers theCouncil should dobetter thantodecide arbitrarily which countries should begranted
sixmonths, fourmonths orevenafewer months extensions. Members should takealookatthestatistics
andnotpunish those whohadexperienced theleastproblems andwereasking foranextra extension.
Thefactthattherepresentative ofPakistan hadmentioned thatthiswould bethelastwaiver request
should alsobetaken intoconsideration. TheCouncil should therefore agree togivetherequested six-
month extension oratleastenough timefollowing thesummer holidays toenable Pakistan tocomplete
thenecessary work.
1.45 Therepresentative ofBrazil stated thathisdelegation hadheard withgreatinterest thevarious
statements made, andbelieved thatinthecaseofthecountries currently being examined asix-month
extension ofthewaiver would beappropriate.G/C/M/4
Page9
1.46 Therepresentative ofEgypt stated thatthisOrganization should doitswork withthespirit
ofcompromise andflexibility thathadalways beenpartoftheGATT. TheCouncil should notbe
discussing thepossibility ofaccording three orfourmonths extensions, butshould grant auniform
extension ofsixmonths tothecountries presently requesting suchextensions ofwaivers. Heappealed
toallMembers topreserve theintegrity ofthisOrganisation andtoaccord standard treatment toeach
case.
1.47 Therepresentative ofUruguay supported therequest made bytherepresentative ofTrinidad
andTobago aswellasthatofJamaica forasix-month extension ofthewaiver which heconsidered
fullyreasonable. Hisdelegation alsofeltthatthearguments presented byPakistan forasix-month
extension werejustified. Therepresentative ofEgypt haddrawn attention tothefactthatthereexisted
aregular time-period fortheextension ofwaivers, andMembers should notgetinvolved inthisform
of"auctioning ofdeadlines".
1.48 Therepresentative ofVenezuela agreed thatthisprocedure ofgranting extensions "àlacarte"
wassurprising, andhisdelegation thought thatoneshould revert tothemore pragmatic approach that
hadbeenusedinthepastonthese issues. Thispragmatic approach would betogrant auniform time-
period which would besixmonths tothose countries requesting suchextensions. From thestatements
made bythose delegations itappeared thatinmostifnotallcases, thereasons delaying thecompletion
ofthework weretechnical innature. Thedelegations concerned hadgiven assurances thatwithin a
six-month period theywould beabletoovercome theseproblems, particularly nowthattheSecretariat
hadalsobeenrequested toco-operate inthese efforts. Itwould beunfortunate ifthese countries could
notbegiven therequested extension ofawaiver, inwhich casetheywould beinanalmost automatic
situation oftechnical non-compliance. Itwould bepreferable, assuggested byother delegations, to
handle thisissue inapragmatic manner withthehopethatbytheendofthesix-month time-limit the
necessary work would becompleted.
1.49 Therepresentative ofHong Kong stated thathisdelegation hadexpressed concerns thatthe
granting ofextensions ofwaivers should notbeviewed asaroutine-like exercise. However, onhearing
theexplanations provided byPakistan, Jamaica andTrinidad andTobago, which seemed reasonable,
theCouncil should notbeputting itselfinaposition ofarbitrarily shortening theperiods ofextension
requested. Hisdelegation feltthatallcountries involved should haveanextension ofsixmonths.
1.50 Therepresentative ofMexico supported thestatements made bythedelegations whohad
expressed theirsupport forgranting asix-month extension ofthewaivers tothecountries concerned.
1.51 Therepresentative oftheEuropean Communities stated thatitwasunlikely thataconclusion
tothisdiscussion would bereached atthisstage. Thediscussion hadhighlighted certain facts, for
example, thataroutine extension ofthese waivers should beavoided andthatthese matters should
bedealtwithonapragmatic basis. Asregarded thecaseofPakistan, hisdelegation hadheldbilateral
consultations andhadarrived attheconclusion thatafourmonth period didinfactmeet theneeds
ofPakistan. Hesuggested thattheChairman organize consultations veryrapidly sothatagreement
could bereached ontherecommendation tobemade totheGeneral Council regarding thetime-period
bywhich thewaivers should beextended.
1.52 Therepresentative ofParaguay stated thathisdelegation supported theviews expressed which
favoured anacross-the-board extension forallthose countries asking foranextension ofwaivers. This
should betheapproach followed, unless there wereobjective criteria which would leadtoadifferent
approach oranagreement among therespective countries concerned whomaydecide onaperiod other
thansixmonths.G/C/M/4
Page10
1.53 Therepresentative fromMalaysia speaking onbehalf oftheASEAN countries stated thathe
supported asix-month extension forthose requesting suchanextension. Ifaparticular country could
agree toashorter extension thenthatshould begranted. However, alltherequests considered atthis
meeting were from countries which were requesting six-month extensions.
1.54 Therepresentative ofColombia supported thesuggestion made bytherepresentative ofthe
European Communities thattheChairman undertake consultations onthismatter. Headded thatin
thecourse ofthatexercise, ahomogenous solution should bereached thatcould beapplied equally
toallcountries having requested awaiver. Itappeared tohimthatifthere wasdiscrimination, even
ifitwerecoincidental, itwould leave anunpleasant taste. Hehoped thatasolution would befound
thatwould notgiveanimpression ofanydiscrimination.
1.55 TheChairman concluded thatforfivecountries (i.e.Bangladesh, Israel, Morocco, Senegal
andSriLanka) there wasnoproblem ofextensions forsixmonths. Inregard toJamaica, Trinidad
andTobagoandPakistan,therehadbeenasuggestionfromoneortwodelegationsthatshorterextensions
ofwaivers begiven. Theimportant point wasthataconsensus onthematter wasneeded. Asthere
wasnoconsensus, heproposed thepostponement ofconsideration ofthismatter andtoholdinformal
consultationsinsofarastheextensionsofwaiversforthosethreecountrieswereconcerned.Asregarded
Guatemala 'srequest foranextension ofitswaiver heproposed thattheCouncil agree topostpone
consideration ofthismatter toitsnextmeeting.
1.56 TheCouncil forTrade inGoods agreed totherequests from Bangladesh, Israel, Morocco,
Senegal andSriLanka forasix-month extension ofthewaiver andtopostpone consideration ofthe
waiver requests fromGuatemala, Jamaica, Pakistan andTrinidad andTobago. TheCouncil alsoagreed
thattheChairman undertake consultations regarding therequests fortheextension ofwaivers from
Jamaica, Pakistan andTrinidad andTobago.
2. Agreement onPreshipment Inspection
2.1 TheChairman recalled thatatitslastmeeting, hehadinformed theCouncil thatasolution
hadbeen found regarding thequestion ofthestatus oftheIndependent Entity andofthelegalliabilities
oftheIndependent Entity, itsstaffandpanellists. Thissolution hadmetwiththeapproval ofmost
ofthedelegations participating intheconsultations, aswellaswiththeagreement oftheInternational
Chamber ofCommerce andtheInternational Federation ofInspection Agencies.
2.2 Atitslastmeeting, theCouncil hadheard thatonedelegation, among those consulted bythe
Secretariat, wasnotyetabletogiveitsfinalposition ontheproposed solution. Heunderstood that
agreement hadnowemerged andhe,therefore, suggested thattheSecretariat berequested togoahead
withissuing aworking document outlining theproposed solution. Asagreed atthelastCouncil meeting,
thisdocument should becirculated toallMembers forcomment before theproposed solution wasput
tothisCouncil fordecision.
2.3 TheCouncil forTrade inGoods soagreed .
3. Rules ofProcedure fortheCouncil forTrade inGoods
3.1 TheChairman stated thataquestion hadarisen regarding Rule33oftheRules ofProcedure
ofthesectoral Councils. Consultations onthismatter were being heldunder theChairmanship of
Ambassador Kesavapany. Pending theoutcome ofthose consultations, theRules ofProcedure for
theCouncil forTrade inGoods circulated indocument G/C/W/2 would beputbefore theGeneral
Council forapproval.G/C/M/4
Page11
3.2 TheCouncil forTrade inGoods tooknoteofthestatement.
4. Terms ofReference ofWorking Parties onAgreements notified under Article XXIV
ofGATT 1947
4.1 TheChairman stated thathehadconsulted onwhether these Working Parties would examine
theregional trading agreements inthelightofGATT 1947 orGATT 1994 andtowhich body they
would submit theirreport. Contacts hadbeenmade withthecountries involved intheWorking Parties
established prior totheentry intoforce oftheWTO andother interested Members toascertain how
theterms ofreference should read. Itwashisfeeling thatmore timewasneeded toreach acommon
understanding onthematter.
4.2 Therepresentative ofCanada stated thatithadbeenhisunderstanding thattheterms ofreference
asadopted fortheWorking Party ontheEnlargement oftheEC,would apply toallWorking Parties
examining these kindofagreements. Hewondered iftherequest formore timewaswithin thetime-
frame ofthenextmeeting oftheGeneral Council, which could adopt theagreed terms ofreference.
Thiswasnecessary asthefirstmeeting oftheWorking Party onNAFTA wasscheduled for20July
1995.
4.3 Therepresentative oftheEuropean Communities stated thathewould bedisappointed ifthe
meeting scheduled on20July1995fortheWorking Party onNAFTA could notbeheld. Hehadsome
difficulties inunderstanding what theproblem was. Thequestion appeared tobewhether the
consideration bytheWorking Party onNAFTA would cover thewhole ofAnnex 1AoftheWTO
Agreement aswasthecaseoftheWorking Party ontheEnlargement oftheEC. Hesawnoreason
whythereshould bedifferent types ofmethods forsuchanexamination, buthecould understand that
theChairman might wanttoholdconsultations onthismatter. These consultations should make rapid
progress, inwhich case, although theagenda oftheGeneral Council hadalready beenclosed forits
meeting of11July1995, theCouncil could onaconsensus basis include thisitemontheagenda of
thatmeeting oftheGeneral Council. TheGeneral Council could thenadopt theproposed terms of
reference forsuchWorking Parties.
4.4 Therepresentative ofAustralia stated that,astherepresentative ofCanada hadmentioned,
alengthy discussion hadtaken place earlier thisyearontheterms ofreference thatweredrafted for
theWorkingPartyontheEnlargementoftheECwhichhisdelegationwouldhavethoughtwouldprovide
aclearbasisforadecision ontheterms ofreference oftheWorking Party onNAFTA andother related
working parties. If,following thesuggestion made bytherepresentative oftheEuropean Communities,
itwerepossible toobtain aconsensus thatthematter could besubstantively dealtwithbytheGeneral
Council, thenhehoped thatthesuggestion could befollowed.
4.5 Therepresentative ofSwitzerland stated that,likesome other delegations, hisdelegation had
hoped thatthismatter could havebeensatisfactorily dealtwithatthismeeting. Obviously newissues
hadcome upwhich hadprompted thesuggestion bytheChairman tocontinue consultations. Previous
speakers hadstated thattheseconsultations should takeplace veryrapidly. Hisdelegation would agree
thatanyoutstanding issues should beresolved veryquickly sothattheGeneral Council would beable
toadopt theagreed terms ofreference atitsnextmeeting.
4.6 Therepresentative ofMexico stated that,likeothers whohadspoken, hisdelegation hadalso
been under theimpression thattheterms ofreference elaborated fortheWorking Party onthe
Enlargement oftheECwould alsobeapplied inthecaseoftheworking parties referred to.Mexico
hadnoproblems withtheconsultations thattheChairman hadsuggested, butitmight beappropriate
fortheCouncil forTrade inGoods tosuspend itsactivities, remain oncallandbereconvened afterG/C/M/4
Page12
those consultations hadbeenheld. Itwould beunfortunate ifthemeeting oftheWorking Party on
NAFTA could notgoahead asplanned.
4.7 Therepresentative ofCanada stated thathehadnotheard anydelegation object tohaving the
terms ofreference asadopted fortheWorking Party ontheEnlargement oftheECalsoadopted for
anyrelated working parties. Ifthatwerethecase, hesawnoreason topostpone consideration ofthis
matter tothemeeting oftheGeneral Council.
4.8 Therepresentative ofAustralia supported thestatement made bytherepresentative ofCanada.
Itappeared byallaccounts thatnothing would prevent thisCouncil fromtaking adecision atthismeeting
onthebasis oftheterms ofreference elaborated inrelation totheWorking Party ontheEnlargement
oftheEC.
4.9 Therepresentative ofHungary stated thathisdelegation hadseenon30June1995atextwhich
wastheresult ofinformal consultations thathadbeenheldonthismatter. Hisdelegation didnothave
anopportunity ofbeing involved inthose consultations, butnevertheless hehadhadnoobjections to
thattextandhadbeenprepared toadopt itatthismeeting. However, inlightofthediscussion, he
would prefer tofurther reflect onthematter.
4.10 Therepresentative oftheEuropean Communities stated thatthere appeared tobenoproblem
ofsubstance. Hehadthusfarnotseenanyobjections toadopting thesame terms ofreference and
theunderstanding asadopted fortheWorking Party ontheEnlargement oftheEC. Inlightofthe
statement made bytherepresentative ofHungary, theproposal made byhisdelegation seemed allthe
more pragmatic. Hefeltthatthismatter could besolved without difficulty intimefortheGeneral
Council meeting of11July1995.
4.11 Therepresentative ofCanada supported thepoint made bytherepresentative oftheEuropean
Communities. Itwould beworthwhile having theproposed textbefore Members sothatagreement
could bereached rapidly onthetext. Hehoped thatthiscould bedonebythetimeoftheGeneral
Council meeting of11July1995.
4.12 Therepresentative ofArgentina supported theproposal made bytherepresentative ofthe
European Communities. Headded thathisdelegation wanted tomake itclear thatArgentina could
onlygoalong withtheproposal thathadbeenmade, i.e.adoption oftheterms ofreference andthe
understanding elaborated fortheWorking Party ontheEnlargement oftheEC,ifthesame approach
would beapplied tobodies setupbyother organs oftheWTO, forexample working parties which
hadbeensetupwithin theframework oftheCommittee onTrade andDevelopment. Thiswould concern
theWorking Party which wasexamining theMercosur.
4.13 TheChairman stated thatitwasclear thatnodecision onthismatter could betaken atthis
meeting. Heproposed thattheCouncil agree thatthematter beputontheagenda oftheGeneral Council
meeting of11July1995, andinthemeantime timeauthorize himtoholdinformal consultations. He
would request theChairman oftheGeneral Council thatthematter betaken upfordecision attheGeneral
Council meeting of11July1995.
4.14 TheCouncil forTrade inGoods soagreed .
5. Hungarian agricultural export subsidies
5.1 Therepresentative oftheUnited States, speaking under "Other Business", stated thathis
government wasdeeply concerned byreports thatHungary hadincluded inits1995budget, agricultural
export subsidies which were 40percent higher thanitsWTO ceilings. Furthermore Hungary wasG/C/M/4
Page13
apparently subsidizing theexports ofmany products notincluded initsWTO schedule onexport subsidy
reductions. Members hadworked formany years andmade politically difficult compromises toattain
theresults embodied intheAgriculture Agreement andtheagricultural schedules. TheUnited States
wasveryconcerned about Hungary providing export subsidies inexcess ofitsWTO commitments
andforproducts notcontained initsschedule. Thiswould beagrave breach offundamental WTO
disciplines. Heurged Hungary torevise itsagricultural export subsidy plans sothattheyconform
withHungary 'sWTO commitments.
5.2 Therepresentative ofHungary stated thathehadtaken noteofthestatement made bythe
representative oftheUnited States, andwould report tohisauthorities theconcerns thatwereraised.
5.3 TheCouncil forTrade inGoods tooknoteofthestatements made.
6. Taxation ofcertain alcoholic beverages inJapan
6.1 Therepresentative oftheEuropean Communities, speaking under "Other Business", stated
thattheCommunity hadasked forconsultations withJapan under paragraph 1ofArticle XXII ofGATT
1994 andArticle 4oftheDispute Settlement Understanding (DSU) todiscuss theinternal taxation
system foralcoholic beverages inJapan. Hisdelegation believed thatthetaxation system inJapan
wasdiscriminatory withregard toimported spirits andthatitdiscriminated against likeproducts that
weredirectly competitive orsubstitutable toJapanese products. Thiswasinconsistent withJapan's
obligations under paragraph 2ofArticle IIIofGATT 1994.
6.2 Therepresentative ofJapan stated thatsince theadoption ofthePanel report in1987 (BISD
34S)theJapanese government in1989 andagain lastyearhadtaken measures suchasaconsiderable
reduction ofthetaxation gapbetween "shochu" andother alcoholic beverages inquestion inorder to
implement therecommendations contained inthereport. Withrespect totherequest forconsultations
thathadbeenmade bytheEuropean Communities, Japan hadalready responded affirmatively the
previous week.
6.3 TheCouncil forTrade inGoods tooknoteofthestatements made.
7. Agreement between US/Japan onautoandautoparts
7.1 Therepresentative ofJapan speaking under "Other Business" stated thatwithregard toauto
andautopartsissues which Japan hadraised atthelastCouncil forTrade inGoods meeting, hewas
pleased toreport thatasuccessful conclusion tothismatter wasreached on28June1995 asaresult
ofaseries ofnegotiations between thegovernments ofJapan andtheUnited States. Theparties
concerned wereplanning topresent thedetails oftheagreement reached atthenextGeneral Council
and/or thenextDispute Settlement Body (DSB) meeting. Therefore hewould mention onlysome of
themajor points oftheagreement atthisCouncil meeting. Theoutcome ofthenegotiations wasfully
consistent withtheletterandthespirit oftheWTO agreement. Thebiggest obstacle inthenegotiations,
theissue ofnumerical targets suchastherenewal andexpansion oftheparts purchase plans hadnot
beenincluded intheoutcome, thusconfirming theposition ofJapan thatthisissue wasoutside the
scope andresponsibility ofthegovernment. Healsostressed thatthirdcountries could benefit from
theoutcome ofthenegotiations onanm.f.n. basis. Hisgovernment believed thatthefactthatsuch
adifficult trade dispute could besettled inconformity withtheWTO Agreement signified avictory
forthenewly created WTO. Heexpressed hisgovernment 'sgratitude totheWTO andtoanumber
ofitsMembers fortheirsympathetic consideration ofJapan'sstance thatthisdispute should besettled
inaccordance withinternational rules. Itwastheexpectation ofhisgovernment thatthisagreement
would helpmultiply import opportunities totheJapanese market fortrading partners. Hereiterated
thepolicy ofhisgovernment tocontribute tothedevelopment ofworld tradethrough further deregulationG/C/M/4
Page14
andimprovement ofmarket access, while observing, together withother WTO Members, international
rules, inparticular theWTO Agreement.
7.2 Therepresentative oftheUnited States stated thathisgovernment alsowelcomed thishistoric
agreement which wasbroad, detailed andquantifiable. Hisauthorities alsowished toexpress gratitude
tothose Members thathadvoiced theirconcerns invarious WTO meetings inMayabout Japan'smarket
access barriers. TheUnited States, along withthose Members looked forward tosignificantly increased
market access forautos andautopartsandstructural change intheJapanese automotive sector resulting
from thisagreement.
7.3 Therepresentative oftheEuropean Communities stated thatthisagreement hadmade itpossible
toavoid aserious trade conflict. Theveryfactthatthese negotiations wereheldinGeneva gavehope
thattheundertaking, asstated bytheJapanese delegation particularly withregard tonon-discrimination,
didreflect actual reality. Itwould alsobenecessary toseehowthese statements would beapplied
inpractice. Hewasalsointerested toknow iftheparties tothisagreement intended tonotify this
agreement totheWTO.
7.4 Therepresentative ofCanada congratulated Japan andtheUnited States forhaving resolved
thisissuewhichwas"asteptowardsprovidingthesameaccessforforeigncompetitorstoJapan'smarkets
forautos andautoparts". Hisgovernment welcomed andappreciated theassurances given byboth
Japan'sMinister ofInternational Trade andIndustry, Mr.Hashimoto andtheUSTrade Representative,
Mr.Kantor, thattheagreement would beimplemented onanon-discriminatory basis. Hewelcomed
theannouncement bytheJapanese delegation thatthere would beadetailed briefing provided tothe
Members, either atthenextmeeting oftheGeneral Council, oratthemeeting oftheDSB. His
authorities would becarefully reviewing theimplementation ofthenegotiated settlement toensure that
Canadian trade interests were notadversely affected byit.
7.5 TheCouncil forTrade inGoods tooknoteofthestatements made.
8. Signature ofaFreeTrade Agreement between EFTA andSlovenia
8.1 Therepresentative ofSwitzerland, speaking under "Other Business", onbehalf oftheEFTA
countries, namely Iceland, Liechtenstein, Norway andSwitzerland, andalsoonbehalf ofSlovenia
stated thattheEFTA countries andSlovenia hadsigned afreetrade agreement on13June1995. The
agreement wasbeing applied onaprovisional basis since 1July1995, anditwould beimplemented
onadefinitive basis oncetherequired ratification procedures hadbeencompleted. Thecontents and
thestructure ofthisagreement weresimilar tothose contained inthefreetrade agreement concluded
between theEFTA countries andCentral andEastern European countries withcertain adjustments which
reflected recent developments. Theagreement would benotified under paragraph 7(a)ofArticle XXIV
oftheGATT 1994 intheverynearfuture andtheparties tothisagreement wereready toparticipate
inconsultations andtoprovide additional information.
8.2 TheCouncil forTrade inGoods tooknoteofthestatements made.
9. Tariff Quota oftheEuropean Communities
9.1 Therepresentative ofHungary, speaking under "Other Business", drew theattention ofthe
Council toaproblem related totheunbinding bytheEuropean Communities ofatariffquota of20,000
heads ofheifers andcows ofcertain mountain breeds. Thismeasure wasnotified inacommunication
circulated on11January 1995 (Document SECRET/347). Inasubsequent communication dated
15May1995(SECRET/347/Add.1), theEuropean Communities hadindicated thattheyhadconcluded
Article XXVIII negotiations withAustria andthataccording totheagreement reached between thoseG/C/M/4
Page15
twoparties, theconcession would bewithdrawn on1July1995 andwould bereplaced byanew
concession consisting ofaglobal tariff quota ofonly5,000 heads, which didnotevencover thelevel
ofHungarian exports. Hungary hadrequested on7February 1995, wellwithin thedeadline, toenter
intonegotiations withtheEuropean Communities under Article XXVIII. Thisrequest wasrepeated
on20June1995. Intheabsence ofanyresponse fromtheEC,hisdelegation nowwished toconfirm
intheCouncil forTrade inGoods thatHungary maintained itsrequest toenter intonegotiations with
theEuropean Communities under Articles XXVIII ofGATT 1994andGATT 1947, andwaswaiting
forsuggestions fromtheEuropean Communities astothedateforstarting thesenegotiations. Hungary
reserved allitsrights under theWTO andGATT 1947.
9.2 Therepresentative ofSwitzerland, referring tothecommunications from theEuropean
Communities regarding thetariffquota of20,000 heads ofheifers andcowsofcertain mountain breeds,
dated 11January and15May1995, stated thatSwitzerland hadnotified totheDirector General its
intention toreserve allitsrights under Article XXVIII andtoenterintonegotiations withtheEuropean
Communities. Thisnotification wassenton14February 1995 andagain on21June1995. Todate,
Switzerland hadreceived noofficial reaction fromtheEuropean Communities. Switzerland maintained
itsrequest andhoped thattheconsultations would nolonger bedelayed.
9.3 Therepresentative oftheEuropean Communities stated thathehadtaken noteofthestatements
made byHungary andSwitzerland andwould report them tohisauthorities. Hewasconfident that
theproblem would besolved.
9.4 TheCouncil forTrade inGoods tooknoteofthestatements made.
10. Brazil: Provisional Measure N1024 (automobiles)
10.1 Therepresentative ofBrazil, speaking under "Other Business", stated thaton13June1995,
theGovernment ofBrazil hadadopted Provisional Measure N1024, thatdealtwiththetrade régime
fortheautomotive sector andcontained alsoother provisions. AnEnglish version ofthefulltextof
theProvisional Measure hadbeennotified toWTO incompliance withthetransparency obligations
embodied inthe1979Decision andtheUruguay Round Decision onNotification Procedures. Itwould
becirculated indocument WT/L/73.
10.2 Hewanted toinform theCouncil ofthereasons thathadcompelled Brazil toadopt themeasure.
Themain priority ofBrazil 'seconomic program wastostabilize theeconomy, increase productivity
andachieve costreduction. Those wereessential elements ofaneconomic program geared toagreater
insertion oftheBrazilian economy ininternational economic flows. Themonetary stabilization plan
hadcompleted oneyearofsuccessful implementation. Itwentbeyond currency change anditsmore
important features werealargeprivatization program, fiscal andmonetary measures, structural reforms
andafirmcommitment tothecontinuation ofthetradeliberalization process. Inflation -thathadreached
amonthly rateof50%when theplanwasintroduced -averaged lessthan2%amonth inthefirstsemester
ofthisyear. Thiswasaremarkable achievement considering therecent history oftheinflationary
process inBrazil andthefactthatthese results wereobtained inafullydemocratic environment with
highgrowth andinvestment ratesandnopricefreezes. Trade liberalization wasanessential component
oftheplan. Thecontinuity oftheplan'ssuccess required, however, anequilibrium oftheexternal
accounts andforthatpurpose itwasnecessary toavoid increasing trade deficits. Recent events in
international financial markets hadexposed thefragility ofattempts bydeveloping countries engaged
inprogrammes ofstabilization andtradeliberalization toreach equilibrium inexternal accounts through
short termcapital inflows. Brazil hadnoted withsatisfaction thattheG-7leaders hadrecognized the
importance oftheissue, raised byPresident Fernando Hernique Cardoso, ofvolatility ofcapital flows
inaglobalized economy anditsserious implications forthehealth oftheinternational financial system.G/C/M/4
Page16
10.3 After years ofsignificant trade surpluses, Brazil wasnowfacing anincreasing trade deficit.
Inthefirstfivemonths ofthisyear, imports hadincreased by95.7% ascompared tothesame period
lastyear, while exports hadgrown atonly5.9%. Inparticular, inthecaseofautomobiles, since the
beginning of1995 imports hadbeensoaring. InApril, Brazil hadimported passenger carsworth
US$267million; inMay, thisnumber hadgrown toalmost US$400million, which represented an
increase ofabout 50%inonemonth. Ifrecent imports werecompared withlastyear'snumbers, the
surge wasobvious. Inthefirstfourmonths of1994, imports ofautomobiles (notincluding trucks
andbuses) accounted forUS$287million. Inthesame period of1995, imports ofautomobiles had
amounted toUS$1.63billion -anincrease of467.6%. Imports ofallvehicles inthefirstfourmonths
ofthisyearhadreached US$1,743 million, corresponding to8.4% oftotalimports inthesameperiod
or86%oflastyear'stotalimports ofvehicles. Inthose fourmonths, Brazil hadimported 190,406
vehicles, thatwasabout thesame number ofvehicles ithadimported inthetwelve months of1994
(197,180 vehicles). In1994, thenumber ofimported vehicles corresponded to12.5% ofthedomestic
production. Thatratioincreased to37%from January toApril 1995.
10.4 Inafirstattempt tocopewiththissignificant import surge inafinancially volatile atmosphere,
thegovernment hadtemporarily increased tariff ratesforanumber ofdurable goods, asnotified in
document WT/L/66 anditsaddendum 1.Thatprice-based measure designed toreduce thegrowing
trade deficit, however, wasoffset byimporters 'access toforeign financial sources. These foreign
sources offered terms thatweremore favourable thanthose prevailing inthedomestic market inview
ofthefactthat,aspartofthestabilization plan, highinterest rates were required soastoavoid
overheating theeconomy. Brazil hadanintegrated anddiversified automotive industry. Itcomprised
assembly plants andfactories ofalltypes ofautomobiles, trucks andbuses, agricultural machinery,
farmtractors andheavy vehicles (caterpillars), coupled withawellestablished andindependent auto
partsandcomponents sub-sector. Thesignificance oftheautomotive sector totheBrazilian economy
could beassessed bythefollowing data: itwasresponsible for11%ofBrazil 'sGDP, itprovided for
annual revenues ofmore thanUS$16billion andemployed directly around 700,000 persons. The
competitivenessoftheautomotivesector,whichwasoneofthemostinternationalizedindustries,required
aneconomy ofscale, lowcostinputs andprocess optimization. Inthiscontext, theProvisional Measure
providedforgovernmentinitiativestoensurethesounddevelopmentoftheindustry,includingproduction
costreductionthroughlowerimporttariffs.Thisperceptionofthecriticalroleoftheautomotiveindustry
waswidely shared byWTO Members illustrated bytherecent trade dispute between major trading
partners andbytheexisting special trade measures andregimes towhich thesector wassubject in
developed anddeveloping countries, aswellasinregional integration schemes.
10.5 Healsowanted toclarify thenature ofaprovisional measure intheBrazilian legal system.
ItwasanactbythePresident thathadimmediate buttemporary legaleffect onissues requiring urgent
action. Itcould bemodified byCongress andonlyaftercongressional approval didthemeasure acquire
permanent legalstatus. Inthisparticular case,mostoftheprovisions ofMeasure N1024would not
beapplicable untilregulated bydecree.
10.6 TheBrazilian Government wasfirmly committed tothestrengthening ofthemultilateral trading
system embodied intheWTO. Oneofthebasic rulesofthesystem wastransparency. Together with
thenotification ofProvisional Measure N1024, hewished tomake clearthattheBrazilian government
wouldpursuetheprocessoftradeliberalizationwhich,ashehadstressedbefore,wasanessentialelement
toensure thesuccess ofthestabilization plan. While addressing specific problems caused bygrowing
imbalances onBrazil 'sexternal trade duetotherapid increase ofimports intheautomotive sector,
Brazil hadtoensure thesound economic functioning ofthiscrucial sector fortheBrazilian economy,
through, interalia,thereduction ofimport tariffs toallow forlower production costs.G/C/M/4
Page17
10.7 Hisdelegation would takenoteofanycomments itstrading partners might wishtomake on
thisissue andwould submit them toBrasilia forinformation andfurther clarification asmight be
required.
10.8 Therepresentative oftheEuropean Communities thanked therepresentative ofBrazil fora
verycomprehensive presentation ofthedifficulties which Brazil found itselfinatpresent, particularly
withrespect totheautomotive sector. Hehadalsotaken noteofthecommitment repeated onmany
occasions byBrazil tocontinue down thepathofliberalization. Thiswasnotthemoment tolaunch
intoadetailed discussion ofthemeasures adopted, however, some ofthese measures hadalready been
applied, inparticular quotas ontheimportation ofvehicles. These were alsomeasures which hada
major impact onBrazilian trade withitsmajor trading partners andinparticular withtheEuropean
Communities. Itwould have been interesting toknow thelegal justification which theBrazilian
government envisaged presenting tosubstantiate thejustification ofthemeasure ormeasures which
werealready ineffect. Hehoped thattheBrazilian government would alsopresent justification for
themeasures which itintended totakewhen domestic procedures hadbeencompleted. Among the
measures envisaged there were certain provisions which could giverisetoproblems inthelightof
certain commitments entered intobyBrazil within theframework oftheUruguay Round negotiations.
Hisdelegation would welcome, therefore, alegalanalysis andthelegaljustifications which would be
putforward bytheBrazilian authorities.
10.9 Therepresentative ofJapan associated himself withthecomments made bytherepresentative
oftheEuropean Communities.
10.10 Therepresentative oftheUnited States thanked theBrazilian representative forathorough
explanation ofthesituation andexpressed understanding forthemotives thathaddriven Brazil tomake
thedecisions thatithadmade. Thismeasure, however, wasaviolation ofGATT Article XI,andthe
preferential allocation ofthebenefit ofthequota todomestic manufacturers violated GATT Article III.
Moreover, because itwasapparently being applied inadiscriminatory fashion through itsfavourable
treatment ofBrazil 'sMercosur partners theaction alsoviolated GATT Article XIII. Itwasclearthat
Brazilwasnottakingthisactionasabalance-of-paymentsmeasuresincethisactionwasindustry-specific.
Furthermore, hisdelegation believed thatthismeasure wasalsoaprohibited trade-related investment
measure.
10.11 Therepresentative ofCanada thanked theBrazilian representative forhisstatement outlining
thedifficulties thattheBrazilian automobile sector wasfacing andhisassurances thattheBrazilian
government wascommitted totheideaoftradeliberalization. Hehoped thatthenotification contained
sufficient details forhisauthorities tobeabletofullyassess theimpact thatthiswasgoing tohave
onCanada. Canada wasdirectly affected asanexporter ofautomotive products toBrazil andwould
reserve judgement onthemeasure untilthedetails hadbeenseen. LiketheEuropean Communities,
Canada would welcome legaljustification ofthese measures under theWTO provisions.
10.12 TheCouncil forTrade inGoods tooknoteofthestatements made.