US ROW WITH EC SLOWS PROGRESS IN URUGUAY ROUND SERVICES TALKS

US ROW WITH EC SLOWS PROGRESS IN URUGUAY ROUND SERVICES TALKS

Major differences between the United States and the European Community are holding back progress in multilateral talks on trade in services.

Another round of high-level informal discussions between EC and U.S. officials in Geneva, failed once again to produce agreement between the two economic superpowers on the regulatory framework for international trade in services.The General Agreement on Tariffs and Trade now sets the rules that govern trade in goods for the agreement's 97 signatories. Until now, the nearly $560 billion trade in services has not been governed by a similar trade regime.

The EC, the Nordic group of countries and Canada favor a structure that would freeze all existing regulations as they apply to services and then proceed with liberalization measures.

The United States, however, wants to have the freedom to introduce more regulatory measures before proceeding with liberalization. Washington

considers an across-the-board freeze more rigid.

One high-level Western official, who declined to be named, said the discussions are bogged down in complex political and economic arguments.

"There is no real dialogue as both sides are afraid to commit themselves," said another inside source.

A proposal introduced last week by 11 Latin American and Caribbean countries has helped counter this negative mood.

Drafted by representatives of Brazil, Chile, Colombia, Cuba, Honduras, Jamaica, Nicaragua, Mexico, Peru, Trinidad and Tobago and Uruguay, it is seen by negotiators from the industrialized countries as a positive step.

"It's a coherent paper, well worked out. It's written in such a way to be a good negotiating document," said one Western negotiator.

The proposal also shows how much developing countries have shifted on the issue, said a GATT official. Prior to the beginning of the talks, developing countries like Brazil wereadamantly opposed to any negotiations on services.

Still, the paper contains a number of recommendations that negotiators

from some industrialized countries have criticized.

"The proposal contains too much emphasis on special and differential treatment," said one.

The proposal calls for a series of special conditions that, it claims, are needed to meet the needs of developing countries. For example, it urges a gradual liberalization of trade in services, unlike the Western position, which calls for immediate liberalization.

The proposal also argues that developing countries "may subsidize exports of services in a manner consistent with their development needs."

Not many developed countries go along with that, remarked one negotiator.

The proposal also calls for some kind of multilateral framework to oversee restrictive business practices that limit competition. However, one Western official said it's unlikely they will achieve this in the negotiations, as Western countries are not prepared to let go of their sovereign right in this area.