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'ROAD MAP' FOR SERVICES TALKS

by Chakravarthi Raghavan

Geneva, 26 May 2000 -- The World Trade Organization's Council for Trade in Services at its meeting here in Special Session has agreed on what trade diplomats and officials call a road map for the round of mandated negotiations in services, technically kicked off by the General Council in February.

The road map in fact largely parallels the one set by the Committee on Agriculture for the agriculture negotiations.

The GATS (Art XIX.3) requires that for every round of negotiations in services negotiating guidelines and procedures have to be established, and the agreed road map Friday said that this item would be on the agenda of every Special Session starting from the one in May 2000. And so would be the issue of assessing the outcome of trade in services.

Trade officials privately say that much of what would be agreed at some point before the actual 'market access' negotiations, envisaged to start in March 2001, is probably contained in the road map, and the whole idea of the road map is essentially to send a 'political signal' about the services negotiations.

But these have been directly and indirectly linked by some of the Cairns group members to parallel progress in agriculture, while many other developing countries, without formally linking it, have said would depend on how their implementation concerns and issues are resolved satisfactorily.

As for the assessment of trade in services, nearly a decade after the assurances about measures to be taken on agreeing upon, collecting data on trade in services (and thus directions of trade in services), there is still no data that reflects the definition of the trade under GATS. There is only some approximation at a highly aggregate level derived from the IMF's balance of payments statistics (where data on trade in services are not based on the GATS definition, but merely on basis of ownership and remittances).

The negotiations will be on the basis of proposals from Members, and will be discussed at special sessions, addressing matters relating to negotiations under Art XIX (providing for progressive liberalisation in successive rounds), in particular:

* modalities for negotiations;

* increasing participation of developing countries and with special priority for LDC members;

* modalities for treatment of autonomous liberalization; and

* issues arising from work in the CTS and subsidiary bodies including technical review of existing provisions of the GATS "in order to improve the clarity and legal consistency of the text of the Agreement."

However developing countries have made clear, in respect of this last that they would not negotiate to change the GATS architecture, and adopt a 'top down approach' that the US wants -- 'everything is covered except those excepted'.

Also this week, the subsidiary bodies of the CTS have met to consider the issues of 'emergency safeguards' -- the Asean has a concept paper -- and how this could be done for all four modes of supply: transborder delivery services, movement of consumers to another country for consumption of the service, delivery by commercial presence (a term which includes through investment) and temporary movement of natural persons.

The problems arise as to how emergency safeguards can be applied: whether in respect of commercial presence (for example banks, insurance companies, stockbrokers etc), it would apply against existing foreign presence, or only new presence.

Several developing countries do not want to agree to something that ultimately would be easy to apply against delivery of services through movement of natural persons.

And if the GATT model were to apply, how could 'compensation' be provided, more so when there is reliable data on trade in services.

Another CTS subsidiary body discussed the issue of subsidies, whether subsidies in the area of services is 'trade distorting' -- as for example, economists generally agree it is doing in the case of agriculture -- and hence to be dealt with. Related to this are questions about subsidies for social or cultural purposes, and subsidies for services provided by a government on a non-commercial basis - such as health services in Canada or UK, where government health services exist with private services.

Trade officials say that GATS does not have jurisdiction over government services.

But in many developing countries, under pressure from the IMF and the World Bank, are privatizing many government services (even basic ones like health, water, sanitation) and such private services would attract the disciplines against subsidy.

This would create the anomaly that the industrialized countries, because of the government budgetary positions, may be able to maintain some government services, which will escape subsidy disciplines, while developing countries would be hit.

The specific commitments group has also discussed various services classifications, and the idea of clustering of related services - whether it could be used as a negotiating tool, or for commitments through headnotes.

The US for e.g. has put in papers relating to energy services and environment services and the various subsectors. Dominican Republic and some others envisage a similar approach to tourism and other services.

But the panel ruling on government procurement (US vs Korea) and the panel's views about the ability to use the DSU to correct 'bad faith' negotiations in exchange of concessions and the responses of countries to questions in what hitherto is considered a purely 'bilateral' approach in the 'request-offer' approach, is bound to complicate matters.

For with a cluster approach, and based on the questions and answers -- which is entirely a bilateral process., where the secretariat is not involved -- and actual commitments, one side or other, could raise a future dispute, basing itself on its own files and notes of the exchanges. And the developing countries will be caught through the panel process, and more so because of the tendency of panels to 'legislate' and create new obligations through their rulings which are automatically to be adopted. (SUNS4677)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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