TWN Info Service on WTO Issues (July03/15)

28 July 2003

Third World Network


Dear friends and colleagues




In the second week of July, there was a series of WTO meetings on services.

To date, only 30 members submitted their initial services offers.  Most Developing countries are skeptical of offering more liberalisation commitments for various reasons.

A new paper by 14 developing countries was submitted on Mode 4 (movement of labour) to the GATS and discussed.

The discussions on GATS rules have been going on at a very slow pace, with members reported to be “frustrated”, especially the countries that have been pushing for rules allowing safeguard actions by members whose local firms are adversely affected by liberalisation.

In the Working Party on Domestic Regulations, the enthusiasm of the developed countries,  who are the main proponents for setting new rules on domestic regulations, has waned.

According to a WTO staff,  a major factor for this is that pressures exerted by Northern NGOs on their governments have caused the developed countries to stop  pushing the process as hard as they previously did.

There is a growing movement among NGOs in the developed countries which are concerned that GATS disciplines under domestic regulations would compromise the regulatory sovereignty of WTO  member countries.

Below is a report on the recent services negotiations.

Please check our website for previous issues of TWN Info Service.

With best wishes

Martin Khor

Third World Network






Services talks move slowly, developing countries skeptical on further liberalisation

TWN Report by Martin Khor, Geneva 12 July 2003



The services discussions and negotiations in the WTO have been going slowly, with many developing countries  weighing developments in other negotiating areas when considering the commitments they are to offer.  

Several days of meetings over a week (some under regular session, some in informal mode) ended on 10 July with a special session of the GATS Council, which considered a report by the Chair of the services special  session, Ambassador Alejandro Jara of Chile, to the Trade Negotiations Committee of 14 July.

As of 10 July, 30 members had submitted their initial offers, of which 15 are developing countries.  The deadline for initial offers passed on 31 March.

Those who submitted by 31 March were Japan, New Zealand, Australia, Korea, Uruguay, Chinese Taipeh, Canada, Paraguay, Norway, the US and Bahrain.  Others submitting after 31 March were Iceland, Liechtenstein, Argentina, Switzerland, Senegal, Israel, Hong Kong China, Poland, Saint Kitts and Nevis, the EU, Czech Republic, Macao China, Mexico, Fiji, Slovenia, Slovak Republic, Singapore and Chile.  The last two submitted on 10 July.

Inside and outside the meetings, several developing countries indicated that their offers would be linked to whether they would obtain benefits or progress in other areas, within and outside of the area of services.

Developing countries in the Cairns Group, such as Brazil, have voiced their unhappiness with the lack so far of agricultural liberalisation commitments by developed countries, particularly the Europeans.   They do not see why they should make significant commitments in services if they are not to benefit from market access in agriculture.

On the other hand the Asean countries, especially Indonesia, Malaysia, Thailand and the Philippines, have been frustrated at the negative response, particularly from developed countries, to their request for establishing an emergency safeguard mechanism for services.

Some of the Asean countries have indicated that unless there are safeguard measures available to developing countries to use during unforseen developments such as a surge in services imports threatening local firms, it would be difficult for them to make new significant commitments.

Several developing countries have also been pushing for meaningful improvement for increased market access in movement of natural persons (Mode 4).  They point to the imbalance of developed countries piling on the pressure on developing countries to commit to give commercial presence to their firms in a wide range of sectors (under Mode 3 of GATS) whilst they (the developed countries) themselves are not making any commitments on liberalising Mode 4.

Because of this imbalance, some developing countries also do not have the incentive to provide significant offers. 

There are also many developing countries that did not make requests or made only superficial requests, as they do not have the supply-side and marketing capacity to be able to increase their services exports or commercial presence in other countries. For them, there is hardly any incentive to provide offers of new commitments.

This lack of enthusiasm on the part of most developing countries did not however stop officials from developed countries from conducting bilateral negotiations with several developing countries during the past week, seeking responses to the wide-ranging requests they had made. 

For example, a team of US officials have been busy asking some developing countries to liberalise their energy sector, from the stage of minerals exploration and mining to the distribution and retail of petrol and other energy products.

At the special session, there was exhortation by some countries that those who had not yet made offers should do so, so there would be a decent number of offers by Cancun.   The Ministers at Cancun can also be expected to call on members to submit their offers as soon as possible, said trade officials.

The Ministers are also expected to give timelines for completion of discussions on services rules, and on the improvement and revision of initial offers.

At the special session, many developing countries commented on the quality of the offers made by developed countries, complaining especially about their lack of commitment in Mode 4 (movement of labour).

A new paper dated 3 July on “Proposed liberalisation of Mode 4 under GATS Negotiations” was submitted to the special session by Argentina, Bolivia, Chile, China, Colombia, Dominican Republic, Egypt, Guatemala, India, Mexico, Pakistan, Peru, Philippines and Thailand.

It is aimed at highlighting issues arising from previous discussions at the Services Council special sessions as well as from the bilateral request-offer meetings.

Arguing that there is a now greater convergence of interests in Mode 4 between developed and developing countries than during the Uruguay Round, the paper quotes studies by Prof. Alan Winters that increasing developed countries’ quotas for incoming Mode 4 by 3 percent of their labour forces would generate annual gains of over US$ 150 billion.

Most of the 26 offers to date do not include any substantial improvements to existing specific commitments to Mode 4, says the paper.  “Some Members have not introduced any improvement to the existing commitments, others have introduced some minor changes aimed at clarifying and in some cases expanding the scope of commitments.

“Commitments continue to be basically limited to categories of personnel related to commercial presence while developing countries are interested in commitments for categories delinked with commercial presence also.  Whilst it is recognised that this is the first set of offers, many developing countries have expressed disappointment at the level of ambition shown in this area,  which is crucial for many of them.”

The paper then makes proposals in four areas:  nature of commitments, adminstrative procedures, recognition of qualifications and framework for a possible solution.

On the nature of commitments, the developing countries proposed the recognition and use of “common categories of movement” under Mode 4, linked and delinked from commercial presence in members’ horizontal commitments.  The suggested categories include:  intra-corporate transferees, business visitors, contractual services suppliers and independent professionals.

The paper also says that sector specific commitments for most members are unbound and refer to horizontal commitments.  As this does not address specific sectoral commitments where deeper liberalisation is sought, “it is necessary to analyse the extent to which sector specific commitments could complement the horizontal commitments.”

On administrative procedures, the countries say that measures on entry and stay in other members’ territory like visas and work permits are obstacles to temporary movement of persons which largely eliminate the value of commitments made.  

The paper suggests establishing a separate visa or sub-set of procedures for temporary movement leading to more transparent, timely and less burdensome grant of visas for temporary movement under GATS.

The paper also says that the economic needs test (ENT) and similar tests are artificial barriers preventing free labour movement and the conditions on which they are based are not clearly defined.  Eliminating ENTs for the identified categories of movement of service suppliers (proposed in the paper) can remove this barrier.

On recognition of qualifications, the paper says the lack of recognition of professional qualifications and licensing requirements affects the supply of services to developed countries.  It proposes three ways to address this issue:  development of disciplines under GATS Article VI:4 on qualification requirements and procedures, licensing, and technical standards;  undertaking additional commitments under GATS Article XVIII for verifying a foreign service provider’s competence to provide the service;  and strengthening the framework for recognition agreements under GATS Article VII.

On a framework for possible solution to Mode 4 liberalisation, the paper suggests devising a Model Schedule for Mode 4 commitments aimed at greater uniformity and predictability in commitments.  The Model Schedule would also address other limitations relating to administrative procedures, recognition of qualifications, etc.

To move the discussion forward, the countries propose that the Mode 4 issue be discussed in the GATS special sessions under the standing sub-agenda item “implementing para 15 of the guidelines.”  Also, there should be continuous evaluation and assessment of how far members’ offers will provide effective market access in Mode 4 to developing countries, to ascertain the results attained regarding the aims of GATS article IV as provided for in para 15 of the Guidelines for Negotiations (S/L/93).

Earlier, in the Working Party on GATS rules, views by members on the issue of developing an emergency safeguard mechanism under GATS were characterised by “expressions of frustration”, according to a trade official,who added:  “After seven years of discussions, we are nowhere closer to a conclusion or a convergence on the main questions.”

Some Asean countries (Thailand, Malaysia, Indonesia, Philippines) have been leading several developing countries in proposing a safeguard mechanism that can be used to backtrack from GATS commitments when a country’s national services enterprises are threatened. 

However, the developed countries are opposed to such a mechanism, which they consider neither desirable or feasible.

And some other developing countries are not supportive because they fear that a safeguard mechanism, if established, can also be used in Mode 4 and thus threaten the potential benefits from labour movement. 

The present impasse on this issue again highlights the difficulties in setting up a safeguard mechanism in services that can protect developing countries which have committed to liberalise particular services and whose local enterprises subsequently face difficulties coping with foreign competition.

In the latest meeting of the Working Party on GATS Rules, the discussion on this issue has not led to any conclusions, and frustration was expressed by both the supporters and opponents of safeguards.

On subsidies and government procurement, also discussed in the working party, the general opinion was that much more work should have been done, and should be done, according to a trade official.  In other words, there has not been any significant conclusions either.

In the Working Party on Domestic Regulations, it appears that the enthusiasm of the developed countries, who are the main proponents for setting new rules on domestic regulations, has waned.

There is a growing movement among NGOs in the developed countries which are concerned that GATS disciplines under domestic regulations would compromise the regulatory sovereignty of WTO member countries.

Because of the pressures exerted by these NGOs on their governments, many of the developed countries are no longer pushing the process as hard as they previously did, say trade officials. 

Another reason for the absence of enthusiasm among these countries is that they are now, in the request-offer stage, interested in obtaining commitments from other countries to liberalise their professional and other services.  They do not want disciplines on domestic regulations to get in the way of this, at least not for now.