US undermining WTO MTS through "secret" TiSA talks?
This article was first published over two parts in the South-North Development Monitor (SUNS) (Nos. 8066, 21 July 2015, and 8067, 22 July 2015).
Geneva, 20 Jul (Chakravarthi Raghavan*) - The recently published Wikileaks set of updated draft negotiating texts of the "Trade in Services Agreement" (TiSA), along with its earlier publication of some secret chapters of the TPP and the TTIP, bring out into the open the US attempts to drive a coach and four through the post-war multilateral trade, money and financial systems and establish Global Corporatism and US hegemony over the world.
News and views on the TPP, or the Trans-Pacific Partnership (involving the US, Canada, Japan, Australia and some Asian and Pacific region nations), and on the TTIP, or the Transatlantic Trade and Investment Partnership, involving the US, Canada and European nations, have figured from time to time in the media, but that on TiSA much less.
Talks on all three, being pushed and promoted by the administration of US President Barack Obama, are taking place in much greater secrecy than past and current trade negotiations at the multilateral trading system (MTS) of the old GATT or the World Trade Organization (WTO) now.
All three so-called "high quality global trade agreements" are being promoted and negotiated in secret by the United States, with the Obama administration keen to conclude them on its watch (end 2016), without too much contemporaneous public or parliamentary scrutiny and debate within participating countries.
With the US Congress having now ceded its authority in such matters to the administration, under the so-called Trade Promotion Authority (TPA), the Obama administration can conclude the agreements and send them to Congress for "rubber stamping", with Congress having the right only to vote "yes" or "no" but not change any part. This last is essentially a US domestic issue, one of democratic governance and legislative scrutiny.
However, without in fact even this amount of scrutiny, other participating countries will be signing on, reducing and restricting even more their development policy options, but obligated to keep law and order and give free rein to global corporate activities within their countries. Each of these agreements will have negative effects on non-participants.
"Together, the three treaties (TPP, TTIP and TiSA) form not only a new legal order shaped for transnational corporations, but a new economic 'grand enclosure,' which excludes China and all other BRICS countries," says WikiLeaks publisher Julian Assange in a press statement.
Wikileaks and its publisher Julius Assange deserve a public 'thank you' from governments, parliaments and public around the world for getting hold of and publishing these texts.
Of the three, the TPP and TTIP will be claimed to be "Free Trade Agreements" or Regional Trade Agreements permissible under the WTO, subject to WTO multilateral scrutiny as Regional Trade Agreements (RTAs) and other procedural conditions. In both cases, prejudicially affected non-members may be able to invoke some remedies.
The WTO's RTA scrutiny itself may reach no conclusions, since consensus is needed.
However, even when the consideration of the RTA remains bottled up in the relevant WTO committee, if current WTO jurisprudence prevails, an aggrieved member can raise a dispute, have a panel set up and the dispute adjudicated; and, the ruling, as modified by the Appellate Body if there is an appeal, automatically adopted by the Dispute Settlement Body (DSB), and have any ruling in its favour implemented by the RTA participants; or, if unimplemented, invoke automatic authorized retaliation.
Neither the TPP nor the TTIP appear to have a separate mechanism for settling disputes as between their member States. According to US trade law academic Prof. Simon Lester, the States concerned will have to invoke the WTO and its Dispute Settlement Understanding (DSU), but only in relation to their WTO rights and obligations vis a vis actions of the other member States, but not where WTO plus or minus rights and obligations under the TPP or TTIP are to be invoked (Lester 2015).
Thanks to Wikileaks publication of some "secret chapters", both the TPP and TTIP have attracted considerable public disquiet and criticism in the US and in their negotiating partners over their proposed mechanism for dispute settlement as between "investors" and the State concerned. Even "Conservative" groups and personalities, normally supportive of "liberal" or "Free Trade" principles, have voiced their protests.
For e.g., Ben Goldsmith, a financier and chairman of the Conservative Environment Network in the UK, and supporter of a recently launched group "Artists Against TTIP", in an opinion piece in the London Evening Standard on 30 June, has said: "TTIP is not a fringe issue but would mean seismic changes for the UK... It is profoundly hypocritical of our current government to highlight threats to UK sovereignty while also promoting TTIP within Europe. Rather than trying to hide the deal from the British public, ministers should facilitate a fuller debate - and, if such a debate demands it, include the suspension of TTIP in the package of reforms and opt-outs being demanded from the EU."
When admitted conservatives and "financiers", and the English "popular press", are getting into this debate and voicing concerns and opposition, it is a warning signal that the British and European governments cannot ignore or brush under the carpet.
Nor is it easy to comprehend the reported requirements about five-year secrecy, whether talks succeed or fail. What happens if negotiations fail is a different matter. And while Member governments involved in the negotiations may try to keep negotiating texts secret, there is no way that negotiated agreements can be kept under wraps for five years. Any agreement would need to be immediately notified to the WTO, or any non-member can notify a purported text. Such notification is also a pre-requisite, whether they are to be considered FTAs, Regional Agreements, or whatever else.
In addition, how can market operators, the enablers of trade, exploit the new market access opportunities if the agreements were to remain under wraps for as long a period as five years? It sounds absurd on commercial grounds. Moreover, when several governments are involved, nothing can remain secret for some time or all time, and more so in this era of digital technology and information.
The era of Bismarks and Metternichs, and secret treaties, secretly concluded and implemented, are long past. More on that vis a vis TiSA below.
Unlike the TPP or TTIP of which there is some information at a general level, not too much is known about TiSA among the general public or even the media, and it has not attracted the same degree of public attention or controversy; there is discussion and speculation, though, among trade negotiators and officials, and some specialized web-logs.
Nevertheless, TiSA is undoubtedly the most important, and likely to have more negative impacts on the economies of both participating and non-participating countries including India, Brazil, South Africa and China, as well as many others, however big or small their individual or collective trade or economic weight in the world.
While not very much is known or talked about outside, trade negotiators and establishments, and some civil society activists, have been aware for some time, both of the US drive to get an accord on TiSA, and second-hand reports of progress in these talks.
However, excepting to some extent of negotiators and parts of governments in participating countries, the public have not had full access to the details. Mainstream media, having become the hand-maiden of establishments (rather than Burke's Fourth Estate, keeping a watchful eye on the other three), occasionally sing 'hallelujahs', but have not provided any critical analysis and information for the public.
The vast trove of texts now made public by Wikileaks will thus enable various parts of governments in countries, and public interest activists within countries, to cite them, focus on them, their likely benefits, if any, and the vastly greater negative effects on their countries. However, the very quantum of information now in the public domain may have the unintended effect of information overburden, and the consequent effect of turning people's attention off the subject, and one has to guard against it and counter it.
The negotiating texts now made public by Wikileaks (https://wikileaks.org/tisa/) are those of the 'Core' text of TiSA and its various annexes relating to individual sectors of "trade in services", as well as provisions relating to domestic regulations; and linked to each, on Wikileaks, are analysis by activists - both academics and civil society groups campaigning on these issues - attempting to present to the general public the implications of each.
Without going into the relative merits of each of the individual analysis or the technicalities, there are some fundamental issues, common to the Core text and the annexes, that need to be underscored and brought into the open for public debate. We will attempt to do this and flag some of these issues in what follows.
Missing in the various analyses and discussions, are some basic systemic questions relating to TiSA vis a vis the global multilateral trading system (MTS) of rules, rights and obligations of Members, incorporated in the Marrakesh Treaty for the World Trade Organization (WTO) and its agreements and annexes: the Agreements on trade in goods (the GATT 1994 and its associated agreements elaborating on several provisions), the General Agreement on Trade in Services (GATS) and its annexes, the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement and the Dispute Settlement Understanding (DSU).
All these are integral parts of the WTO Treaty concluded as a Single Undertaking in April 1994 at Marrakesh, and interpreted (perhaps somewhat erroneously) under the DSU as also a Single Undertaking with cumulative obligations in their application -- not only obligating Members to abide by all of them (subject to well-known canons of interpretation of public international law, codified in the Vienna Convention on the Law of Treaties), but in fact enabling the DSU's Appellate Body (AB) to empower itself to so interpret them as to enable/oblige members to carry out obligations under all of them. (Raghavan, 2000, DSU monograph).
It is worth recalling some recent history of the WTO Multilateral Trading System (MTS) outlined below for context and better understanding of the implications of TiSA, and the two regional agreements, TPP and TTIP, being pushed by the US administration of President Obama.
While the Marrakesh Agreement itself was concluded in 1994, at the instance of the United States that had pushed for higher levels of liberalization in financial services, negotiations on the Financial Services Annex were enabled to be continued (along with that on Movement of Natural Persons or Mode 4 of supply for trade in services), with each member enabled to substitute the commitments it would accept in the accord in extended negotiations for its original annex of commitments, already scheduled.
After two exercises in negotiations, the Financial Services Agreement, with a set of individual country commitments, was concluded in 1997 (FSA-1997), and incorporated into the WTO and came into force from 1999.
In general, most of the developing countries, as also the EU and US, incorporated in their new schedules of legal commitments, their current, and sometimes lower levels of applied market access and conditions. For the record, the parallel negotiations on Movement of Natural Persons ended without any new or additional commitments than at Marrakesh in the WTO and its annexed agreements.
The US financial services industry, led by American Express, AIG insurance and CitiBank (all incidentally, no longer dominant in the US itself, and some having had to be rescued from the outcome of their follies at the expense of US taxpayers in the aftermath of the 2008 financial crisis), was one of the main drivers behind the US services drive, the launching of the Uruguay Round of Trade Negotiations in 1986 at Punta del Este and its conclusion at Marrakesh in 1994; the US PhARMA and the motion picture industry were the main drivers behind the TRIPS accord in the Treaty. However, the US and its financial sector, dissatisfied with the outcome in the area of services at that time, got the negotiations on financial services extended, and an accord was reached in FSA-1997, as indicated above (Raghavan 2010a and 2010b).
The latest Wikileaks publication (updating also some versions of earlier leaked parts, as that on Financial Services, data protection etc) includes the "Core" TiSA text, as well as a number of annexes for particular services (Financial, Transport, Maritime, E-commerce etc) and a text on Domestic Regulations, along with analysis and commentaries on each of them by civil society activists and some academics. The analyses attempt to bring to public attention and alert the public to what is being negotiated, with major consequences to the people and the services they use or enjoy, all in utter secrecy and behind the backs of their own parliamentarians.
However, global corporations, whose interests these draft accords aim to promote, are fully in the picture and involved. With the recently-provided Congressional authority under the so-called Trade Promotion Authority law, the administration of US President Barack Obama is now able to negotiate and reach agreements, disclosing details to the Congress and Congress having 60 days to vote 'yes' or 'no' but not change any part, before he actually signs the agreement.
the record, there is a similar secretive process at work in relation
to two other US initiatives, the TPP, for liberalization of trade
and investment, involving several of the Asian and Pacific nations
(but excluding China), and the TTIP, being negotiated between the
US, Canada and the European Union.
If successful, the outcome of all these US-driven pacts will be to deliver a fatal blow to the WTO global multilateral trading system and global rules-based trade order, along with other global systems of world order that the United States, under the leadership of US President Franklin Delano Roosevelt (FDR), had envisioned and was so carefully constructed during his Presidency and that of his successor, President Harry Truman (Raghavan 2014a).
Since then, some of FDR's successors are busy, dismantling in this century, this entire framework and to put in place instead a Global Corporatist Order and establish the rule of Global Corporations over the world (Raghavan 2014b).
The incongruity and utter disregard of fundamental principles of natural justice and equity in all these has been revealed when the European Court of Justice recently upheld the right of the European Commission (as the EU's executive and negotiating arm on external trade relations) in refusing to share or provide information under relevant right to information laws to European civil society groups monitoring corporate activities and the European Commission, but upholding the Commission's right to share it with Corporate lobbyists and representatives in consultations at Brussels.
This article will confine itself to exploring the implication of TiSA, its effect on the rules-based WTO MTS, and what perhaps not only the public, but those governments not involved in these can do to challenge and counter these attempts of the US and its allies.
At the outset, it is worth recalling the post-war evolution of the WTO and its MTS, in pursuance of the wartime FDR-Churchill talks and accords (Raghavan 2014a), on the entire range of issues in the post-war order of international peace and security (the UN), and those on money and finance (the Bretton Woods institutions, negotiated, agreed and created in 1944 even ahead of the UN charter), the convening by the UN of the Havana conference for an International Trade Organization (ITO), and its Preparatory Committee processes, the GATT 1947, envisaged as a temporary arrangement till ITO, but remaining provisional for nearly five decades.
The Uruguay Round of GATT trade talks, including new issues, ended in 1994 at Marrakesh, with the WTO treaty and its annexed agreements - the GATT 1994 and other agreements on trade in goods, the General Agreement on Trade in Services (GATS), the Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS), the DSU, and four "plurilateral agreements" - entering into force in 1995 (Raghavan 1990; TWN 2001)
At Marrakesh, developing countries undertook in advance commitments and obligations, including in the new areas of TRIPS and GATS, accepting in good faith the promises of the US, EU and other industrialized countries to reverse course and bring all their agricultural trade and the agriculture sector under normal GATT trade rules and disciplines, but with the reforms in agriculture to be phased in over a longer period, giving time for those engaged in this sector to adjust; the industrialized countries also agreed to end several discriminatory trade restrictions imposed on the developing world as "voluntary export restraints", and managed trade, in textiles and clothing and labour-intensive manufactures within specified time limits (Raghavan, 2014b, pp 102-179).
This last was achieved, with all such restrictions phased out. However, after the initial set of agri-reforms - on border tariffs, domestic support and export sectors in the Agreement on Agriculture (AoA) - the US, EU etc have been resisting further reforms and liberalization and reducing their levels of protection on border tariffs, domestic supports or export subsidies; in fact, according to published OECD data, they have been increasing their supports and protection of domestic agriculture, merely shifting and disguising the support in the "Green Box", while demanding market entry into the developing world. They have thus demonstrated that their promises are made to be broken.
GATS, the General Agreement on Trade in Services, annexed to the WTO, was negotiated from scratch during the Uruguay Round, and it proved difficult. Initially, the US had sought to apply the same GATT rules for trade in goods to trade in services (merely changing 'goods' into 'services' in the various provisions), but quickly realized this was not feasible.
Thus, GATS was constructed ab initio on a new architecture of sorts, needing difficult negotiations and agreements, starting with the definition of "trade in services", with supply in four modes of delivery (but with 'services' itself nowhere defined precisely, but only understood as 'not goods'); for gradual liberalization in a bottoms-up voluntary process of market access commitments, based on request-offer approach by countries, and subject to specified conditions in each service sector or sub-sector, with core Most Favoured Nation (MFN) principles, subject to stipulated conditions, underpinning GATS.
During the Uruguay Round negotiations, the US kept constantly changing its position on GATS; and in 1993, with Bill Clinton in the White House and Robert Rubin as his Treasury Secretary (Larry Summers as Deputy Secretary and Timothy Geithner as Asst. Secretary), the US again tried to reverse course so fundamentally that others disagreed and said either the agreement had to be finalized on texts developed hitherto, or the 'services' component has to be taken out and negotiated later separately, while all the other accords negotiated in the Uruguay Round are concluded without the services component.
At first, the US sent to Geneva for the Uruguay Round-GATS talks, its tax law specialist at Treasury, who lectured others on the intricacies of tax laws (national and international), but was politely asked to look at an already agreed footnote in the draft text (Fn 6 to what is now Art. XIV(d) of the GATS). The US persisted, sending Deputy Secretary Larry Summers to the next meeting, but Mr. Summers was told either to agree to finalize the Services accord on the existing draft or, if the US wanted to reopen issues, abandon the 'services' component on the Uruguay Round agenda, and conclude talks on the rest of the accords. Otherwise, Summers was told, the whole round may be in jeopardy. An isolated US gave way, and the Marrakesh Treaty was concluded and signed in April 1994, the blow being softened by agreeing to extend negotiations on financial services (as mentioned earlier).
Moves for further GATS liberalization have, however, got stuck, since the launch of the second round of GATS liberalization talks in 2000, which was rolled into and made part of the Doha Round trade negotiations, launched in 2001 as a Single Undertaking, with agriculture negotiations and its outcomes becoming the yardstick for progress in other areas of the negotiations.
As mentioned above, at Marrakesh, developing countries undertook in advance commitments in the area of the trade in goods sector, and in the new areas of Services and Intellectual Property, accepting in good faith promises of the industrialized countries to continue on the path of further reforms in the agriculture sector, and the commitments of the US and the developed countries, to accept and comply with the rules and disciplines of the system, including changes to their domestic laws and regulations to comply with the obligations under the WTO and its annexes, as well as binding rulings of the dispute panels and Appellate Body in disputes (Raghavan 2014b).
On this last, the US has been the biggest culprit, not changing its domestic laws or regulations to comply with DSU rulings, as in anti-dumping, and having continuing recourse to coercive negotiating tactics to get trading partners to comply with its demands on behalf of corporations on IP issues - despite the undertaking it gave to a dispute settlement panel which went into the US Sec. 301 family of laws in the US Tariff Act. That panel recorded the undertaking, said WTO members can accept this, but did not give a ruling that the US law as it stood was WTO non-compliant and needs to be changed; and with panel rulings automatically adopted by negative consensus, the Dispute Settlement Body adopted it (Raghavan 2000, DSU monograph pp4-5 and pp13-14, and Preface p3).
In this connection, Mr. B. K. Zutshi, India's Ambassador to the GATT, who negotiated the Uruguay Round accords after the failure of the 1990 GATT meeting in Brussels, has in a message to the writer commented that during the Uruguay Round negotiations of the TRIPS agreement, developing countries asked for the revocation of the S. 301 family of provisions in the US law. But it was argued by the US, and endorsed by legal experts, including from the then GATT secretariat, that these provisions, not being mandatory but discretionary in nature, would not be inconsistent with the US obligations under the TRIPS agreement and that the cause of action would arise only if the provisions were to be invoked.
Since then, he says, these provisions have been invoked several times by the US, without anyone explicitly questioning their legality under the WTO. And hence, Zutshi adds, he has been advocating for some time now that developing countries, particularly India, should challenge the US invocation, at the time notices are issued for review of members' procedures and practices in intellectual property rights (IPRs) under the so-called 'Special 301' Watch Lists and the like.
The US, however, continues to flourish this threat to coerce developing countries to make further concessions.
It is time for developing countries, and the major ones among them, to concert and consider in a cohesive way this entire complex of US non-compliance, and raise them collectively, not at separate sectoral meetings, but at the General Council and Ministerial Conference, and take some collective strategic and tactical courses to exert pressure on the US on these and other issues.
US finance capitalism, and plurilateral games at the WTO
As pointed out at the outset, the updated draft negotiating texts of trade pacts promoted by the US, and negotiated in secrecy, but recently released by Wikileaks (TiSA, TPP and TTIP), clearly bring out the attempts of the US to dismantle the entire postwar multilateral systems on trade, money and finance, and secure instead global hegemony of US Finance Capitalism.
The TiSA, as a plurilateral trade agreement, is part of this US effort for a new architecture of world order, and integral to its attempt to go back on all past commitments to cater to the neo-mercantilist greed of US Finance Capital, leaching the world's real economy.
The idea of plurilateral negotiations in services first surfaced at the WTO at the time of the Hong Kong Ministerial Conference in 2005, in relation to the ongoing Doha Development Round of trade negotiations, launched in November 2001, of which further liberalization of trade in services under GATS is part of a Single Undertaking.
At the Hong Kong Ministerial, in Annex C of that Ministerial Declaration, relating to the services negotiations, the Ministers said in para 7 of that Annex, that in addition to bilateral negotiations, "we agree that the request-offer negotiations should also be pursued on a plurilateral basis in accordance with the principles of the GATS and the Guidelines and Procedures for the Negotiations on Trade in Services.The results of such negotiations shall be extended on an MFN basis." (emphasis added).
The Ministers also set out a procedure for organizing such negotiations, to ensure full transparency to WTO members, in these terms: (a) Any Member or group of Members may present requests or collective requests to other Members in any specific sector or mode of supply, identifying their objectives for the negotiations in that sector or mode of supply; (b) Members to whom such requests have been made shall consider such requests in accordance with paragraphs 2 and 4 of Article XIX of the GATS and paragraph 11 of the Guidelines and Procedures for the Negotiations on Trade in Services; and (c) Plurilateral negotiations should be organised with a view to facilitating the participation of all Members, taking into account the limited capacity of developing countries and smaller delegations to participate in such negotiations.
The Hong Kong Declaration and its Services Annex set some deadlines: end February 2006, or as soon as thereafter, for submitting plurilateral requests, for countries to which requests are made to consider them, a July 2006 deadline to submit revised offers, and 31 October 2006 for finalizing and filing services annexes by Members.
This plurilateral approach was a highly controversial issue at Hong Kong, and was resisted by many developing countries, who reluctantly yielded ground at the end, but with at least two developing countries (Cuba and Venezuela) entering reservations at the Ministerial Conference.
At the WTO Services Council meet in February 2006, when this issue came up, Brazil and several others made clear their understanding that participation in this approach would be voluntary.
Collective requests in some 14 sectors were made among others by Australia, Canada, the EU and the US, as also some developing countries (Singapore, Hong Kong, Chinese Taipei and South Korea) in particular sectors.
Each of the collective requests, making demands for response on about 20-25 members, listed the names of demandeurs and the coordinator for that demand (mostly from the OECD countries); however, Members to whom it was addressed were not made known, but known to be the larger or "more prosperous" developing countries.
From information that became available informally, it would appear that the requests pitched the demands, 'collective requests', and the sectors covered as related to finance, telecommunications, construction, energy, environment services, computer and related services, maritime transport and architectural and engineering services. For some of the sectors like computer and related services, a few developing countries (including India, Pakistan, Chile, Peru) joined.
The demands related to various modes of supply: Mode 1 on cross-border supply of services; Mode 2 on consumption abroad of services; Mode 3 on commercial presence; and Mode 4 on movement of natural persons. (Khor 2006)
All the plurilateral collective requests typically made extreme demands in the first three modes of supply, with maximum freedom to be provided to foreign firms and operators to engage in trade and investment, and to have national treatment. And in Mode 3, commercial presence, there were demands for no restrictions on foreign enterprises and investors in their right to establish, share of ownership, form of legal entity and hiring of foreign personnel, with firms to be given "national treatment" or treated at least as well as local firms.
The entire services negotiations and with it, the plurilateral approach, as other parts of the Doha negotiations, however, have got stuck on Agriculture, due to the unwillingness of the US and EU to cut their support programmes in agriculture in all three pillars of domestic support, border protection and export competition, and to carry out their commitments made at Marrakesh on further agricultural sector and trade reforms.
It is in this context that the US has now attempted, with the help of its willing associates in the industrialized countries, an approach for plurilateral negotiations on services and a conditional plurilateral accord outside the Doha talks and the WTO - the current ongoing negotiations for a Trade in Services Agreement (TiSA).
It needs to be made clear that this proposed TiSA is completely different from the plurilateral services negotiations envisaged at the Hong Kong Ministerial Conference and explained above (see Raghavan 2014b, pp367-372, on this issue as of 2012).
As envisaged, the aim in TiSA (initially, it was tentatively called ISA or International Services Agreement) was to reach a plurilateral conditional agreement for maximum liberalization of services. Conducted outside the WTO, with plurilateral meetings organised among participants in key developed country WTO missions in Geneva, the negotiations have gone into several rounds of meetings, with another one beginning with a stock-taking exercise and discussions on the core text, financial services and some other annexes held in Geneva last week.
However, according to information from some of the participants, it is highly unlikely for the TiSA negotiations to be concluded by the time of the forthcoming Nairobi Ministerial Conference (MC) this December, since the same set of negotiators from missions will be engaged after the summer break in negotiations to try and reach an accord on the post-Bali package, aiming to conclude these talks by the time of the Nairobi MC.
The Wikileaks documents, comprising the negotiating texts of the core TiSA accord and its various annexes, and analysis on each of them, has come out at this juncture. The analysis on each of these, posted along with the latest negotiating texts (as of April), while focusing on many details and issues relating to each of them, raise more basic questions relating to TiSA vis-a-vis the WTO and its GATS. These basic questions are fundamental to the future of the WTO-based multilateral trading system (MTS), with global membership and enforceable rights and obligations.
As mentioned earlier, at Marrakesh, the developing countries undertook in advance new obligations and commitments under the GATT and other agreements on trade in goods, as well as in new areas of TRIPS and GATS, accepting in good faith the promises and commitments of the developed countries to gradually, but fully integrate trade in agriculture under normal GATT rules, phasing in the reforms over a period of time.
The US, EU, Canada, Japan and others committed themselves, after an initial set of agriculture sector reforms and assessment, to the continuance of the reform process till the sector is fully integrated into the rules and disciplines of the MTS. This agenda was incorporated in the negotiations on the Doha Work Programme, more popularly known as the Doha Development Round. It is these negotiations as a Single Undertaking that remain stalled on Agriculture.
It is against this background that the US, EU and others are now attempting to negotiate a conditional separate agreement on services trade, including the trade in financial services. Initially named a plurilateral services accord for ISA, it is now called a 'Trade in Services Agreement', raising some fundamental issues vis-a-vis the WTO and GATS.
The TiSA documents and texts, now made public by Wikileaks, show that in terms of the "Core Text", providing the framework of the TiSA, and its FSA (Financial Services Annex) (both bristling with many square bracketed texts and proposals) are on the same lines as an earlier version.
The "Core Text" for the TiSA framework agreement, still incomplete with a plethora of square brackets, is almost a word-for-word reproduction of the multilateral GATS provisions, be they those relating to the definition of trade in services, other definitions (with changes in some of the definitions), market access, national treatment, scheduling of commitments etc. A significant omission is the notion of "progressive liberalization" as reflected in Article XIX of the GATS.
This suggests that the participants are taking this course with a view to facilitating the entry of new members to the agreement or of fully multilateralizing it. It may also be that through selective leaked information, an attempt is being made to entice or panic some of the major developing countries to join in. This is confirmed by place holders in the draft for such provisions for others to come on board at some stage.
As for the financial services annex, it is an attempt to seek greater liberalization of this sector, although the core provisions of the annex are more or less on the lines of the Financial Services annex in the GATS.
As outlined in some detail elsewhere by this writer, in a technical working paper for the Group of 24 (Raghavan 2010b), whether intended or not, this US-driven approach will enable the US Fed and central banks in Europe, and the private US, Swiss and EU Financial Services providers, to dump on the markets of the developing world their "toxic" assets from the 2008 financial crisis and the rescue of financial firms, with treasuries and central banks adopting unorthodox measures to shift the costs onto taxpayers.
From the large number of square brackets in all the negotiating texts, now leaked, it seems that there is still a lot of disagreement among the participants on some key provisions.
It can thus be deduced, and this is a view also shared by some of those who negotiated the GATS, that these negotiations are an attempt at pressurizing the developing countries for greater liberalization in sectors of interest to the US and other industrialized countries, without the latter having to pay any price for it. There is nothing in the draft framework agreement either to indicate any possibility of greater liberalization under mode 4.
The WTO is now a rules-based international organization set up under an international treaty, with rights and obligations for all members, a binding dispute settlement process, and specific provisions for any amendments to the treaty and agreements annexed to it, and for their entry into force after acceptance by members.
Under the provisions of Article II:1 and Article III:2 of the Marrakesh treaty, any negotiations for any trade accord on any of the agreements in Annex 1 (1A on goods trade, 1B on services trade and 1C on TRIPS) are to be conducted with the WTO as "the forum for negotiations" (emphasis added).
Also, Article II:1 of the GATS on Most Favoured Nation (MFN) treatment, relevant to the TiSA issue, stipulates: "With respect to any measure covered by this Agreement, each member shall accord immediately and unconditionally to services and services suppliers of any other Member, treatment no less favourable than it accords to services and services suppliers of any other country."
The wording is unambiguous and, as stipulated by public international law (and codified in the Vienna Convention on the Law of Treaties), the words are to be read and given their 'ordinary meaning'. Besides, there is more than 50 years of jurisprudence on the interpretation of this (MFN) provision in the GATT agreement. The GATS provision on MFN is a mirror image of the GATT provision in this regard.
Paragraphs 2 and 3 of Article II of the GATS have set out some exceptions and limitations: they provide for derogation from MFN if it is listed in a particular way in a member's GATS schedule, as also for the ability of two adjacent countries to confer advantages to services locally produced and consumed in contiguous frontier zones. These exceptions/limitations are not relevant to the consideration of the TiSA issue.
Thus, under the WTO rules, the parties to the planned TiSA cannot make liberalization of their services markets applicable only to other TiSA members. Nor can they extend it to other WTO members on any conditional basis.
The liberalization (reduction of barriers) in any sector by any of its Members has to be unconditionally extended to all other WTO members, whether TiSA or non-TiSA. Since the TiSA framework and annexes are intended to cover "service transactions" across sectors and modes of supply and involve non-MFN treatment to those not members, for such an amendment to be adopted and come into effect, it needs the acceptance of all WTO members.
There have been suggestions floated that TiSA can be added to Annex IV of the WTO treaty, the Annex titled 'Plurilateral Trade Agreements'.
All the four agreements listed in that Annex were negotiated as 'codes' during the Tokyo Round (TR). While several Tokyo Round codes were further negotiated during the Uruguay Round and became binding WTO agreements, signed on to by all participants, there was no appetite among the general membership in translating the TR codes in these four areas into agreements to form part of the WTO agreement. The Annex IV approach was adopted as a compromise. The four listed in this Annex at Marrakesh are: Agreement on Trade in Civil Aircraft, Agreement on Government Procurement, the International Dairy Trade Agreement, and the International Bovine Meat Agreement. The last two were terminated by its members in 1998.
However, it is a mind-boggling legal conundrum, and a massive legal stretch, for an issue like services, already covered by an existing WTO Agreement, namely the GATS, to be considered a separate subject, an issue of interest to a minority of WTO members, and thus included in Annex IV as a plurilateral agreement. Any attempt to use such an approach to TiSA will strain credulity.
Moreover, for the TiSA to co-exist with the GATS and for its lodgement for this purpose in Annex 4 of the Marrakesh treaty, it needs to conform to Article IX:9 of the treaty, which says:
"The Ministerial Conference, upon the request of the Members parties to a trade agreement, may decideexclusively by consensus (emphasis added) to add that agreement to Annex 4."
Procedurally, if normal procedures are followed, for this to be on the agenda of a Ministerial Conference, the General Council has to consider and recommend it, a process requiring consensus. If WTO members, particularly developing countries not involved, agree to go on this route, it is equivalent to committinghara kiri.
At one stage, there has also been a suggestion, from media reflecting US thinking, that it could be fitted into the WTO framework as a GATS Article V integration agreement among its members. However, for any agreement to be viewed as an Article V one (an FTA in services trades of its members, or an integration agreement in services among its members), the agreement must satisfy the terms of Article V of the GATS.
Among others, Article V:1(a) requires that the TiSA, as an FTA, have "substantial sectoral coverage"; a footnote (Fn.1, p331 of Legal Texts) explains that "This condition is understood in terms of number of sectors, volume of trade affected, and modes of supply. In order to meet this requirement, agreements should not provide for the a priori exclusion of any mode of supply."
Article V of the GATS provides for negotiations when the services integration accord involves modification of scheduled commitments of its members. Irrespective of any Working Party consideration and recommendation (as per WTO procedures) or decisions by the WTO Council for Trade in Services, any non-TiSA WTO member can raise a dispute on grounds of impairment of its rights and obligations, and get a ruling via the Dispute Settlement Understanding.
Such a grievance could arise for a WTO member if the TiSA does not comply with Article V:1(a) or the member finds its existing access to the services markets of the TiSA members reduced as a result of infringement of the provisions of Article V:4. The latter provides that any Article V:1 agreement, in respect of a non-member, "shall not ... raise the overall level of barriers to trade in services within the respective sectors or subsectors compared to the level applicable prior to such an agreement."
Thus, all the current noise about the planned TiSA can be understood only as a big bluff and an attempt to panic the major emerging economies (and/or their particular service sectors or subsectors) that have stood out but fear loss of markets or loss of competitiveness vis-a-vis other trading partners and their suppliers, into joining the TiSA negotiating process.
It can thus be deduced, and this is a view also shared by some of those who negotiated the GATS, that these negotiations are an attempt at pressurizing the developing countries for greater liberalization in services sectors of interest to the US and other industrialized countries, without the latter having to pay any price for it. There is nothing in the draft framework agreement either to indicate any possibility of greater liberalization under mode 4.
A WTO secretariat 'staff working paper', written in 27 November 2013 by Juan A. Marchetti and Martin Roy, two staff members of the WTO's services division, and published in 2014 by the WTO Secretariat's Economics and Statistics Division as a 'Staff Working Paper ERSD-2013-11', addresses what it calls "The TISA Initiative: An Overview of Market Access Issues," with this disclaimer, "This is a working paper, and hence it represents research in progress... represents the personal opinions of individual staff members and is not meant to represent the position or opinions of the WTO or its Members, nor the official position of any staff members."
The 33-page paper explores options for implementation of TISA including as a 'Plurilateral Agreement' in Annex IV, and notes that this can only be done by consensus by the Ministerial Conference. It completely avoids, however, the core issue, of how the WTO can have two trade agreements on the same subject: an agreement on 'trade in services', the GATS with an MFN principle, and a separate conditional one, also on 'trade in services' in Annex IV. This, as already pointed out earlier in this article, is infeasible.
We now turn to ways in which this issue can be brought into the open, and raised as a systemic issue at the WTO.
The large majority of developing countries have raised their voices and made clear they will not agree to abandoning the Doha Development Round (DDR) as a Single Undertaking, allow the US and the industrialized world to resile from their obligations, in particular on agriculture, and agree to what is known as a "re-calibrated" DDR agenda (which has become a code word for abandoning existing mandates) and conclude the negotiations at Nairobi, to enable the US and its friends, as well as the secretariat, to move on to new agendas.
With the DDR, and as a part of it, the Services negotiations at the Council for Trade in Services, on the agenda, but totally stalemated, the non-participants, armed with the leaked documents of texts of the TiSA, can and ought to raise the issue collectively at the next scheduled Services Council meeting, and demand responses from TiSA proponents and participants, on their activities, as well as their disregard of the WTO requirement for the WTO to be the forum for all or any such talks on GATS issues, bilaterally or plurilaterally.
The legal division should be asked to give an opinion on the legality of the simultaneous existence of a plurilateral and multilateral agreement on services within the WTO legal framework. Caveats must be entered on this, against any attempt by the secretariat to use this request for legal opinion to promote its own agenda for completion of the DDR on terms acceptable to the US and dominant trading partners. As a side-issue, the Director-General and the secretariat may be asked to disclose or clarify any kind of informal help or support that is being provided by the staff to the TiSA talks outside the WTO forum, and if so under what authority.
If no Services Council meeting is due to be held soon, non-participants in this TiSA exercise should demand a special session of the Services Council to specifically address this issue. The non-participants should collectively prepare and table an official document or paper, bringing into WTO records the Wikileaks texts. Such a paper should also raise in a prominent way the systemic implications, and the irrevocable damage that will ensue for the WTO.
Raising the issue, and holding media briefings of their own, at the WTO and elsewhere on this, will help create public awareness too.
Khor, Martin (2006), ‘Plurilateral services requests made at WTO in 14 or more sectors’, SUNS #5977, 2 March
Legal Texts (1994), The Results of the Uruguay Round of Multilateral Trade Negotiations, GATT Secretariat, Geneva
Lester, Simon (2015) http://worldtradelaw.typepad.com/ielpblog/2015/07/thoughts-on-the-tpp.html
Raghavan, Chakravarthi (1990), ‘Recolonization: GATT, Uruguay Round and the Third World,’ Third World Network, Penang and Zed Books, London
Raghavan, Chakravarthi (2000), ‘The World Trade Organization and its Dispute Settlement System: Tilting the Balance against the South,’ with Preface by Bhagirath Lal Das, TWN Trade & Development Series No 9, TWN Penang
Raghavan, Chakravarthi (2002), ‘Developing Countries and Services Trade: chasing a black cat, in a dark room, blind-folded,’ TWN, Penang.
Raghavan, Chakravarthi (2010a), ‘Financial Services, WTO and Initiatives for Global Financial Reform,’ in Jomo Kwame Sundaram ed. ‘Reforming the International Financial System for Development,’ pp 218-242, Colombia University Press, New York
Chakravarthi (2010b), ‘Financial Services, the WTO and Initiatives
for Global Financial Reform,’ Research Papers of the Group of 24,
Raghavan, Chakravarthi (2014a), ‘Third World in the Third Millennium CE,’ Vol 1 TWN Penang, pp 3-50
Raghavan, Chakravarthi (2014b), ‘Third World in the Third Millennium CE,Vol 2, TWN Penang, pp 402-423
TWN (2001), ‘The Multilateral Trading System: A Development Perspective’, report prepared for the UN Development Programme by the Third World Network, Penang.
WikiLeaks - Trade in Services Agreement, <https://wikileaks.org/tisa/>, July publication of Core Text and Annexes of the TiSA texts under negotiation.
[An earlier version of this comment was in the Indian webnewsdaily 'The Wire' on 17 July,http://thewire.in/2015/07/17/how-the-us-is-using-a-secret-agreement-on-services-to-wriggle-out-of-its-wto-obligations-6459]
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