GATS DR disciplines hinge on progress in agriculture

The Indian TFS proposal got an earlier airing at another WTO meeting which also saw many developing countries voice concerns over proposed disciplines to streamline domestic regulations on services trade.

by D. Ravi Kanth

GENEVA: Members of the African Group along with the least-developed countries on 14 March delivered the strongest message yet that any potential deliverables in domestic regulation disciplines at the WTO’s eleventh Ministerial Conference in Buenos Aires will hinge on commensurate results in other areas of the Doha Development Round (DDR), particularly agriculture, services negotiators told the South-North Development Monitor (SUNS).

On India’s proposal for substantive commitments as part of a new agreement on trade facilitation in services (TFS), the African Group said it is extremely “broad” without any mandate at this juncture. The Indian proposal would impose burdensome multilateral obligations for members, the African Group suggested.

During the 14 March meeting of the WTO Working Party on Domestic Regulation (WPDR), many developing and least-developed countries severely criticized proposals on “transparency” and “development of measures” by Australia, Canada, Colombia, the European Union, Israel, Japan and Mexico; and “administration of measures” by Australia, Chile, Colombia, the EU, Japan, Mexico, Norway, Peru, Korea and Chinese Taipei.

Bolivia said the proposals by major developed and several developing countries on transparency, development of measures and administration of measures in domestic regulation (DR) do not seek any improvements in Mode 4 concerning short-term movement of services providers. They would also curb the right to regulate services in politically sensitive areas, Bolivia said, suggesting that the proposal would also deny “regulatory policy space” for developing countries.

Speaking for the African Group, South Africa said African countries are not demandeurs for DR disciplines. But they want the right to regulate and to introduce new regulations concerning the supply of services for accomplishing their overall developmental policy objectives.

The African Group reminded the proponents that work on improving disciplines in DR as per Article VI.4 of the General Agreement on Trade in Services (GATS) is part of the overall development round as mandated in the Doha Development Agenda (DDA). Without internal balance in each area, particularly agriculture, and balance among all DDA issues, it would be naive to work on DR, the African Group cautioned.

Moreover, the general thrust of the proposals on transparency, development of measures and administration of measures, as set out in the separate proposals by the proponents, imposes burdensome regulatory disciplines that go far beyond the GATS Article VI.4 mandate.

Article VI.4 of GATS states: “With a view to ensuring that measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade in services, the Council for Trade in Services shall, through appropriate bodies it may establish, develop any necessary disciplines. Such disciplines shall aim to ensure that such requirements are, inter alia: (a) based on objective and transparent criteria, such as competence and the ability to supply the service; (b) not more burdensome than necessary to ensure the quality of the service; (c) in the case of licensing procedures, not in themselves a restriction on the supply of the service.”

The African Group asked the proponents why they are seeking “a piecemeal approach and fragmentation of the proposals” and why they are not tabling “a single working document”.

It reiterated the Group’s commitment to engaging in the discussions but on the condition that there is movement across all areas of the DDA, according to negotiators who were present at the meeting.

On behalf of the least-developed countries (LDCs), Uganda said that “over the years, the LDCs’ services trade deficit has widened from $16.43 billion in 2005 to $39 billion in 2015. Being net importers of commercial services, the LDCs will face further erosion in their export of services because of domestic regulation disciplines being demanded by the proponents.”

Uganda said that domestic regulation disciplines imply effective market access and the LDCs will be granting “unfettered” market access because of DR. Therefore, any deliverable on domestic regulation must state explicitly that “LDCs shall not be required to apply these disciplines ... LDCs are nonetheless encouraged to apply these disciplines, to the extent compatible with their special economic situation and their development, trade and financial need.”

The LDCs also expressed sharp concern on the application of a necessity test in the proposal on development of measures circulated by Hong Kong-China and New Zealand. It raised several questions on what is meant by the “objective” and “transparent measures”.

Cuba said the original draft text on DR circulated by Peter Govindasamy in 2009 must remain the basis while insisting that DR cannot be dealt with in isolation without resolving the unfinished DDA issues, particularly the special safeguard mechanism and the permanent solution for public stockholding programmes for food security.

Ecuador said the proposals by the proponents on DR seem to be “very intrusive” and might compromise policy space for development objectives.

Venezuela concurred with Ecuador that the DR proposals impose burdensome requirements on developing countries.

But Thailand, New Zealand and several other countries welcomed the proposals on transparency, development of measures and administration of measures for improving DR disciplines.

TFS proposal

Meanwhile, India made a PowerPoint presentation of its draft legal text on trade facilitation in services (TFS) at the WPDR meeting, seeking a constructive dialogue.

The underlying rationale for TFS, India said, is to remove the hurdles in global trade in services along the lines of the Trade Facilitation Agreement for goods, so as to ensure that market access remains “effective” and “commercially” meaningful.

The TFS agreement, India emphasized, is not about “new market access”. India explained the provisions in the 13-page draft legal text, suggesting that it is ready to continue negotiations both bilaterally and in various groups.

Ecuador said while it is not a demandeur in services, it is willing to discuss issues concerning the movement of short-term services providers as set out in the Indian proposal.

Brazil praised the Indian proposal as “balanced” and “reasonable”, suggesting that it is ready to engage in serious discussions.

Peru said it is ready to engage in further discussions on administration of economic needs tests but cautioned that short-term results are difficult.

Venezuela and Bolivia said the TFS agreement would impose an additional burden on developing countries and goes beyond Article VI.4 of GATS.

Turkey praised India for presenting a bold proposal on TFS which covers several issues in Mode 4 and cross-border insurance. Turkey said it is ready to support the Indian proposal.

Canada said it is still studying the Indian proposal, while the EU welcomed TFS, suggesting the “overarching notion is valuable and promising.”

The EU suggested that substance in the Indian proposal should prevail over form, arguing that it has large domestic regulation provisions.

On behalf of the African Group, South Africa said while it shares the constraints the Indian services suppliers are continuing to face, the African countries would benefit from removing hurdles in the movement of short-term services providers.

South Africa expressed surprise over the timing of the Indian proposal on TFS against the backdrop of a worsening political climate.

The African Group, according to South Africa, is concerned about several new and potentially onerous multilateral commitments proposed by India without any existing mandate at this juncture.

The TFS proposal is “extremely broad” and appears to be inappropriate. Further, the enhanced transparency obligations in the Indian proposal go beyond GATS Article III, South Africa suggested.

Instead of a development-centred proposal, the TFS actually imposes burdensome requirements on many African countries, particularly the LDCs, South Africa said.

It maintained that provisions such as the creation of a “single window”, resolution of appeals on a fast track and several other elements are costly and difficult for African countries to implement at this juncture.

South Africa reminded India that the proposed TFS agreement cannot be fitted into the Trade Facilitation Agreement template that centres around customs procedures. It also questioned whether the agreement will offer any long-term gains for African countries which are net services importers, according to negotiators who asked not to be quoted.

Nevertheless, the African Group said, it will work with India for addressing issues concerning the movement of short-term services providers in Mode 4 in the TFS proposal.

In short, India’s proposal on TFS was welcomed more by developed and several advanced developing countries. Many African and other developing countries remained concerned about the Indian proposal on the grounds that it would impose burdensome commitments at a time when they are net importers of services. (SUNS8423)           

Third World Economics, Issue No. 635, 16-28 February 2017, pp6-7