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TWN Info Service on WTO and Trade Issues (Jun05/11)

28 June 2005
 

Controversial "benchmarking" idea to dominate GATS talks?
 
The services negotiations have resumed in the WTO, with the week starting 27 June seeing a series of meetings in Geneva.

The concept of "benchmarking" is expected to be a major issue during the week. "Benchmarking" is an instrument that some developed countries are attempting to use to put on the pressure on developing countries to make more commitments to liberalise their services sectors.

It is still not clear what exactly the proponents of "benchmarking" are proposing. However, many developing countries have been sceptical about the concept, believing that it is being used as an instrument to oblige them to open up more of their services sectors and in more ways than they would otherwise like.

Below is a report on how this issue is emerging at the WTO. 

It was published in the SUNS (South North Dewvelopmentt Monitor of 27 June 2005).

With best wishes
Martin Khor
TWN

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 Controversial "benchmarking" idea to dominate GATS talks?

By Martin Khor (TWN), 24 June 2005

The concept of "benchmarking" is expected to be a major issue in the week of services negotiations starting on 27 June, as some developed countries put on the pressure on developing countries to make more commitments to liberalise their services sectors.

It is still not clear what exactly the proponents of "benchmarking" are proposing. However, many developing countries have been sceptical about the concept, believing that it is being used as an instrument to oblige them to open up more of their services sectors and in more ways than they would otherwise like.

"Although we are still to get a concrete proposal on what the major countries exactly mean by benchmarking, we believe they want us to bind our present level of liberalization through commitments in GATS (the General Agreement on Trade in Services)," said one developing country diplomat.

"This will take away the flexibility that we now have, of making binding commitments only when we are ready to do so. It will erode the concept of progressive liberalization, and the special treatment for developing countries, that we can choose which sector and when and how much to commit to liberalise, without pressures."

The diplomat also said that "benchmarking" had never been agreed to as part of the Doha work programme mandate, nor had it been included in or even been part of discussions on modalities.

He added that there is no need for new "benchmarking" because the benchmarks for services negotiations already exists, in the Guidelines and Procedures for the Negotiations on Trade in Services (which had been adopted by the GATS Council on 28 March 2001).

The European Union is expected to be the major proponent advancing the "benchmarking" concept in the forthcoming week's negotiations.

It would appear that "benchmarking"would be the equivalent in services to the adoption of a "formula" approach applied in market access negotiations in agriculture and NAMA, in aiming to bind members to certain minimum commitments.

According to European NGO sources in Brussels, the European Commission has indicated to EU member states that in its concept, benchmarking would be a negotiating tool that is "complementary" to the main request/offer method.

Benchmarks as envisaged by the EC would have quantitative and qualitative elements. It would also have a cross-sectoral approach and would differentiate between developed countries, developing countries and LDCs.

In the cross-sectoral approach, a certain number of key sectors would be selected for priority targeting. WTO members would agree to make commitments in a number of key sectors with major economic interest.

For example, if ten key sectors are agreed on, then developed countries would make commitments in 8 or 10 sectors, developing countries in 5 or 6, and LDCs would be exempted but do whatever they can.

There would also be a "qualitative" element in the EC approach. This would include an obligation to bind at least the status quo in the selected sectors and go beyond it in some of them. The flexibility for developing countries is that they will be required to "go further" in fewer sectors than the developed countries.

According to the sources, the EC idea of benchmarking will also include specific measures to reduce horizontal limitations in members' existing GATS schedules. There would also be an obligation to reduce the current requirements related to each mode of supply in a certain percentage of sectors.

The benchmarking exercise will be aided by the use of model schedules and sectoral understandings. It will also involve binding commitments.

The EC is expected to float its benchmarking concept at the services special session, and may try to get a reference or agreement to have "benchmarking" as a modality accepted as part of the July General Council's text on "first approximations".

When benchmarking was brought up in previous services discussions as a possible negotiating method, it was received with some hostility by developing country delegations.

The benchmarking approach would, they believe, significantly alter the architecture of the GATS framework and remove a large part of the flexibility. At present, countries are able to choose whether they would like to make commitments in whichever sectors, in which mode, and to what degree.

The 28 March 2001 Guidelines and Procedures, which are taken as the main framework for the services negotiations, states (in the section on Objectives and Principles) that "the negotiations shall take place within and shall respect the existing structure and principles of the GATS, including the right to specify sectors in which commitments will be undertaken and the four modes of supply."

In the section on modalities and procedures, paragraph 12 states that "there shall be appropriate flexibility for individual developing country members for opening fewer sectors, liberalizing fewer types of transactions, progressively extending market access in line with their development situation, and when making access to their markets available to foreign service suppliers, attaching to such access conditions aimed at achieving the objectives referred to in Article IV."

The benchmarking approach which is expected to be floated by the EC contradicts the principle of respecting the existing GATS structure and principles. It would also not be in line with the modality of allowing "appropriate flexibility" for developing countries for making market access commitments in line with their development situation.

Up to now, the GATS architecture, including its positive-list approach, has been seen to have a positive aspect, in that members (especially developing countries) are given some flexibility to choose whether to make commitments and if so, the timing, type and level of commitment in each sector.

The benchmarking approach (involving the selection of "key sectors", the proposed requirement to bind in GATS existing liberalization (and then go further) and the proposed obligation to reduce horizontal limitations and current requirements in modes of supply) would change the architecture and largely erode the existing flexibilities, especially for developing countries.

 


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