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TWN Info Service on Trade and WTO Issues (Jun05/12)

28 June 2005

 
Services negotiations resume, with corridor talk on "benchmarking"

The Special Session of the Council for Trade in Services of the WTO started a week-long series of meetings on 27 June morning, with the Chair giving a brief account of the latest situation regarding members' offers, and an indication of how he will report on the state of the services negotiations to the Trade Negotiations Committee (TNC).

Meanwhile, in the corridors of the meeting, several diplomats were considering and discussing the issue of "benchmarking", or the new term for this concept, "common baseline", which is being put forward by some developed countries.

This issue had been discussed at an informal meeting of 11 members hosted by the European Commission last Friday and is expected to emerge during this week's services meeting.

At the start of the meeting on Monday, the Chair of the Special Session, Ambassador Alejandro Jara of Chile, said that the revised offers that had so far been received showed a "small improvement", and that more needs to be done.

With best wishes
Martin Khor
TWN


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Services negotiations resume, with corridor talk on "benchmarking"

By Martin Khor (TWN), 27 June 2005

The Special Session of the Council for Trade in Services of the WTO started a week-long series of meetings on Monday morning, with the Chair giving a brief account of the latest situation regarding members' offers, and an indication of how he will report on the state of the services negotiations to the Trade Negotiations Committee (TNC).

Meanwhile, in the corridors of the meeting, several diplomats were considering and discussing the issue of "benchmarking", or the new term for this concept, "common baseline", which is being put forward by some developed countries.

This issue had been discussed at an informal meeting of 11 members hosted by the European Commission last Friday and is expected to emerge during this week's services meeting.

At the start of the meeting on Monday, the Chair of the Special Session, Ambassador Alejandro Jara of Chile, said that the revised offers that had so far been received showed a "small improvement", and that more needs to be done. The August 2004 framework agreement on services had given a deadline of May 2005 for submission of revised offers.

Jara said that as of 24 June there had been 68 initial offers representing 92 members. Excluding 31 LDCs, there were 24 members that had yet to submit offers. As of the same date, 25 revised offers had been received, of which 11 were from developing countries.

The Chair also said that in his report to the Trade Negotiations Committee in July on the state of play in the services negotiations, he would include a quantitative assessment (of offers), as well as issues relating to special and differential treatment, LDCs, services rule-making, and a qualitative assessment, according to a trade diplomat present at the meeting.

He indicated that the qualitative assessment would be based on the discussion on Friday, when members would be invited to make their assessments on the state of play. [One of the final items on the agenda is "Review of Progress in Negotiations", under which the members are expected to make their review and possible suggestions].

In a 10 June note to members on "review of progress in the services negotiations", the Chair had said that the negotiations have not been progressing in a satisfactory manner.

Under the item "review of progress", members have at past meetings related in a general manner to the "shortcomings in offers submitted, the lack of sufficient progress in bilaterals as well as the rule making negotiations," said the Chair's note.

He requested members to express their views at this week's Special Session in a "much more detailed and specific manner", and provide a detailed account of how they evaluate the offers submitted by others in sectors and modes of supply of interest to them, and identify what they would have liked to have seen in other members' offers.

Members were also asked to identify the main barriers or regulatory issues they wish to see addressed. This should give a clear idea as to where each Member wishes to be at the end of the round, and an indication of members' overall ambitions in the negotiations.

Such views, said Jara, would be the main inputs for his report to the TNC which would describe the state of play, the desired destination and suggestions on how to arrive at it on time.

Meanwhile, in the corridors of the meeting, several delegates were informally discussing the issue of "benchmarking," which is expected to come up in a major way later during the week (Thursday or Friday), possibly under the item "review of progress."

This issue had been the focus of an informal meeting on services hosted by the European Commission on 24 June for about 11 countries, including the US, Japan, Canada, Hong Kong, Chile, Brazil, China, India, Rwanda and Malaysia.

According to trade diplomats, the EC at the meeting circulated a paper on "Common Baseline for the Services Negotiations: Possible Elements". The term "common baseline" had apparently replaced the more commonly-used "benchmarks" or "benchmarking."

The paper sets out possible elements for a "common baseline" for the services negotiations that (together with plurilateral approaches aimed at achieving "critical mass" in key sectors) would complement the request-offer approach.

The paper contains points for "cross sectoral elements" and "modal elements." Under cross sectoral elements are five points:

1. Commitment to make offers in a minimum number of sectors/subsectors from an agreed list of priority sectors/subsectors. Commitments offered should be commercially meaningful and reflect "no less than existing level" of market opening

(status quo).

2. If a sector from the list is already committed to the extent required by point 1, this sector would be counted towards the total.

3. Flexibility should be provided to all members, with each member choosing the sectors it commits from the agreed list with the option of not committing a limited number.

4. Additional flexibility to take into account the level of development of members, in particular LDCs. Developing countries could commit to offer fewer sectors, and have longer implementation periods. LDCs would commit even less sectors.

5. Economic needs tests should be inscribed, indicating if they are discriminatory and the main criteria on which the test is based.

Under "modal elements" are the following:

1. Mode 1: Commitments in X% of sectors/subsectors offered from the agreed list and in those sectors, removal of all commercial presence requirements.

2. Mode 2: Commitments in and removal of limitations in Y% of sectors/subsectors committed from the above list.

3. Mode 3: Commitments in Z% of sectors/subsectors committed from the agreed list and in those sectors, removal of national treatment limitations in sectors committed as to types of legal entities, ability to buy or rent land and buildings for direct commercial use, nationality requirements for board members and senior management. In addition, removal of foreign ownership restrictions or where maintained foreign ownership should be allowed up to at least 51% and should not be combined with licensing quotas.

4. Mode 4: Commitments for business visitors and intra-corporate transferees in all committed sectors from the above list. Commitments for contractual service suppliers and independent professionals in at least E% of committed sectors from the above list.

According to trade diplomats, the EC proposal was supported at the 24 June meeting by the developed countries present, but was received coolly by developing countries. Some of the latter criticised the proposal for being incompatible with the principles and structure of the GATS (General Agreement on Trade in Services).

The EC paper, or at least its concepts, are expected to be presented at the Special Session. Some diplomats from developing countries are critical of it, being of the view that the "common baseline" or "benchmarking" detracts from the GATS structure.

The proposal would also enable developed countries to have a "round for free" in services, while forcing developing countries to make more concessions.

The diplomats are concerned that an atmosphere of "crisis in the services negotiations" is being created in order to prepare the ground to justify a change in the current positive-list request-offer approach which allows flexibility to developing countries to commit in sectors and modes of their choice and at their own timing.

They feel that the developing countries are being picked on for not making enough offers, or offers of quality. The developed countries are trying to make the case that the present request-offer and positive-list approach of GATS is inadequate and that new disciplines in the form of "common baseline" or "benchmarks" have to be created, to get the developing countries to make commitments in important sectors.

In fact, say the diplomats, it is the weak offers on Mode 4 by developed countries, that is the real problem, and not the developing countries' offers.

The EC-proposed measures would erode the flexibility allowed in the present GATS model, which does not oblige members to commit in any sector or in any list of sectors. Through the EC proposal, mandatory commitments, which developing countries had opposed during the Uruguay Round, would return.

The diplomats were also concerned about the EC proposal that sectors already committed in the Uruguay Round could be counted again to fulfil a country's new commitments under the priority list. Since developed countries generally made more commitments during the Uruguay Round, they can now count these same sectors again in the Doha Round, and thus have a round for free in services.

Meanwhile, the developing countries have to take on all the burden of making new commitments. Such an approach subverts Articles IV and XIX of GATS where flexibility is established in favour of developing countries, and not against them.

The "common baseline" would also pre-determine sectors and contents of market access commitments in each mode of supply. This would be against Articles XVI and XVII of GATS which form the basis for specific commitments and provide the possibility for members to maintain requirements inscribed in their schedules.

For the above reasons, say the diplomats, the "common baseline" or "benchmarking" approach is fundamentally flawed, being incompatible with GATS and with the development principles of the Doha round. It would force developing countries to make commitments much beyond those of developed countries.

It is vital that the present GATS structure and flexibilities are retained, and any improvements should be on individual offers, according to the diplomats.

 


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