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TWN Info Service on WTO and Trade Issues (Jul05/2)

5 July 2005
 

North and South countries differ on assessment of services talks, and on the need or otherwise for new negotiating approach

A week of services negotiations took place at the WTO in the week 27 June to

1 July. On the final two days (Thursday and Friday) there was a discussion at plenary level on "Review of progress and organisation of future work."

At the debate on that agenda item, some major developed and developing countries gave significantly different assessments of the state of the services negotiations.

Major developed countries have been projecting a sense of crisis over what they consider to be unsatisfactory market access offers by developing countries. In light of this, the European Union is asking that new negotiating approaches ("alternative complementary methods") be adopted by the General Council meeting in July.

This was taken by other members as a code for what was widely called "benchmarking", which again is a code term for asking countries to commit themselves to liberalization in a list of sectors of major economic value.

On the other hand, many developing countries were of the view that there is no crisis, and that the talks in services are not lagging behind talks in agriculture or NAMA (non agricultural market access).

In the market access offers, say the developing countries, the problem is not the lack of offers by developing countries but rather the lack of offers by the developed counties in Mode 4, or the opening of their labour markets to workers from developing countries.

Many developing countries also rejected the EU proposal to adopt new negotiating modalities, as the existing methods are adequate, while the new proposed approach may compromise the flexibilities that the developing countries now have in the GATS over the sectors and pace for liberalization.

Below is a report of the discussion at the services meeting.

With best wishes
Martin Khor
TWN

_______________________________________

North and South countries differ on assessment of services talks,
and on the need or otherwise for new negotiating approach

By Martin Khor (TWN), 1 July 2005

Some major developed and developing countries have been giving significantly different assessments of the state of the services negotiations during the Special Session of the Council for Trade in Services held at the World Trade Organisation on 27 June to 1 July.

Major developed countries have been projecting a sense of crisis over what they consider to be unsatisfactory market access offers by developing countries. In light of this, the European Union is asking that new negotiating approaches ("alternative complementary methods") be adopted by the General Council meeting in July.

This was taken by other members as a code for what was widely called "benchmarking", which again is a code term for asking countries to commit themselves to liberalization in a list of sectors of major economic value.

On the other hand, many developing countries put forward the view that there is no crisis in the services negotiations and that the talks in services are not lagging behind talks in agriculture or NAMA (non agricultural market access).

In the market access offers, say these countries, the problem is not the lack of offers by developing countries but rather the great disappointment at the lack of offers by the developed counties in Mode 4, or the opening of their labour markets to workers from developing countries.

Many developing countries also rejected the EU proposal to adopt new negotiating modalities, as the existing methods are adequate, while the new proposed approach may compromise the flexibilities that the developing countries now have in the GATS over the sectors and pace for liberalization.

The differences became evident in the discussion on the item "review of progress and organization of future work.", held on Thursday and Friday.

The EC said it was seriously disappointed with the current situation in services. The revised offers do not redress the situation created by poor offers in the initial round. The substantial commitments requested by the EC were not put on the table and the EC's level of ambition was not reciprocated.

The EC said an ambitious outcome in services implies genuine new market opportunities, which it could not find in the offers tabled. The overall picture would not change with the few new revised offers in the months ahead. The time has come, said the EC, to consider ways of addressing the shortcomings in the services negotiations to give impetus and ensure ambition.

The EC blamed the poor results on the negotiating method being used, i. e. the bilateral request-offer process has limitations and are not the most conducive for results. It thus suggested complementing the request-offer process with "multilateral and plurilateral approaches".

The EC claimed this would be "fully compatible" with the GATS architecture and negotiating modalities. It proposed that the July 'first approximation' should mention the opportunity to explore such complementary methods and the General Council should mandate the Special Session to proceed with such exploration, and a Ministerial discussion could steer the exploratory phase.

This was taken by several diplomats that the EC wanted the WTO mini-Ministerial meeting in China in the second week of July to agree to exploring the use of the "benchmarking" approach in services, and that this "exploration" would be adopted at the General Council meeting at the end of July.

Canada also saw insufficient progress in the services talks, with two gaps: first, the divergence on number of commitments made by members (with developed countries having made more commitments than developing countries); second, the gap between many members' GATS commitments and their current state of market openness.

Like the EU, it suggested complementing the request-offer process in order to "move forward." While stating that new negotiating approaches are needed, it also stressed that it was not suggesting new modalities, as this could lead to unproductive renegotiation of the process.

It noted the development of plurilateral requests (benchmarks for some) in the form of various statements and proposals from sectoral and modal proponents. The process needs to find a way to make these proposals more precise and facilitate real engagement between demandeurs and others. It proposed informal meetings focusing on particular sectors or modes.

Several developing countries had views that differed from the EU on the state of negotiations and the proposal for a new negotiating modality.

Brazil, represented by Ambassador Luiz Felipe de Seixas Correa, said the services negotiations face difficulties, but the same assessment can be made about all other segments of the Round. On services, the difficulties are not insurmountable and should not give cause for alarm.

Unlike in agriculture, in services it is a question of technical work, particularly to overcoming the present imbalance, which clearly favours the developed countries.

Brazil said that on difficulties in market access, the correct approach is not to put together aggregate figures and to draw an anonymous panorama, but to look at which problems - country specific or group specific problems - lie behind those figures.

Given that only one month has elapsed since the target date for revised offers, and that many members have announced that they are about to table theirs, it is premature to talk about the lack of revised offers, said Brazil.

The question is why have LDCs in general and other countries still not chosen to present offers? Brazil said in its view LDCs are still unconvinced that they have something to gain from the services negotiations.

The July Package mandate for "special attention" to LDCs has not been fulfilled. The same reasoning applies to the other developing countries that have not presented initial offers so far. If the services negotiations have nothing for them, why make offers?

"We have thus identified a first problem - lack of many initial offers - and its cause - misapprehension on the part of developing countries, mainly LDCs. If this cause is not addressed, and if a system is not devised to provide for their interests, all those lacking initial offers will probably not come up."

A second set of problems stem from the quality of revised offers. The quality overall is by no means the same. Some, like Brazil's, reflect an effort to bring about new commitments, to incorporate new sectors and to consolidate new opportunities, and these are mostly offers by developing countries.

Others, mostly by developed countries, are just a reselling of old Uruguay Round commitments, pointing to no improvements, containing even backtrackings in areas of interest for developing countries, and keeping dozens of Economic Needs Tests without giving transparency to their criteria.

Brazil said some offers are more transparent, others either still hide important barriers behind dubious inscription techniques or cancel out sectoral commitments through horizontal restrictions. One offer, for example, allegedly proposes numerical ceilings in Mode 4, but since the numbers are not given, strictly speaking they cannot be considered numerical, only discretionary barriers.

Some traditional "demandeurs" in sectors like transportation or financial services fail to provide a reasonable level of market access in the same sectors that they so insistently demand from others.

Given all these specific problems, said Brazil, it would not be appropriate to consider those offers as a whole, but rather "we should analyse specific shortcomings of specific offers". This analysis must be done not in a vacuum, "but in light of our main negotiating reference, (Annex C of the July 2004 package), which in paragraph (d), calls for quality offers and for special attention to sectors and modes of supply of export interest to developing countries."

Brazil said the revised offers by developed countries are in general very disappointing, and it is their deficiencies that should primarily be looked at, since developing countries are making a much bigger effort.

"The developed countries with the biggest economies in the world have so far offered nothing in Mode 4 and close to nothing in specific sectors," said Brazil. "If we do not correct this imbalance, Annex C will be subverted and we risk having a 'round for free' for developed countries."

"We have thus come to the identification of a second problem - poor quality of some revised offers - and we attempt an answer to address it - to go on with an offer-by-offer analysis."

Brazil added that this can be done bilaterally, plurilaterally or multilaterally, abiding by Annex C and the GATS structure, with a focus on specific problems of specific offers.

"Any sort of benchmarking would dissolve those specific problems in a formless amalgam, and transform individual responsibilities in alleged collective failures. This is unacceptable," said Brazil.

It added that each country or group can have its own standards to evaluate offers. "A very different thing is to press all Members to accept one's own standards. This would destroy confidence among us and make a deal impossible."

On services rule-making, Brazil said there were specific questions - how to enter into a negotiating mode in domestic regulation, how to define subsidies, how to discuss government procurement without detracting from GATS, and how to devise a multilateral safeguard clause.

Brazil said this will involve technical work in the appropriate bodies, under the appropriate mandate, and stressed that the full development of the GATS rules would in itself be a great step forward.

Brazil stressed that the abstract concept of "levels of ambition" becomes pointless "if we try to use it as a parameter for negotiations." "The search for 'levels of ambition' cannot justify benchmarks, baselines or any sort of parameters that would accentuate the present imbalance between developed and developing countries' interests in services.

"No generic approach can capture the specific problems we face, let alone bring a solution to them. The causes of those problems cannot be masked. They stem from specific offers and positions. Only by dealing with them, not by avoiding them, can we generate enough momentum and adequate balance to bring the process forward."

According to trade diplomats, points along the same lines as the Brazil presentation were also made by several countries, including Argentina, Jamaica and Peru. Several countries expressed the need to preserve policy space for developing countries, and thus concern about proposals for "benchmarking", or alternatives to the present negotiating modality.

Jamaica said services liberalization can play an important role, but it should be undertaken progressively with due regard to implications for building domestic capacity, preserving policy space and strengthening and diversifying services exports.

It placed a lot of store by the fact that GATS does provide scope for this kind of approach through flexibilities in the GATS agreement. Jamaica said it was deeply concerned by initiatives which would erode or eliminate this flexibility and by negotiating stances which do not take account of the needs and circumstances of developing countries.

In a joint statement on the review of progress, the African and LDC Groups said they recognize the need for more progress in services, but said this should be matched with progress in other areas.

"The African Group and the LDCs would not like to see a situation whereby Members try to create an artificial crisis in services negotiations to justify certain approaches that are inconsistent with the GATS framework and its objectives, when in fact little attention is being given to our issues.

"In fact, the crisis, if at all, is in the areas that we have interest in. We would like all groups of countries to benefit from the negotiations, and not just a few."

The two groups said they would like real progress in special and differential treatment and the implementation of the LDC Modalities, as this is a development round. In market access, members should understand that most African countries and LDCs have a narrow range of sectors and modes of interest.

Unfortunately these are the areas that continue to lag behind, for instance in Mode IV there is limited progress. In some revised offers some members incorporated new categories of service suppliers, but sector specific commitments have been left unbound and therefore compromise the quality of offers, while various restrictions are also maintained.

India stressed parallelism in the three market access areas of agriculture, NAMA and services for a balanced outcome, which requires balance in the levels of ambition and equivalent level of specificity in the mandates at Hong Kong while recognizing the different structure of the services negotiations.

India said it had conducted an initial analysis of revised offers, and found the results "not at all encouraging", especially in Mode 4 and cross-border supply. Two rounds of offers have failed to deliver results in these areas.

In Mode 4, some important trading partners continue to maintain the status-quo as compared with their Uruguay Round commitments. While some had included categories of personnel not linked to commercial presence (like contractual service suppliers and independent professionals), however there are still many gaps in coverage of such categories, inadequate sectoral coverage and lack of mention of duration of stay or very short periods of stay, presence of unspecified and non-transparent economic needs tests, labour market conditions like absolute wage parity and other restrictive conditions.

There is also hardly any improvement with respect to binding commitments for enhancing transparency in Mode 4 commitments for each of the specified categories.

On cross border supply, India said there are still large gaps in commitments in sectors of commercial importance where cross border trade is increasing dynamically. New technological developments have made possible such trade in hitherto unknown areas. There is little progress in improved commitments in the revised offers in such areas.

India made six points on "deliverables" for Hong Kong. In Mode 4, there should be specific inclusion of categories of personnel not linked to commercial presence in members' schedules, with adequate sectoral coverage and clear specification of market access conditions relevant to each of them. The duration of stay should be specified and not too short, with renewal possibilities and less onerous provisions. Economic needs tests and the use of labour conditions as a pre-condition should be removed or relaxed, while numerical quotas should be abolished.

There should be more transparency (including through binding commitments) of Mode 4 commitments relating to each of the scheduled categories, including specification of application procedures and documentation.

In cross border supply, India proposed that members should lock in the current liberal regimes in sectors of importance (including professional services, computer related services, R&D, management consulting, telephone answering, environmental services, financial data processing) to prevent future protectionist backlash.

India also wanted progress in disciplines on domestic regulations with clear deliverables in Hong Kong. In other rule making areas there should be a reality check based on merits and achievable progress.

India said development has to be centre stage, and this ambition can be fulfilled only by substantial progress in market access in sectors and modes of interest to developing countries (like Mode 4, tourism, business process outsourcing etc). Further, the flexibility in GATS provided to developing countries has to be persevered.

At press time (Friday afternoon), several other countries were still to make their statements.

 


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