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TWN Info Service on WTO and Trade Issues (Mar06/4)

7 March 2006
 

WTO's plurilateral requests aim at maximum opening of South's services


The plurilateral negotiations that were launched on 28 February by the major developed countries (joined by a handful of developing countries) are clearly aimed at creating a new negotiating method to more effectively pressurize some emerging developing economies to open up many of their key services sectors to competition from the large multinational service enterprises.

On 28 February, collective requests relating to at least eight sectors were presented to "requested members". The US and EU however separately announced a total of 14 sectors in which they are participating as interested parties.

A typical collective request makes demands on about 20 to 25 members. A typical list of invited countries in a sectoral request would include Brazil, Argentina, China, India, Pakistan, Philippines, Indonesia, Malaysia, Thailand, Egypt, Morocco, South Africa and Nigeria.

Making the demands are the OECD countries with a few developing members (espciellay Singapore and Hong Kong) joining in.

A look at the documents of the first eight collective requests that were made (i. e. in finance, telecommunications, construction, energy, environment services, computer and related services, maritime transport and architectural and engineering services) show that they contain the specific commitments being requested in the various modes (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).

In all the requests, extreme demands are made for the first three modes and especially Mode 3. They typically call on the requested members (and also on the demanding members themselves) to allow maximum freedom to foreign firms and operators to engage in trade and investment, and to have national treatment.

For Mode 3, the requests are usually that no restrictions are placed on foreign enterprises and investors in their right to establish, share of ownership, form of legal entity, and hiring of foreign personnel. There should also be given "national treatment", or treated at least as well as local firms.

Below is a report on the plurilateral requests, including a summary of the demands in the eight sectors. It was published in the SUNS.


With best wishes
Martin Khor

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Plurilateral requests aim at maximum opening of South's services

By Martin Khor (TWN), 3 March 2006


The plurilateral services negotiations that were launched at the WTO on 28 February by the major developed countries (joined by a handful of developing members) are clearly aimed at creating a new negotiating method to more effectively pressurize some emerging developing economies to open up many of their key services sectors to competition from the large multinational service enterprises.

On 28 February, collective requests relating to at least eight sectors were presented to "requested members". The US and EU however separately announced a total of 14 sectors in which they are participating as interested parties.

A typical collective request makes demands on about 20 to 25 members. The names of these "requested members" were not made available by the "demanding members." However, a look at earlier drafts of the collective requests (which do contain the preliminary list of members on which the requests would be served) show that the likely members being requested in many of the sectors are the larger or more prosperous developing economies.

A typical list of invited countries in a sectoral request would include Brazil, Argentina, China, India, Pakistan, Philippines, Indonesia, Malaysia, Thailand, Egypt, Morocco, South Africa and Nigeria. In the specific case of energy services, the Middle East countries such as Kuwait, Oman, Qatar and UAE are included in the draft request. In other sectors, some other Latin American and African countries are also listed.

The first eight collective requests that were made relate to the following sectors: finance, telecommunications, construction, energy, environment services, computer and related services, maritime transport and architectural and engineering services. Besides these eight, requests have been or are being prepared for other sectors, including legal services; Postal and Courier services; Air Transport; Distribution services; Audiovisual and Education services.

The eight first collective request documents (which were seen by the SUNS) show that there is a common list of demandeurs in almost all of them. These are led by the OECD countries, especially the EU, US, Japan, Australia, New Zealand, Canada, Norway, Korea and Mexico, but also include Hong Kong, Singapore and Taiwan. A few other developing countries also joined in as demandeurs in specific sectors (for example, India, Pakistan, Chile and Peru in computer and related services).

The request documents typically contain an introduction section on the importance of the sector, then sections on the coverage of services in that sector; the list of members making the demand, and the specific commitments being requested in the various modes (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).

In all the requests, extreme demands are made for the first three modes and especially Mode 3. They typically call on the requested members (and also on the demanding members themselves) to allow maximum freedom to foreign firms and operators to engage in trade and investment, and to have national treatment.

For Mode 3, the requests are usually that no restrictions are placed on foreign enterprises and investors in their right to establish, share of ownership, form of legal entity, and hiring of foreign personnel. There should also be given "national treatment", or treated at least as well as local firms.

It is interesting to note that some of the major demandeurs of total freedom for foreigners to invest and operate are themselves now embroiled in controversial attempts to block the bids by foreign enterprises to take over or operate in their countries.

For example, a controversy is raging in the United States over the acquisition by the UAE company Dubai Ports World of Peninsular & Oriental, which would give it operational control of six American ports.

This is being opposed by a broad coalition in the US Congress and Senate on security grounds, giving rise to the charge that the US practises double standards and racism, that on one hand it demands the freedom to invest, but on the other hand it will block legitimate attempts by others to take over services in its country.

Below is a summary of the contents of the collective requests in the eight sectors.

FINANCIAL SERVICES: The coordinator of the request is Canada and the demandeurs are Australia, Canada, the European Communities, Ecuador, Hong Kong China, Japan, the Republic of Korea, Norway, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, and the United States. The Request is as follows:

-- Mode 1: undertake commitments for marine, aviation and transport insurance; reinsurance; insurance intermediation, insurance auxiliary services; financial advisory services and financial information and data processing services.

-- Mode 2: undertake commitments for marine, aviation and transport insurance; reinsurance; insurance intermediation, insurance auxiliary services; and all non-insurance financial services (sub-sectors v-xvi).

-- Mode 3: for all financial services sectors, undertake commitments encompassing rights to establish new and acquire existing companies, in the form of wholly-owned subsidiaries, joint ventures and branches.

-- Modes 1, 2 and 3: remove discrimination between domestic and foreign suppliers regarding application of laws and regulations ("national treatment").

-- Modes 1, 2 and 3: remove limitations such as monopolies, numerical quotas or economic needs tests and mandatory cessions.

-- Transparency in development and application of laws and regulations, transparent and speedy licensing procedures, and other regulatory issues should be addressed in the negotiations.

The request also lists the sub sectors and activities covered, including insurance, banking and other financial services. A very wide range of activities is included.

CONSTRUCTION SERVICES: The coordinator is Japan and the requesting members are Australia, Canada, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, the European Communities, Japan, the Republic of Korea, Malaysia, Mexico, New Zealand, Norway, Singapore, Turkey, and the United States of America. 19 members were sent the requests. The requests are as follows:

Mode 2: Requested members are highly encouraged to make full commitment on market access and national treatment.

Mode 3: (i) Elimination of foreign equity limitation; (ii) Elimination of restriction on types of commercial presence (i. e. subsidiaries, branches and representative offices) and joint venture and joint operation requirements; (iii) Elimination of discriminatory registration requirement and licensing procedures; (iv) Elimination of restrictions on the types of projects undertaken by foreign service suppliers, including the size of projects assessed by the total project value; (v) Elimination of burdensome asset requirements.

ENERGY SERVICES: The coordinator is the EC. Requesting members are Australia, Canada, the European Communities, Japan, Norway, The Kingdom of Saudi Arabia, Republic of Korea, Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, Singapore, the United States. There are 23 requested members. The requests are:

The coverage includes engineering, management consulting, technical testing and analysis; mining-related services; maintenance and repair; construction work for civil engineering; renting of equipment; wholesale and retail trade.

Mode 1: Substantial reduction of market access limitations; Removal of existing requirements of commercial presence

Mode 2: We request commitments whenever technically feasible.

Mode 3: Removal or substantial reduction of foreign equity limitations; Substantial elimination of joint ventures and joint operations requirements for foreign service suppliers; Removal or substantial reduction of economic needs tests; Elimination of discriminatory licensing procedures

Mode 4: Make commitments in accordance with paragraph 1(d) of Annex C of the Hong Kong Ministerial Declaration; No general exclusion of energy services from horizontal Mode 4 commitments

ARCHITECTURAL, ENGINEERING AND INTEGRATED ENGINEERING SERVICES: Canada is the coordinator and the requesting countries are Australia, Canada, Chile, the European Communities, Japan, Korea, Mexico, New Zealand, Norway, Switzerland and the United States. There are 27 requested members. The requests are:

-- Modes 1 and 2: Commitments which aim, to the greatest extent possible, to reduce or eliminate restrictions such as commercial presence requirements; nationality/citizenship requirements and residency requirements.

-- Mode 3: meaningful Mode 3 commitments which aim to eliminate or substantially reduce restrictions such as limiting types of legal entity; limiting the participation of foreign capital; limitations on the establishment of joint ventures; nationality/citizenship requirements; and residency requirements.

-- Mode 4: commitments for all categories with a special emphasis on contract service suppliers including independent professionals which include "architects" and "engineers" or the architectural, engineering and integrated engineering services sectors. Remove or substantially reduce economic needs tests.

-- Eliminate any current MFN exemptions for architectural, engineering and integrated engineering services.

ENVIRONMENTAL SERVICES: The EC is coordinator and the requesting members are Australia, Canada, the European Communities, Japan, Korea, Norway, Switzerland, The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, and the US. There are 23 requested members. The requests are:

Coverage includes Sewage services; Refuse-disposal services; Sanitation and similar services; and Other Environmental Services. Other sub-sectors include: Cleaning Services of exhaust gases; Noise abatement services; Nature and landscape protection services.

Mode 1: Schedule "none", where possible.

Mode 2: Undertake full commitments in Mode 2 for all sub-sectors.

Mode 3: Remove barriers to commercial presence (e. g. foreign equity limitations, Joint Operation requirements, restrictions or requirements on types of legal entity for foreigners, such as Joint Venture). At a minimum, expeditiously phase out barriers to commercial presence.

The supply of services at central or local level may be subject to public monopoly and exclusive rights. If a Member awards exclusive rights contracts to environmental service suppliers, foreign service suppliers should be able to participate in the supply of the service.

Mode 4: Schedule commitments to ensure mobility of service suppliers involved in the supply of environmental services.

COMPUTER AND RELATED SERVICES: Chile is the coordinator and the requesting members are Australia, Canada, Chile, the European Communities, Hong Kong China, India, Japan, Republic of Korea, Mexico, New Zealand, Norway, Pakistan, Peru, Singapore, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, and the United States. The requests are:

Mode 1-3: Full market access and national treatment commitments for the sector as a whole with no limitations.

Mode 4: Commitments in accordance with Paragraph 1(d) of Annex C of the Hong Kong Ministerial Declaration. No exclusion of CRS services from horizontal Mode 4 commitments. No additional limitations beyond horizontal limitations.

MARITIME TRANSPORT SERVICES: Japan is the coordinator and the requesting members are Australia, Canada, the European Communities and its Member States, Hong Kong China, Iceland, Japan, Republic of Korea, Mexico, New Zealand, Norway, Panama, Switzerland, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu. There are 25 requested members. The requests are:

The requested Members are urged to make new or improved commitments in accordance with the attached Maritime Model Schedule, with particular reference to the following points:

(a) commitments on International Freight Transport (less cabotage): Mode 1, Mode 2 and Mode 3 including but not limited to:

- elimination of cargo reservation (Mode 1);

- elimination of restrictions on foreign equity participation (Mode 3);

- elimination of restrictions on the right to establish a commercial presence (Mode

3);

- elimination of nationality requirements of board members (Mode 3);

- elimination of any other preferential treatment (NT).

(b) commitments on Maritime Auxiliary Services (Mode 1, 2 & 3) including but not limited to:

- elimination of restrictions on foreign equity participation (Mode 3);

- elimination of restrictions on the right to establish a commercial presence (Mode 3);

- full commitments on consumption abroad and cross-border supply subject to technical feasibility (Mode 1 and 2).

( c) additional commitments on the access to and use of port services

(d) additional commitments on the access to and use of services necessary for the conduct of multi-modal transport operations

(e) elimination of MFN exemptions

TELECOMMUNICATIONS: Singapore is the coordinator and the requesting members are Australia, Canada, the European Communities, Hong Kong China, Japan, Republic of Korea, Norway, Singapore, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, and the US. There are 24 requested members. The requests are:

Mode 1: No national treatment limitations and no substantial market access limitations, specifically: No unbound; No requirement to use networks of specific suppliers; No requirement of commercial presence; and No requirement for commercial arrangements.

Mode 2: No market access or national treatment limitations.

Mode 3: No national treatment limitations and no substantial market access limitations, specifically: No limitations on the establishment or number of service suppliers (eg quotas, exclusive service suppliers, or geographic restrictions within a Member state's territory); No economic needs tests; No restrictions on the types of legal entity permitted; No limitations on nationality or residency; and majority foreign capital participation and effective control to be allowed.

Mode 4: Make commitments in accordance with paragraph 1(d) of Annex C of the Hong Kong Ministerial Declaration, in particular new or improved commitments on the categories of Intra-Corporate Transferees and Business Visitors; No additional limitations beyond horizontal limitations; and No exclusion of telecommunications services from horizontal Mode 4 commitments.

Reference Paper: Commitments to all provisions of the Reference Paper developed in the Negotiating Group on Basic Telecommunications.

Among the commitments in this Paper are prevention of anti-competitive practices in telecoms, including cross-subsidisation and not making available to other service providers information about essential services. Interconnection with a major supplier will be ensured. Members can define the kind of universal service obligation it wishes to maintain. The regulatory body is separate from and not accountable to any supplier of basic telecom services.

 


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