TWN Info Service on WTO and Trade Issues (Oct09/06)
26 October 2009
Third World Network

WTO Members conclude latest cluster of services talks
Published in SUNS #6792 dated 14 October 2009

Geneva, 13 Oct – updated (Riaz K. Tayob*) -- The World Trade Organization (WTO) concluded on 9 October its latest round of week-long meetings on services, with Members generally expressing satisfaction over the progress made so far in the services negotiations.

The Special Session of the Council for Trade in Services (CTS-SS) on 9 October reviewed the progress in the negotiations including guidelines for the talks and future work, as well as the implementation of modalities for the special treatment of the Least Developed Countries (LDCs) and the work of the subsidiary bodies.

According to a developing-country trade diplomat, Members expressed satisfaction and were "not too negative" about the cluster of recent meetings. They "felt that it was good to reconnect on these issues again."

While some Members expressed an interest in more substantive offers, other Members felt that the work was essentially preparatory in nature for the expected more substantive negotiating round in the services cluster.

A number of developing-country delegates on the other hand privately expressed concerns over the traction that the European Communities proposal on Government Procurement may be gaining, in part, through the Informal Note by the Chairman of the Working Party on GATS Rules (WPGR). This issue was discussed on 6 October.

With regards to the future work, a full day of discussions has been scheduled for the Working Party on Domestic Regulation (WPDR) in November. Originally, a half-day of discussions had been planned. In addition, it is anticipated that an additional WPDR meeting with the participation of senior officials will be held in December.

Some developing-country trade diplomats had expected the EC to push more strongly for its request for an informal survey of bilateral offers; this was mentioned by the EC, but not taken up in the discussions nor raised by any other Member. A trade diplomat, present at the meeting, said that it is expected that the request-offer process for new commitments would continue in bilateral mode.

On the issue of the LDCs, according to another developing-country trade diplomat, Norway said that discussions on the special treatment for LDCs were also underway. The US expressed concerns over the information being made available about the progress of these discussions.

The services cluster of meetings included an informal CTS-SS on 1 October, services cluster negotiations from 5-8 October, and informal meetings of subsidiary bodies including the WPDR and WPGR.

On 5 and 6 October, Members commented upon and endorsed the CTS annual report, including the annual reports from the subsidiary bodies, namely, the Committee on Specific Commitments (CSC), the Committee on Financial Services and the WPDR. The CTS also received a slew of reports prepared by the Secretariat.

The draft Annual Report of the Council states that since WPGR's last annual report to the Council in 2008 (S/WPGR/18), three meetings were held, which included on its agendas, the three negotiating mandates entrusted to the Working Party, namely, Emergency Safeguard Measures (Article X of the GATS), government procurement (Article XIII) and subsidies (Article XV). The annual report summarizes the events at the Working Party meetings on these issues.

The Annual Report also states that delegations continued to exchange views on the 2006 proposal from the EC concerning a legal text for an Annex to the GATS on Government Procurement (S/WPGR/W/54). Members also considered the topics and the approach to be taken up in informal discussions on government procurement. [Developing countries successfully removed multilateral negotiations on transparency in government  procurement from the Doha Work Programme].

The regular CTS meeting of 6 October received an "Informal Note by the Chairman - Synthesis of past discussions on Article XIII negotiations on government procurement" (dated 30 September - Job (09)/114). It states that it "does not seek to capture all the aspects of past discussions but focuses on exchanges leading up to and beyond the submission of the proposal" of the EC (S/WPGR/W/54). The Note is aimed at reflecting the main thrust of comments made by Members with a view to facilitating further analysis and discussion.

The Note contains background information, a description of the litany of proposals from the EC and the questions and answers that have been compiled from consultations. The Note also includes the EC communication (S/WPGR/W/54) and the EC's proposed "Annex to the GATS", which is appended to it.

According to a developing-country trade diplomat, in an informal session of the WPGR discussing government procurement, the EC started the session with a presentation of its submission (S/WPGR/W/54). The trade diplomat said that the discussions on the EC proposal were a useful and constructive attempt by Members to engage on the technical aspects. But the trade diplomat pointed out that the issue with the EC proposal is the market access aspect of its proposal. [Services can be a significant proportion of procurement by developing country governments. For example, the European Union noted that 2/3 of government procurement in OECD countries is services and in certain sectors, government procurement represented half of all services trade. Therefore it is clear why many developing countries believe that providing market access to government procurement of services would be a considerable step. This is particularly the case in the current financial and economic crisis, when developing country governments using their limited budgets to stimulate their economies may not want this stimulus to “leak out” of the country due to opening their government procurement contracts to developed country companies via the EU’s proposal].

A couple of delegations said that there was need for more proof of why developing countries should enter into the government procurement discussions and what the benefits of such arrangements would be, the trade diplomat said. The trade diplomat noted that issues regarding market access and thresholds (in relation to what procurement is covered and what valuation rules will apply) resulted in "big debates" in the Working Party.

The Informal Note by the Chairman recalled that in accordance with the Hong Kong Ministerial Declaration, "on government procurement, members should engage in more focussed discussions and in this context put greater emphasis on proposals by Members" in accordance with GATS Article XIII.

[GATS Article XIII. 2 on Government Procurement states: "There shall be multilateral negotiations on government procurement in services under this Agreement within two years from the date of entry into force of the WTO Agreement."]

The Note further states that in 2003, the EC suggested the creation of an Annex to the GATS on government procurement in services (S/WPGR/W/42). It proposed modalities for the scheduling of commitments on government procurement, which would be inscribed in an additional column added to the GATS schedules of commitments of WTO Members. The EC suggested that Members indicate, in that column, for each sector and mode of supply, whether commitments on procurement were undertaken and if specific restrictions applied (e. g. thresholds, price preferences for nationals).

Regarding the MFN principle, the proposal suggested that it be extended to government procurement, subject to an exception to protect more favourable treatment granted in the context of the GPA (Government Procurement Agreement) and the possibility for Members to schedule MFN exemptions in relation to government procurement.

The Note states that on procedural rules, the EC suggested, to avoid duplication, that the (proposed GATS) Annex refer to future disciplines negotiated in the (proposed) Working Group on Transparency in Government Procurement. A footnote in the Note explains that in the 1 August 2004 (July Package), the General Council decided that no work towards negotiations on the Singapore issues of transparency in government procurement would take place within the WTO during the Doha Round Negotiations.

In 2005, according to the Note, the EC presented a communication (S/WPGR/W/52) on procedural rules that might be developed for government procurement in the context of the GATS. Areas where the development of rules was suggested included: valuation of contracts, technical specifications and qualification of suppliers, procurement methods, time periods, tender documentation and contract award.

The WPGR, the Note further states, discussed a number of issues in relation to these submissions including based inter alia on informal communications from Singapore (JOB(03)/216) and Hong Kong, China (JOB(04)/139), and two Secretariat Notes titled "Government Procurement-Related Provisions in Economic Integration Agreements" (S/WPGR/W/49) and "Main Approaches to the Undertaking of Commitments on Government Procurement in Economic Integration Agreements: Summary Observations" (S/WPGR/W/51).

According to the Note, issues discussed in the WPGR included: the meaning of government procurement commitments for certain modes of supply; how contracts involving more than one sector might be treated; how thresholds and covered entities might be scheduled; whether the MFN obligation would in principle apply to all services sectors (as in GATS) or only to those where government procurement commitments were made; the interaction between the proposed framework, including its MFN obligation, and the plurilateral GPA where some Members have attached reciprocity provisions to their commitments; possible benefits to developing countries of the proposed framework; the opportunity of distinguishing between goods and services in the context of disciplines on government procurement; and special and differential treatment.

In addition, said the Note, Members have, over the years, expressed diverging views as to whether the negotiations should entail market access issues. A number of delegations have taken the view that the negotiating mandate in Article XIII did not entail market access issues, while others thought that these were covered.

Noting that in June 2006, the EC proposed the text of an Annex to the GATS on government procurement in services (S/WPGR/W/54), the Note explains the divergent views on the EC proposal. "Broadly speaking, two divergent positions seem to exist on the negotiations on government procurement under Article XIII and the specific proposal from the EC."

"A first group of Members are ready to engage in substantive debates with the objective of establishing disciplines on services procurement, in particular with respect to market access. These Members are of the view that the mandate contained in Article XIII includes negotiations on market access and national treatment.

"A second group of Members is of the view that the mandate contained in Article XIII does not entail negotiations of disciplines under either Articles II [MFN], XVI [Market Access] and XVIII [Additional Commitments]. Moreover, this group is not convinced that such disciplines would yield any benefit for developing country Members. Some Members are also concerned that more sectors would be opened up in their markets, while no substantial progress is seen in other areas of pivotal interest for them."

(The EC communication and annex proposes amongst others general principles that include national treatment, application of MFN treatment "across the board", one-off possibility to schedule MFN exemptions, significant procedural requirements (including regarding transparency) and an absence of application of rules of origin for services supplied under government procurement different from the rules applied for the same services in the normal course of trade. While the national treatment is supposed to be on a positive list basis (ie in sectors where governments make commitments, they can no longer reserve procurement for local suppliers) according to the EC’s summary in its 2006 communication; in fact their proposed language in the paragraph 15 of the Annex may involve liberalisation on a negative list basis (ie all procurement sectors are liberalised unless an exception is made). Their proposal also includes market access for government procurement of goods where this is less than 50% of the value of the contract (“covered procurement includes the procurement of goods incidental to the supply of services if the value of these incidental goods does not exceed that of the services themselves”). The proposal also includes "threshold values", which apply GATS disciplines to procurement contracts of a value not less than the threshold scheduled by a Member. The EC proposes one threshold value for construction services and another for all other services, and reiterates its practical interest of harmonized thresholds amongst Members. Also included are disciplines on the valuation of contracts, as well as very specific definitions of tendering, "open tendering", "selective tendering" and "limited tendering" together with attendant disciplines.)

Meanwhile, at a formal session on 6 October, the Philippines, for ASEAN minus Singapore, said that it had underscored time and again the political and economic importance that ASEAN attaches to the negotiations on the Emergency Safeguard Measure (ESM). Work on this issue continues to be fundamental for proponents, not only in the WTO but also in the context of ASEAN and the APEC Group on Services.

It urged the Chair to convey this basic fact to Ministers in such a report, in the event that the Chair is requested to prepare a report to Ministers during the forthcoming seventh Ministerial Conference of the WTO.

An informal note from the WPGR Chairperson (JOB09/95 dated 9 September 2009) provides a summary of past discussions on the definition of domestic industry (in relation to negotiations on emergency safeguard measures) and highlights issues for further consideration. Discussions are set to continue in November and include a senior officials' meeting in December.

(* With inputs from Sanya Smith) +

(updated from original SUNS #6792 publication)