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TWN Info Service on WTO and Trade Issues (Feb15/02)
13 February 2015
Third World Network

 
High-level meeting on operationalising LDC services waiver
Published in SUNS #7958 dated 10 February 2015
 
Geneva, 9 Feb (Kanaga Raja) -- The WTO Council for Trade in Services convened a high-level meeting on 5 February where a number of developed country members and developing country members in a position to do so indicated the services sectors and modes of supply where they intend to provide preferential treatment to the Least Developed Countries (LDCs).
 
Under the Bali Ministerial Decision of 7 December 2013, the Council for Trade in Services was instructed to initiate a process aimed at promoting the expeditious and effective operationalisation of the LDC services waiver.
 
According to the Decision: "With a view to accelerating the process of securing meaningful preferences for LDCs' services and service suppliers, the Council for Trade in Services shall convene a High level meeting six months after the submission of an LDC collective request identifying the sectors and modes of supply of particular export interest to them. At that meeting, developed and developing Members, in a position to do so, shall indicate sectors and modes of supply where they intend to provide preferential treatment to LDC services and service suppliers."
 
"Members, in their individual capacities, are encouraged at any time to extend preferences to LDCs' services and service suppliers, consistent with the waiver Decision, which have commercial value and promote economic benefits to LDCs. These preferences may accord, inter alia, improved market access, including through the elimination of economic needs tests and other quantitative limitations," the Decision further said.
 
According to trade officials, the non-LDC members on 5 February made their announcements based on the collective request that the LDCs had submitted in July 2014 (S/C/W/356) indicating the services sectors and modes of supply of key interest to the LDC group.
 
In their collective request submitted last July, the LDCs said that due to a number of barriers and encumbrances, it is clear that LDC services suppliers are experiencing difficulties in being able to supply services sought by existing and potential consumers and clients in a number of WTO Members, both developed and developing countries.
 
"Underpinning such difficulties are, for example, obstacles to recognition of LDC educational institutions, diplomas, and professional skills; imposition of transit taxes and other fees on tourists travelling to LDCs; and onerous application fees for visas, licenses, and residence and work permits, which for many LDCs are tantamount to one month's salary for their families - a detriment, but also a severe loss if the visa is not granted and when the fees are not returned. Visa denials stamped on passports, or similar stamps with the same implication, and other measures, serve to stigmatize qualified LDC suppliers who have been presented with offers or are contracted abroad," the LDCs had said in the collective request.
 
The collective request had further noted that other barriers range across several sectors impacting Modes 1, 2, 3 and 4 market access and national treatment. But the most staggering market access, administrative and other barriers were in Mode 4, where, LDC services suppliers indeed have secured customers abroad. Some LDC companies willing to enter markets and establish under Mode 3 are also facing barriers similar to those they face, as natural persons, under Mode 4.
 
At the high-level meting on 5 February, trade officials said that in their indications, the non-LDC members covered most, if not all, sectors in modes 1, 2 and 3 including professional services, IT and computer services, other business services, construction, distribution, financial services, transport and logistics, tourism, and sporting and other recreational services.
 
Some members made specific indications, with Canada, for example, saying that it would respond to 75% of the requested sectors.
 
In mode 4, some members responded to the request concerning contractual services suppliers, independent services suppliers and intra-corporate transfers.
 
According to trade officials, these included, amongst others, India, which made a specific offer to train 1,000 persons from the LDCs each year; China, which said that it would train 1,200 LDC professionals in 2015 and organise 19 training sessions on various sectors; Japan, which said that it would waive resident permit fees and not impose economic needs tests and labour market tests; and Korea, which made offers in mode 4.
 
Many members made their offers based on their market access offers in the Doha Round context. For example, the US said that it could immediately grant preferential treatment in the translation and interpretation services.
 
According to trade officials, many members including Mexico, Norway, Australia, Iceland, and the EU went further by using their most liberal Free Trade Agreements as a basis.
 
Mexico and the US proposed to extend the outcomes of the Trade in Services Agreement (TISA), which is being negotiated outside the WTO, specifically to the LDCs.
 
Many members including Australia, the US, Switzerland, New Zealand, Chinese Taipei, Iceland, Hong Kong-China, Liechtenstein and Russia also said that their markets are already open.
 
Others touched upon the supply side constraints faced by the LDCs and that these be addressed through technical assistance activities, with the US, for example, mentioning one of its USAID programmes.
 
According to trade officials, all members expressed hope for a prompt domestic process so that they could notify their preferences for the LDCs to the WTO as soon as possible.
 
Members agreed to set 31 July 2015 as the deadline for the submission of the preferences for the LDCs, but preferably before that, trade officials added.
 
As to the next steps, Members will assess this high-level meeting at the next Services Council meeting on 19 March 2015.
 
According to the WTO website, in a video message, WTO Director-General Roberto Azevedo said that it was vital to "implement all the elements of the Bali Package, and particularly the decisions on LDC issues, without delay."
 
He also urged potential preference-granting members "to indicate where they intend to provide preferential treatment to LDC services and service suppliers."
 
Speaking on behalf of the LDC Group, Ms Amelia Anne Kyambadde, Minister of Trade, Industry and Cooperatives of Uganda, said that Bali was a significant Ministerial for the WTO in that many Members lauded the results on Trade Facilitation as the first Agreement from the Doha Development Round in WTO history.
 
However, of the decisions taken for LDCs in Bali, the decision to operationalize the 2011 MC8 LDC Services Waiver Decision came with promises of concrete results, after the LDC Group could examine its interests and table a collective request.
 
"In Bali, we recognized that the promise to grant preferential treatment to LDCs services and services suppliers in the form of a waiver, was suffering from attrition. That waiver decision has a shelf life of only 15 years. Three years have slipped away with no notifications of commitments from any Member in favour of services preferences to LDCs," said the Minister.
 
As far as the sectors and modes of supply are concerned, Uganda said that its request has provided specificity, priorities, and flexibility.
 
"We reduced our ambition on the supply of services through the movement of natural persons (Mode 4). In the collective request, aside from what we have asked about market access and quotas, we actually focused our attention on preferences in administrative areas such as reducing procedures, reducing fees and paperwork for visas, work permits, residents permits and the like where LDC services suppliers have an offer or obtained a contract in your country."
 
According to Uganda, onerous application fees for visas, licenses, and residence and work permits, for many LDCs are tantamount to one month's salary for their families, also a severe loss if the visa is not granted and the fees are not returned.
 
"We believe that Members can provide preferences to LDC suppliers in the form of reduced application procedures and reduced fees, whether or not the granting Member is providing market access preferences or bindings."
 
In Mode 3, the supply of services through commercial presence, Uganda said that LDC small and medium sized enterprises have suffered similar barriers that they found in Mode 4, in terms of burdensome paperwork, restrictions, and requirements that render the ability to form a presence impossible.
 
"Some Members have informed us that their markets are already open and that they are considering assistance initiatives to help LDC suppliers avail themselves of such openness. However, we remind Members that in WTO we speak of market access bindings and certainty," said Uganda.
 
Uganda underlined that the high-level meeting will be a decisive test on the credibility of the WTO. "A successful outcome of this meeting will greatly impact the lives and livelihoods of millions of our poor people."
 
The Commerce Minister of Bangladesh, Mr Tofail Ahmed, told the high-level meeting that the issue of preferential market access in services is a long-standing one. It is a well recognised fact that the LDCs need preferential market access to better integrate them into the multilateral trading system.
 
With this spirit, he noted, the GATS contains a specific provision for providing special priority to LDCs in the case of services.
 
"However, we had to negotiate year after year to develop a mechanism for providing special priority to LDCs. Finally, we ended up with a Waiver Decision in 2011 though the GATS came into force in 1995 along with the WTO. But, the Waiver Decision is not yet operationalized."
 
The Minister said that to achieve the goal of becoming a middle-income country by 2021, "we need faster growth of economy. We are trying to have faster growth by utilizing trade opportunities evolving in international trade. In fact, we are doing better in trade in goods. One of the reasons of our better performance is DFQF [duty-free quota-free] market access we are enjoying in various markets of our friendly countries."
 
However, he said, "our trade in services still remains very poor though 50% of our GDP comes from services. We have enormous potential in services. Being a home of 160 million people, Bangladesh has a large pool of human resources. We are capable of providing many kinds of services based on our human resources, if proper market access opportunities are provided."
 
According to trade officials, in its remarks, the US acknowledged and appreciated the efforts made and the fact that the WTO has now moved to a more tangible phase with regards to this decision on the LDCs. It has the potential to produce meaningful outcomes.
 
The US said that it has a very open market for services with few restrictions including an open market in tourism, education, ICT services and the creative services industries. It does not impose work permit and residence permit requirements and its mode 4 commitments are among the best in the WTO.
 
The US said that it believes that the most useful focus of the effort is to examine and address export capacity constraint issues, and it remains committed to working with the LDCs in this regard.
 
The US also mentioned its ambition to liberalise the services trade including through the TISA negotiations. It is ready to extend the outcomes of the TISA to the LDCs.
 
It also said that it could immediately provide access to LDCs of its translation and interpretation services, which is a revised offer that it made under the Doha Round.
 
The US also said that it needs more time to process what it had heard today before it can maybe make more offers before the 31 July 2015 deadline.
 
The EU said that its preferences will include both a significant sectoral scope, and market access in specific sectors and modes of supply. The indications - or signals - presented today, will be followed by a formal notification with a specification of these unilateral preferences, once a formal internal legal decision is taken.
 
For Mode 4, the EU is prepared to offer preferences that constitute a comprehensive improvement over existing GATS commitments. These will include key elements of the improvements made in its DDA offers, such as the expansion of categories, sectoral scope and periods of stay - and benefits found in its recent preferential agreements, such as a broadening of the sectors covered by commitments.
 
The EU said it has progressively improved its DDA-offers, for example, by adding new commitments for graduate trainees, doubling the period of stay for contractual services suppliers, or adding the categories of Independent Professionals (IPs) and Graduate Trainees. Further, such consolidated benefits now apply on an EU-wide basis in the enlarged Union, subject to specific limitations.
 
In this context, the EU mentioned preferences relating to intra-corporate transfers, business visitors, and contractual service suppliers.
 
The EU said that it is preparing preferences, in addition to the Mode 4 elements, within all groups of sectors identified in the LDC collective requests. The EU is prepared to offer preferences, going beyond the extensive offers already presented as part of the DDA, in a number of sectors including for example: Travel and tourism services including also convention services; Financial services, possibly also including payment services; Transport and logistics services; ICT and outsourcing services.
 
The collective requests also cover an extensive ("catch-all") list of sectors in addition to the groups mentioned above, the EU noted, saying that it welcomes this approach, and is prepared to offer preferences for a majority of these.
 
This would imply market access and national treatment commitments, that builds on the EU's DDA offer supplemented with further improvements found in recent development-oriented FTAs. Examples of this include professional services such as auditing and taxation services, business services like real estate, design, rental and leasing services, management consulting, repair and maintenance services and several more, it said.
 
India proposed to grant preferential treatment in the areas of market access, technical assistance and capacity building and visa-related offers. In mode 4, these include engineering services, integrated engineering services, computer services, management consulting, project management services other than for construction, hotel and lodging, travel agency and tour operator services, and tour guide services other than in the English language.
 
It suggested new improvements in its commitments in the category of installer of services, which was requested by the LDCs. Offers in mode 3 will be without any foreign equity limitations, it said.
 
In the area of technical assistance, India proposed to earmark 25% of all technical assistance and capacity building opportunities to LDC members. It will be providing preferential treatment to services suppliers providing consultancy services in training programmes in financial services, as well as consultancy courses for LDC professionals.
 
It would accord priority in training of LDC professionals and is also committed to promoting tourism, which is an important services sector for the LDCs. It will be providing free space for the LDCs during the Indian edition of the Global Exhibition on Services and every year thereafter, as well as for other events. It is also proposing to waive visa fees for LDC applicants.
 
According to trade officials, China announced three categories where it would be granting preferential treatment to the LDCs - market access, domestic regulation and capacity-building and assistance.
 
Under market access, in the area of mode 4, China said that it will grant business visitors the possibility to stay in the country for up to six months, applicable to all the 100 services sectors and sub-sectors that have been included in China's services schedule.
 
In air transportation, China said that there will be the possibility of establishing joint venture enterprises with Chinese partners under mode 3. It also mentioned building and cleaning services, and printing and packaging material services.
 
On domestic regulation, China said it will provide preferential treatment in tourism, whereby it will simplify and streamline the procedures for the LDCs and shorten the timeframe for the processing of applications.
 
On capacity building, China said that within the framework of South-South cooperation, it is offering to reinforce capacity building. It will invite 1,200 professionals from the LDCs to visit China and will organise 19 training sessions and will invite around 500 persons from the LDCs to attend those sessions. The sessions will cover tourism services.
 
China said that it will assist further in the construction of infrastructure in the tourism sector, as well as the construction of services facilities such as hospitals, schools, stadiums and theatres.
 
In some closing remarks at the end of the high-level meeting, the Chair of the Services Council, Ambassador Choi Seokyoung of the Republic of Korea, noted the "very high level of engagement" from the preference granting countries.
 
More than 30 members intervened under this agenda item with indications of preferences that they would grant to sectors and modes of interest to LDC services and service suppliers. Their willingness to contribute substantially to the process through their indications today is a positive development, said the Chair.
 
Most developed members and developing members in a position to do so, have indicated a willingness to grant access on the basis of their DDA offers to LDCs. Some of them have gone further and consider granting access to LDCs on the basis of their most liberal preferential agreements.
 
With regard to specific sectors and modes of supply, the Chair said that the meeting has heard from numerous delegations that they are willing to provide improved market access in modes 1, 2 and 3, with few, if any, restrictions in a range of services sectors, such as professional services, IT and computer services, other business services, construction services, distribution services, financial services, transport and logistics services, tourism services, and recreational and sporting services.
 
The Chair noted that some members have foreshadowed preferences in more quantitative terms. One member, for example, indicated that it would respond to some 75% of requested sectors with the granting of either full access, or access with very limited restrictions.
 
With regard to the collective request on Mode 4, the Chair observed that a number of delegations have stated their willingness to respond specifically on the sought-after categories of contractual service suppliers and independent service suppliers for a range of professions and occupations, on which, only very few commitments have been made at the multilateral level.
 
Additional commitments on other requested categories, such as graduate trainees and installers have equally been indicated by several Members. In addition, on other categories such as business visitors or intra-corporate transferees, GATS-plus preferences for LDCs have been detailed by many Members.
 
Several Members indicated that specific restrictions would not apply to LDC members, such as economic needs and labour market tests, and have indicated the extension of timeframes for the duration of stay of natural persons engaged in Mode 4 movement.
 
According to the Chair, one member specifically indicated the waiving of visa fees for business and employment visas for LDC persons. Another member proposed waiving of residence permit fees. Several members reported on their efforts to streamline and rationalize their visa procedures which would benefit LDC service suppliers.
 
Compared to these substantive indications, the Chair said that the meeting heard fewer specifics on the area of recognition and professional accreditation.
 
The Chair further said that a large number of members emphasised the importance of targeted technical assistance to address supply side constraints, and to enhance the participation of LDCs in world trade services.
 
A number of concrete initiatives conceived to benefit LDC services suppliers were mentioned, many of them relating to training programmes to the benefit of LDC service suppliers, and support in infrastructure upgrading.
 
According to the Chair, a number of members noted the large degree of openness that they are already extending on an MFN-basis to all WTO members, including LDCs.
 
"I believe we would all agree that to the extent members are fully liberalized with regard to Article XVI measures, there is no scope for preferences under this Article. That said, numerous specific requests by the LDC Group relate to measures that go beyond Article XVI, and relate to positive measures that would further facilitate the supply of services by LDCs. Such measures require consideration by all Members, also those who are generally more ‘open'", said the Chair.
 
The Chair underlined that it is crucial to follow up on the verbal indications delivered today through concrete notifications to the Council. +

 


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