TWN Info Service on WTO and Trade Issues (Oct16/06)
6 October 2016
Third World Network

India circulates concept paper on TFS initiative
Published in SUNS #8322 dated 29 September 2016

Geneva, 28 Sep (D. Ravi Kanth) -- India has circulated a “concept note” to members at the World Trade Organization on 23 September for considering an initiative on “Trade Facilitation in Services” agreement to eliminate numerous barriers and bottlenecks that impede global trade in services, a move New Delhi likened to the so-called Trade Facilitation Agreement (TFA) for goods concluded in 2013.

Describing the TFA as “a significant milestone in relation to trade in goods,” India has suggested that there is “a need for a counterpart agreement in services (“TFS Agreement”), which can result in reduction of transaction costs associated with unnecessary regulatory and administrative burden on trade in services.”

The two-page “concept note” circulated to members of the WTO’s Working Party on Domestic Regulation (WPDR), according to India, will address several “key” issues such as “transparency, stream-lining procedures, and eliminating bottlenecks” for facilitating trade in services.

The “scope of the proposed TFS Agreement,” India says, will cover measures affecting trade in services across all modes of supply and it will include special and differential treatment provisions for developing and poorest countries like in the TFA.

A TFS Agreement, according to India, will also address several cross-cutting issues that impinge on all four modes of supply of services. An illustrative list of cross-cutting issues mentioned by India in the concept note include:

(i) Publication and availability of information, including automation and international electronic exchange of trade data.

(ii) Transparency in application of all measures of general application affecting trade in services.

(iii) Ensuring administration of measures affecting trade in services in a reasonable, objective and impartial manner.

(iv) Consultations and cooperation among relevant authorities.

(v) Opportunities to comment before entry into force of measures affecting trade in services.

(vi) Procedures and timelines for consideration of applications from service suppliers, as well as for appeal and review.

(vii) Disciplines on taxes, fees, charges and other levies on supply of services.

(viii) Special and Differential Treatment for developing country Members and LDCs.

(ix) Institutional arrangements.

Further, the proposed TFS will also cover specific issues in the four modes of supply of services under the General Agreement on Trade in Services (GATS). The mode-specific issues suggested by India are as follows:

(a) Mode 1: Facilitation of free flow of data across borders for ensuring meaningful supply of Mode 1 services.

(b) Mode 2: Facilitation of supply of Mode 2 services, including through cross-border insurance portability for availing of medical or tourist related services in a foreign country. Endeavour to streamline temporary entry formalities, such as visa processing fees, procedures and timelines for consumers seeking entry into another country to avail of services (such as medical services, education services, tourism, etc.).

(c) Mode 3: Facilitation of supply of Mode 3 services, including through measures such as single window clearance for setting up commercial presence. Disciplines on charges applicable on Mode 3 service suppliers, in order to ensure that these do not unfairly disadvantage foreign service suppliers.

(d) Mode 4: Facilitation of supply of Mode 4 services through simplification of procedures for temporary entry and stay, and clarity in respect of work permits and visas as relevant for the categories of the Mode 4 commitments.

Disciplines on measures relating to taxation, fees/charges, discriminatory salary requirements, social security contributions in relation to temporary entry, etc. in order to ensure that these do not unfairly disadvantage foreign service suppliers.

India has argued that “a well-structured TFS will significantly enhance the potential for trade in services for all [WTO] members” and that it would require “careful deliberation in order to enable the development of a framework that can effectively address the main concerns of all Members.”

Puzzlingly, India chose to circulate the paper at the WPDR, a weak limb of negotiations for liberalizing trade in services, instead of the Doha special negotiating body on services. The WPDR is in a limbo since 2009 after a major industrialized country, the United States, shot down a middle ground text issued by the former Singapore’s trade diplomat Peter Govindasamy.

Despite regular meetings of the WPDR over the past seven years and another watered-down text in 2011 to kick- start the outstanding work on domestic regulation, the US succeeded in atrophying the WPDR, according to a developing country services negotiator who asked not to be quoted.

Moreover, India’s concept note comes at a time when major developed countries - the US, the European Union, and several other members - are shutting down their borders for movement of short-term services providers under Mode 4.

After the Brexit and the heightened scare-mongering unleashed by right-wing political parties in the US and the EU member countries about the threats posed by foreign workers for jobs previously held by locals, it is somewhat intriguing as to what India can accomplish at this juncture when immigration has become a violent political issue, the services negotiator argued.

On Tuesday (27 September), the European Union trade commissioner has listed several issues - digital trade, electronic commerce, services, fisheries subsidies, and domestic farm subsidies - as likely candidates for the WTO’s eleventh ministerial meeting next year. It remains to be seen how Brussels would respond to India’s paper on TFS.

It is not clear whether India weighed the pros-and-cons of its proposed TFS Agreement which largely involves eliminating domestic regulation barriers and economic need tests that developing countries want from the developed countries.

The Trade Facilitation Agreement for goods was piloted and clinched by the developed countries, particularly the United States and the EU, as part of the initiative launched by the Colorado group at the WTO’s first ministerial conference in Singapore in 1996.

It was also part of the four Singapore issues - trade and investment, competition policy, government procurement, and trade facilitation - that were dropped at the WTO’s fifth ministerial conference in Cancun, Mexico, in 2003 following fierce opposition from developing countries.

Later, the Trade Facilitation Agreement was included in the July 2004 framework agreement as a compromise for addressing the core issues in the Doha Development Agenda, especially in all three pillars - market access, trade- distorting domestic support, and export competition - of agriculture and market access for industrial goods based on less-than-full-reciprocity commitments.

Ultimately, the TFA was hived off from the DDA by the US along with its developed and some developing countries’ allies after 2009 despite protests from developing countries, including India - which repeatedly emphasized that the outcome of the Doha negotiations shall be treated as part of a single undertaking under paragraph 47 of the Doha Work Programme.

The TFA, which sought to harmonize customs procedures and provisions of the developed countries in developing countries, is primarily a market access agreement, according to the former Brazilian ambassador Roberto Carvalho de Azevedo.

However, it was Azevedo, as WTO’s Director-General, who enabled the US and its allies to secure the TFA at the WTO’s ninth ministerial meeting in Bali, Indonesia, in 2013, and also facilitated the decimation of the DDA negotiations at the WTO’s tenth ministerial conference in Nairobi, Kenya, according to an African trade envoy who asked not to be quoted.

Against this backdrop, India’s paper on TFS appears to be a conscious move by New Delhi to switch gears from the bread-and-butter issues of poor farmers and the permanent solution for public stockholding programs for food security to the demands of its software services companies who are facing major barriers in the US, according to services negotiators familiar with the development.

Also, New Delhi’s concept note has come on the heels of a trade dispute that India is waging against the US at the WTO over Washington’s several inconsistent policies on visa fees and numerical quotas for L-1, and H-1B visas. +