TWN Info Service on WTO and Trade Issues (Mar08/09)
11 March 2008
Third World Network

WTO Services talks caught in webs of "horizontal process" and blame game
Published in SUNS #6431 dated 10 March 2008

By Martin Khor, Geneva, 7 March 2008

The services negotiations in the Doha Round are taking place in a strange sphere, caught within the politics of the whole Round, and playing out by the side of what have so far been considered the main issues of agriculture and non-agricultural market access (NAMA).

Developed countries seem to be projecting services as a front-line issue, so that it can be used as a major part of the "blame game" that is also shaping up in the WTO.

An informal services meeting held on Friday (7 March) could not come to agreement on the easy parts of a report by the Chair of the services negotiations, Ambassador Fernando de Mateo of Mexico. The "report" has elements of a text, and questions were raised as to whether what was being negotiated was really a Chair's report or a draft text by members. (See end of article).

Meanwhile, the week starting 10 March will see officials from capitals of several countries having another round of bilateral services talks. However, it is not supposed to be just another routine week of bilaterals, at least where the United States is concerned.

The US Trade Representative Susan Schwab has sent personal letters to Trade Ministers of several developing countries, pressing them to make better offers in opening services sectors that the US is interested in, and in ways that the US wants.

According to a diplomat whose country was sent such a letter, the USTR asked the Minister to ensure that senior capital-based officials be present in the Geneva services bilateral talks in the week starting 10 March, and that these be officials with the authority to make decisions; for example, in the finance sector, they should be regulators who can decide on market openings.

The USTR's letters also reportedly provide details of the market openings or removal of barriers to national treatment that the US would like to see in specific services sectors of the countries.

Schwab's letter also reportedly reiterated the US position that the level of ambition in services market access must be comparable to the level of ambition in agriculture and NAMA. Moreover, and importantly, the US insists that there be a multilateral text on services, which contains an agreement by WTO members to make commitments (in their revised offers) to consolidate or lock in their existing levels of market access and national treatment, and that also provide new market access.

The US is understood to be insisting that these services concessions by developing countries are a pre-requisite to the US making concessions in agriculture.

The developing countries that are targeted are apparently the ones that have been given plurilateral requests in many sectors, such as finance, telecommunications, energy, distribution, environment, etc.

However, diplomats of some of the targeted developing countries have privately said that it is unlikely that their officials would be making new offers in the coming week, despite the letter from the USTR. This is because their own countries are awaiting the outcome of the agriculture and NAMA negotiations, before they respond to requests in services.

In addition, some countries, especially India, are also waiting to see what new offers, if any, the major members like the US and EU are going to make for them in areas within services they are interested in, such as Mode 4 (movement of natural persons) and Modes 1 and 2 (relating to outsourcing of services).

One diplomat remarked that the tone (and also the content) of the USTR's letter to his country's Minister was aggressive and even rude and offensive. "It was certainly not in the usual language of trade diplomacy," he said.

The EC and US are also insisting that a "signalling conference" be held at the same time as a mini-Ministerial expected to be called to negotiate agriculture and NAMA in a "horizontal process." They wanted services to be part of the horizontal, but this faced opposition, and so a services Ministerial conference is now proposed to be held side-by-side with the "horizontal Ministerial."

In effect, the services talks are treated as being held alongside but not within the horizontal process.

At the signalling conference, the EC and US evidently want the developing country Ministers that are invited to "signal" what they are going to give in their revised offers.

But since the developing countries do not know what the US or EC are going to "give" in agriculture, they would be very reluctant to provide concrete "signals" of new services offers. Some countries may also have no intention of making any significant new offers, whatever happens in agriculture.

The bilateral services meetings beginning 10 March in Geneva, which some diplomats say are being held up as a kind of "preparation" for the signalling conference, is also not anticipated to come up with concrete new offers from developing countries.

Given this scenario, some analysts and diplomats are of the view that the US and EU are really seeking to prepare the ground for a "blame game", i. e. to collect points for why there is no progress in the Doha talks, and eventually for who is responsible for a collapse.

They would like to make use of the argument that there is "no or little movement in services" to put the blame on developing countries for their own inability to make any new movements in agriculture.

In other words, the major developed countries are making demands and planning events in services (such as a multilateral services text to their liking, a new serious round of bilateral meetings starting 10 March, and a Ministerial signalling meeting) to position themselves to place the blame on developing countries and deflect blame away from themselves when it becomes evident that they themselves cannot make extra satisfactory concessions in agriculture.

Schwab was clearly entering the preliminary stage of this new blame game when she said in a speech on 5 March that there is a decent chance of concluding the Round only if major developing countries like India and Brazil agree to open their markets.

"The Doha Round is coming down to the question of what contribution will the emerging markets, the advanced developing countries, be prepared to make to support the global trading system," she said, according to a Reuters article. "Here, I am talking about India and Brazil and South Africa, and others like China, Argentina and Indonesia," she said.

She added that the US is prepared to make a "dramatic reduction of trade-distorting subsidies" and reduce its own trade barriers, but only if advanced developing countries open their markets to more imports. According to the report, she "however ruled out the possibility that the US would step forward with a new offer to help negotiators get over the top."

The main multilateral negotiations taking place in services is on the question of producing a new "services text." This was originally pushed by developed countries led by the US and EC, with most developing countries eventually reluctantly agreeing to the possibility of a text, even though they believe that a services modalities text already exists, in Annex C of the Hong Kong Ministerial Declaration of 2005. Three countries (Venezuela, Bolivia and Cuba) have flatly, on principle, disagreed that there be any services text at all.

The Chair of the services negotiations, Ambassador de Mateo of Mexico, originally planned to come up with his own Chair's draft text, which would later become a members' text. However, he later announced that he would only produce a Chair's "report" rather than a text.

The Chair's report was issued on 13 February as JOB(08)/5. It noted that Bolivia, Cuba and Venezuela "took the position that they would not join a consensus on a text." [After the report was issued, the countries objected to this wording, arguing that there was no consensus to begin with, so it was not the case that they did not "join a consensus"].

The report said that there was "considerable convergence" on a number of elements for a "possible text", and these are placed in its paragraph 4, which includes 12 elements, categorized as (a) to (l). It added that on "a few other elements significant divergences persist", and these are listed as four points [(a) to (d)] in paragraph 5.

Paragraph 4 reflects some points put forward by several developing countries, but it also contains some phrases and terms that most of them do not agree with, for example, in para 4 (d) are phrases such as that members "recognize that an ambitious outcome in services would be integral to the overall balance in the results of the DDA" and that Members shall, "to the maximum extent possible, expand the sectoral and modal coverage of commitments and improve their quality."

Para 5, on the other hand, contains the points the developed countries want, particularly: (1) that the same level of ambition in agriculture and NAMA modalities is required for services (para 5a); (2) that members provide effective market access by offering commitments that reflect current levels of market access and national treatment, and provide new market access and national treatment in sectors where trade impediments remain (para 5b); and (3) that members offer a broader range of sectors and make deeper or full commitments in these sectors without having any limitations on market access and national treatment.

On Friday (7 March), a meeting (to which 42 delegations were invited) was held to discuss para 4 of the report. There were 8 papers with proposals to amend the Chair's report, from US, EC, Japan and 8 others; a group of 5 developing countries (Brazil, China, India, Pakistan, and South Africa); the small, vulnerable economies; ASEAN; the ACP Group; a group including Chile; the Recently Acceded Members; and Cuba.

A document containing the proposed amendments under each sub-paragraph of Para 4 of the report was also circulated.

According to trade diplomats, there was some discussion on the nature of the report itself. Venezuela questioned the Chair why he was asking delegations to negotiate on what was only a report of the Chair that was not meant to be a text.

Bolivia said it was not going to negotiate on a report and that this report only reflected the Chair's opinion and not that of members. It stated that agriculture is central to the Doha negotiations as there were many imbalances in agriculture, and other areas cannot be put on the same footing as agriculture. Argentina reportedly said it was its understanding that this report was not binding on members and the meeting was only helping the Chair in writing his report.

The meeting discussed only sub-paragraphs 4 (a), (b) and ( c). There were a number of disagreements in each of these sub-paragraphs, which remained unresolved during the meeting.

According to a diplomat, in Para 4 (a), the major contentious issue was the attempt by the group of US, EC, Japan etc to insert that services was "one of the three market access pillars of the DDA". This was objected to by developing countries.

In para 4 (b), one of the issues was whether the set of plurilateral requests should be annexed to the report. The group of US, EC, etc. had proposed the annexing of these requests, while many others disagreed. This group also wanted to give equal standing to bilateral and plurilateral negotiations, while developing countries wanted language that reaffirms that the bilateral approach is the main method of negotiation, and the plurilateral approach was only supplementary.

In para 4 ( c), many developing countries and their groups wanted to delete the phrase that "major strides are needed to reach a successful conclusion". On the other hand, the US, EC etc wanted to retain this, while instead proposing to delete that some members consider progress achieved so far was satisfactory.

They also wanted to place in an annex a summary assessing the state of play of the market access aspect of the services negotiations (which would presumably be the assessment of the negotiations made by the requesting members). This was objected to by others.

The next meeting of this services group looking at the Chair's report will take place on Monday 17 March. +