TWN Info Service on Trade and WTO Issues (July08/52)
30 July 2008
Third World Network

Trade: Services conference gives out "positive signals"
Published in SUNS #6528 dated 30 July 2008

Geneva, 28 July (Martin Khor and Kanaga Raja) -- A "services signalling conference" that took place at the WTO on Saturday afternoon seems to have pleased many of the developed and developing countries that took part in it.

The Trade Ministers of the United States, European Union and Australia, as well as India and Brazil gave broad indications that they had received positive signs or signals that their potential partners had been forthcoming.

Independent experts are, however, sceptical whether the US and EU Ministers are able to live up to their promises in trying to offer commitments under Mode 4 to have more visas for developing country professionals. (See end of article).

There is no publicly available list of which countries took part. However, it is understood that the participants included the US, EU, Japan, Australia, Canada, Norway, Switzerland and New Zealand, as well as China, India, South Africa, Thailand, Malaysia, Mexico, Singapore, Brazil, Chile, Indonesia, Korea, Egypt, Hong Kong, and Uruguay.

The services meeting mid-way through the negotiations on agriculture and non-agricultural market access (NAMA) was insisted on by developed countries as well as India, so that they could gauge the levels of concessions their potential partners were willing to make.

This, they said, would give them an idea of the overall level of gains they could get in the overall market-access package of agriculture, NAMA and services. In turn, this may influence the concessions they would be willing to make in agriculture and NAMA.

In any case, this was the rationale of the demandeurs of the signalling conference. The developed countries were interested to find out the revised offers in Mode 3 (commercial presence) that the developing countries would make, while India was interested in the offers on Modes 1 and 4 that the developed countries would make, while LDCs were especially interested in Mode 4 (temporary movement of natural persons).

Speaking after the meeting, US Trade Representative Susan Schwab said that she felt that the first conversation about services by Ministers was ''a good step forward... All of us would liked to have seen more on the table... but I think the vast majority would acknowledge it was a good step and we hope that the Doha Round will proceed so that we can see what these signalled offers actually look like in writing...''

Asked as to what the US signalled on Mode 4, Schwab said that ''on Mode 4, we've had consultations with Congress. We'll continue to do that and when it comes to temporary entry of business professionals, we signalled that we are prepared to have that conversation in the context of the Doha Round, but obviously it needs to be in conjunction with our consultations with Congress.''

EU Trade Commissioner Peter Mandelson said ''we just had a very good meeting of signalling future potential offers. I was encouraged by some of the signals that we got and I think that what was said this afternoon will provide a basis for revised offers in services in the autumn.''

He said that he heard some interesting signals from India, and a couple of things from China, one in particular that he wants to specify and follow up. He will also sustain the opening that he indicated on Mode 4. He hoped that others would match what he has indicated so ''as to make it worth our while...''

Indian Commerce Minister Kamal Nath told journalists that on Modes 1 and 4, there were more specific offers from the EU, while the US made some positive statements on Mode 4 but said that it was subject to decisions by the US Congress.

Indian Commerce Secretary G. K. Pillai said that the EU had signalled an offer on Mode 4 that included the removal of an economics needs test and the establishment of a minimum quota of a certain number (that it mentioned). Other developed countries such as Australia and Canada also spoke on Mode 4. However, the US conditioned their statement on Mode 4 with the fact that it had to consult with Congress.

According to a diplomatic source, Brazil signalled offers on reinsurance, financial information services, maritime transport; China signalled professional services, retail trade, construction and energy services; and India signalled commitments in R&D, market research, mining-linked services, courier and express delivery, telecoms, financial services and asset management.

While the reports from the major participants of the signalling conference were positive, there is considerable scepticism whether the US will be able to follow through on its promise to try to win over Congress to get more professional visas for developing country citizens.

Commenting on the reports that Schwab is "ready to talk" on giving more visas, WTO expert Chakravarthi Raghavan said that "to have a conversation in the context of Doha", in the words of Schwab - is even less than "signalling" and has zero value, and more so when the "conversation" will be in conjunction with "consultations with Congress".

"Even in terms of the 'expired' fast track authority, the congressional authorisation had excluded visa issues - viewing it as 'not a trade' issue. Even in the Uruguay Round, the US agreed to provide some temporary visas, but hedged it with several other requirements; and in some instances, the issues also touch the states.

"But with the Bush administration having no authority whatsoever to undertake and ensure adoption of the commitments by Congress, and given the widespread and tense internal political debates in the US over the 'immigration' issues and the 'temporary guest worker' proposal that Bush made, but was shot down by Congress, the offer to hold conversations is meaningless PR exercise.

"As for Mandelson 'offering' to provide more such visas, unless the Lisbon treaty is ratified by all EU members (and there is no sign Ireland is about to hold another referendum), the visas, and other work permit requirements, for non-EU 'persons' is within jurisdiction of individual members.

"This means that individual members of the EU have to agree and, as at the time of the Marrakesh Treaty and scheduling of the GATS concessions, they could each put in their own conditions and limitations - and in some cases, it could result in a 'person' going to one European country to perform a service, not being able to combine the work and move on to another European country to do another job".

New Zealand academic Dr Jane Kelsey, an expert on services negotiations, said that to understand the EC's "signal" on Mode 4, it is necessary to look at the EC's position on "movement of key business personnel" in their current FTAs, the template for which is the CARIFORUM EPA.

"You will see there that there are very strict conditions for gaining access that will work to screen out large numbers of contract service suppliers and professionals who might at first instance appear to qualify," she said. "It seems inconceivable that the EC would offer more in the GATS negotiations than its newly adopted approach in regional and bilaterals, especially as it is still negotiating an FTA with India and will want to retain bargaining chips for that one."

Myriam Vander Stichele, another GATS expert and working as senior researcher at SOMO (a Netherlands-based CSO research centre) and closely monitoring the EU and its GATS offers, demands and proposals, said that the so-called positive signals from the EU (and the US) on Mode 4, allowing more contractual service suppliers from developing countries to work temporarily in the EU are very misleading.

She said that it appears that the persons who would be allowed to work in the EU would have to be high level professionals if they have a contract, and not the many other lower level and poorer services people some developing countries are also interested in.

Actually, the business community in the EU is very much interested of being able to hire the high-educated from around the world in the EU where they are facing a lack of the professionals they need. For quite some time, the services businesses have been lobbying for more relaxing of immigration of only high level professionals, she added.

"Other so-called positive proposals that have been seemingly made at the signalling conference included significant reduction of foreign equity limitation (i. e. less exemptions of Art. XVI on market access)," said Vander Stichele.

"This means that developed countries' multinational companies will have it easier to take over and control more and more services companies in the developing countries (e. g. when owing more that 50% of the shares), with higher profits going to the Northern headquarters and their shareholders," she said. "This is without assurance of better services in the developing world... The arguments that Northern controlled services companies bring more efficiency in developing countries is far from proven in different sectors."

Particularly worrying is the liberalisation that may be "signalled" for financial services, added Vander Stichele. "What has been called progress means that some Northern countries might give more market access in financial services for sophisticated consumers. However, these sophisticated clients are mostly in the North and are mostly those speculators that have been contributing to the financial crisis and the food crisis, as regulation and supervision of institutions such as hedge funds and the financial services they have been offered, is still far off."

Raghavan added that viewing the so-called Mode 4 offers of the EU and US, and the other offers and proposals in Modes 1 and 3, as a kind of trade-off for the market access demanded by the US and EU from India or other developing countries is highly misleading. +