North and South countries differ on assessment of services talks

Submitted by Sasha Costanza-Chock on July 6, 2005.English | WTO

Third World Network

North and South countries differ on assessment of services talks, and on the need or otherwise for new negotiating approach. A week of services negotiations took place at the WTO in the week 27 June to
1 July. On the final two days (Thursday and Friday) there was a discussion
at plenary level on "Review of progress and organisation of future work."

At the debate on that agenda item, some major developed and developing
countries gave significantly different assessments of the state of the services
negotiations.

Major developed countries have been projecting a sense of crisis over what they
consider to be unsatisfactory market access offers by developing countries. In light
of this, the European Union is asking that new negotiating approaches ("alternative
complementary methods") be adopted by the General Council meeting in July.

This was taken by other members as a code for what was widely called
"benchmarking", which again is a code term for asking countries to commit
themselves to liberalization in a list of sectors of major economic value.

On the other hand, many developing countries were of the view that there is no
crisis, and that the talks in services are not lagging behind talks in agriculture or
NAMA (non agricultural market access).

In the market access offers, say the developing countries, the problem is not the
lack of offers by developing countries but rather the lack of offers by the developed
counties in Mode 4, or the opening of their labour markets to workers from
developing countries.

Many developing countries also rejected the EU proposal to adopt new negotiating
modalities, as the existing methods are adequate, while the new proposed approach
may compromise the flexibilities that the developing countries now have in the GATS
over the sectors and pace for liberalization.

Below is a report of the discussion at the services meeting.

With best wishes
Martin Khor
TWN

_______________________________________

North and South countries differ on assessment of services talks,
and on the need or otherwise for new negotiating approach

By Martin Khor (TWN), 1 July 2005

Some major developed and developing countries have been giving significantly
different assessments of the state of the services negotiations during the Special
Session of the Council for Trade in Services held at the World
Trade Organisation on 27 June to 1 July.

Major developed countries have been projecting a sense of crisis over what they
consider to be unsatisfactory market access offers by developing countries. In light
of this, the European Union is asking that new negotiating approaches ("alternative
complementary methods") be adopted by the General Council meeting in July.

This was taken by other members as a code for what was widely called
"benchmarking", which again is a code term for asking countries to commit
themselves to liberalization in a list of sectors of major economic value.

On the other hand, many developing countries put forward the view that there is no
crisis in the services negotiations and that the talks in services are not lagging behind
talks in agriculture or NAMA (non agricultural market access).

In the market access offers, say these countries, the problem is not the lack of offers
by developing countries but rather the great disappointment at the lack of offers by the
developed counties in Mode 4, or the opening of their labour markets to workers from
developing countries.

Many developing countries also rejected the EU proposal to adopt new negotiating
modalities, as the existing methods are adequate, while the new proposed approach
may compromise the flexibilities that the developing countries now have in the GATS
over the sectors and pace for liberalization.

The differences became evident in the discussion on the item "review of progress and
organization of future work.", held on Thursday and Friday.

The EC said it was seriously disappointed with the current situation in services. The
revised offers do not redress the situation created by poor offers in the initial round.
The substantial commitments requested by the EC were not put on the table and the
EC's level of ambition was not reciprocated.

The EC said an ambitious outcome in services implies genuine new market
opportunities, which it could not find in the offers tabled. The overall picture would
not change with the few new revised offers in the months ahead. The time has come,
said the EC, to consider ways of addressing the shortcomings in the services
negotiations to give impetus and ensure ambition.

The EC blamed the poor results on the negotiating method being used, i.e. the bilateral
request-offer process has limitations and are not the most conducive for results. It thus
suggested complementing the request-offer process with "multilateral and plurilateral
approaches".

The EC claimed this would be "fully compatible" with the GATS architecture and
negotiating modalities. It proposed that the July 'first approximation' should mention
the opportunity to explore such complementary methods and the General Council
should mandate the Special Session to proceed with such exploration, and a
Ministerial discussion could steer the exploratory phase.

This was taken by several diplomats that the EC wanted the WTO mini-Ministerial
meeting in China in the second week of July to agree to exploring the use of the
"benchmarking" approach in services, and that this "exploration" would be adopted
at the General Council meeting at the end of July.

Canada also saw insufficient progress in the services talks, with two gaps: first, the
divergence on number of commitments made by members (with developed countries
having made more commitments than developing countries); second, the gap between
many members' GATS commitments and their current state of market openness.

Like the EU, it suggested complementing the request-offer process in order to "move
forward." While stating that new negotiating approaches are needed, it also stressed
that it was not suggesting new modalities, as this could lead to unproductive
renegotiation of the process.

It noted the development of plurilateral requests (benchmarks for some) in the form
of various statements and proposals from sectoral and modal proponents. The process
needs to find a way to make these proposals more precise and facilitate real
engagement between demandeurs and others. It proposed informal meetings focusing
on particular sectors or modes.

Several developing countries had views that differed from the EU on the state of
negotiations and the proposal for a new negotiating modality.

Brazil, represented by Ambassador Luiz Felipe de Seixas Correa, said the services
negotiations face difficulties, but the same assessment can be made about all other
segments of the Round. On services, the difficulties are not insurmountable and should
not give cause for alarm.

Unlike in agriculture, in services it is a question of technical work, particularly to
overcoming the present imbalance, which clearly favours the developed countries.

Brazil said that on difficulties in market access, the correct approach is not to put
together aggregate figures and to draw an anonymous panorama, but to look at which
problems - country specific or group specific problems - lie behind those figures.

Given that only one month has elapsed since the target date for revised offers, and that
many members have announced that they are about to table theirs, it is premature to
talk about the lack of revised offers, said Brazil.

The question is why have LDCs in general and other countries still not chosen to
present offers? Brazil said in its view LDCs are still unconvinced that they have
something to gain from the services negotiations.

The July Package mandate for "special attention" to LDCs has not been fulfilled. The
same reasoning applies to the other developing countries that have not presented initial
offers so far. If the services negotiations have nothing for them, why make offers?

"We have thus identified a first problem - lack of many initial offers - and its cause -
misapprehension on the part of developing countries, mainly LDCs. If this cause is not
addressed, and if a system is not devised to provide for their interests, all those lacking
initial offers will probably not come up."

A second set of problems stem from the quality of revised offers. The quality overall
is by no means the same. Some, like Brazil's, reflect an effort to bring about new
commitments, to incorporate new sectors and to consolidate new opportunities, and
these are mostly offers by developing countries.

Others, mostly by developed countries, are just a reselling of old Uruguay Round
commitments, pointing to no improvements, containing even backtrackings in areas
of interest for developing countries, and keeping dozens of Economic Needs Tests
without giving transparency to their criteria.

Brazil said some offers are more transparent, others either still hide important barriers
behind dubious inscription techniques or cancel out sectoral commitments through
horizontal restrictions. One offer, for example, allegedly proposes numerical ceilings
in Mode 4, but since the numbers are not given, strictly speaking they cannot be
considered numerical, only discretionary barriers.

Some traditional "demandeurs" in sectors like transportation or financial services fail
to provide a reasonable level of market access in the same sectors that they so
insistently demand from others.

Given all these specific problems, said Brazil, it would not be appropriate to consider
those offers as a whole, but rather "we should analyse specific shortcomings of
specific offers". This analysis must be done not in a vacuum, "but in light of our main
negotiating reference, (Annex C of the July 2004 package), which in paragraph (d),
calls for quality offers and for special attention to sectors and modes of supply of
export interest to developing countries."

Brazil said the revised offers by developed countries are in general very disappointing,
and it is their deficiencies that should primarily be looked at, since developing
countries are making a much bigger effort.

"The developed countries with the biggest economies in the world have so far offered
nothing in Mode 4 and close to nothing in specific sectors," said Brazil. "If we do not
correct this imbalance, Annex C will be subverted and we risk having a 'round for free'
for developed countries."

"We have thus come to the identification of a second problem - poor quality of some
revised offers - and we attempt an answer to address it - to go on with an
offer-by-offer analysis."

Brazil added that this can be done bilaterally, plurilaterally or multilaterally, abiding
by Annex C and the GATS structure, with a focus on specific problems of specific
offers.

"Any sort of benchmarking would dissolve those specific problems in a formless
amalgam, and transform individual responsibilities in alleged collective failures. This
is unacceptable," said Brazil.

It added that each country or group can have its own standards to evaluate offers. "A
very different thing is to press all Members to accept one's own standards. This would
destroy confidence among us and make a deal impossible."

On services rule-making, Brazil said there were specific questions - how to enter into
a negotiating mode in domestic regulation, how to define subsidies, how to discuss
government procurement without detracting from GATS, and how to devise a
multilateral safeguard clause.

Brazil said this will involve technical work in the appropriate bodies, under the
appropriate mandate, and stressed that the full development of the GATS rules would
in itself be a great step forward.

Brazil stressed that the abstract concept of "levels of ambition" becomes pointless "if
we try to use it as a parameter for negotiations." "The search for 'levels of ambition'
cannot justify benchmarks, baselines or any sort of parameters that would accentuate
the present imbalance between developed and developing countries' interests in
services.

"No generic approach can capture the specific problems we face, let alone bring a
solution to them. The causes of those problems cannot be masked. They stem from
specific offers and positions. Only by dealing with them, not by avoiding them, can

we generate enough momentum and adequate balance to bring the process forward."

According to trade diplomats, points along the same lines as the Brazil presentation
were also made by several countries, including Argentina, Jamaica and Peru. Several
countries expressed the need to preserve policy space for developing countries, and
thus concern about proposals for "benchmarking", or alternatives to the present
negotiating modality.

Jamaica said services liberalization can play an important role, but it should be
undertaken progressively with due regard to implications for building domestic
capacity, preserving policy space and strengthening and diversifying services exports.

It placed a lot of store by the fact that GATS does provide scope for this kind of
approach through flexibilities in the GATS agreement. Jamaica said it was deeply
concerned by initiatives which would erode or eliminate this flexibility and by
negotiating stances which do not take account of the needs and circumstances of
developing countries.

In a joint statement on the review of progress, the African and LDC Groups said they
recognize the need for more progress in services, but said this should be matched with
progress in other areas.

"The African Group and the LDCs would not like to see a situation whereby Members
try to create an artificial crisis in services negotiations to justify certain approaches
that are inconsistent with the GATS framework and its objectives, when in fact little
attention is being given to our issues.

"In fact, the crisis, if at all, is in the areas that we have interest in. We would like all
groups of countries to benefit from the negotiations, and not just a few."

The two groups said they would like real progress in special and differential treatment
and the implementation of the LDC Modalities, as this is a development round. In
market access, members should understand that most African countries and LDCs
have a narrow range of sectors and modes of interest.

Unfortunately these are the areas that continue to lag behind, for instance in Mode IV
there is limited progress. In some revised offers some members incorporated new
categories of service suppliers, but sector specific commitments have been left
unbound and therefore compromise the quality of offers, while various restrictions are
also maintained.

India stressed parallelism in the three market access areas of agriculture, NAMA and
services for a balanced outcome, which requires balance in the levels of ambition and
equivalent level of specificity in the mandates at Hong Kong while recognizing the
different structure of the services negotiations.

India said it had conducted an initial analysis of revised offers, and found the results
"not at all encouraging", especially in Mode 4 and cross-border supply. Two rounds
of offers have failed to deliver results in these areas.

In Mode 4, some important trading partners continue to maintain the status-quo as
compared with their Uruguay Round commitments. While some had included
categories of personnel not linked to commercial presence (like contractual service
suppliers and independent professionals), however there are still many gaps in
coverage of such categories, inadequate sectoral coverage and lack of mention of
duration of stay or very short periods of stay, presence of unspecified and
non-transparent economic needs tests, labour market conditions like absolute wage
parity and other restrictive conditions.

There is also hardly any improvement with respect to binding commitments for
enhancing transparency in Mode 4 commitments for each of the specified categories.

On cross border supply, India said there are still large gaps in commitments in sectors
of commercial importance where cross border trade is increasing dynamically. New
technological developments have made possible such trade in hitherto unknown areas.
There is little progress in improved commitments in the revised offers in such areas.

India made six points on "deliverables" for Hong Kong. In Mode 4, there should be
specific inclusion of categories of personnel not linked to commercial presence in
members' schedules, with adequate sectoral coverage and clear specification of market
access conditions relevant to each of them. The duration of stay should be specified
and not too short, with renewal possibilities and less onerous provisions. Economic
needs tests and the use of labour conditions as a pre-condition should be removed or
relaxed, while numerical quotas should be abolished.

There should be more transparency (including through binding commitments) of Mode
4 commitments relating to each of the scheduled categories, including specification
of application procedures and documentation.

In cross border supply, India proposed that members should lock in the current liberal
regimes in sectors of importance (including professional services, computer related
services, R&D, management consulting, telephone answering, environmental services,
financial data processing) to prevent future protectionist backlash.

India also wanted progress in disciplines on domestic regulations with clear
deliverables in Hong Kong. In other rule making areas there should be a reality check
based on merits and achievable progress.

India said development has to be centre stage, and this ambition can be fulfilled only
by substantial progress in market access in sectors and modes of interest to developing
countries (like Mode 4, tourism, business process outsourcing etc). Further, the
flexibility in GATS provided to developing countries has to be persevered.

At press time (Friday afternoon), several other countries were still to make their
statements.
+


http://www.twnside.org.sg