Roundtable Discussion of GATS issues
Chair:
- Razeen Sally - Global Dimensions programme, London School of Economics
Panellists:
- Christopher Findlay - Asia Pacific School of Economics and Management, Australian National University
- Margaret Liang - Ministry of Foreign Affairs, Singapore
- Andrea Spear - Department of Foreign Affairs and Trade, Australia
Presentation of Background Paper on GATS Issues.
The complete paper by Julian Arkell is available here.
Services Overview
The services sector was of growing importance to countries’ GDP and could be the key to development of the developing countries. For one, the services industry provided new and better paying jobs.
The GATS had been designed to support trade in services and to be positive for business interests. Thus, business groups should play a more important role in consultations by providing business information. Governments should take into account their views.
There had been NGOs that had taken an “anti-GATS” stance, fearing that GATS would bring about decreasing standards of healthcare and education. However, it had to be brought to their attention that services supplied in the exercise of governmental authority were excluded. Following this line of reasoning, terms like “privatisation” and “deregulation” were not mentioned in the GATS.
However, the GATS did provide an avenue for privatisation if governments decided to undertake liberalisation measures. Such measures were good ways to attract foreign investment.
Developing countries were reluctant to liberalise and open up their services sector. They did not have the capacity for the enforcement of regulation, lacked human capacity, and did not have the benefit of studying comprehensive academic studies for previous experiences by developing countries that liberalised. Since there was no “one-size-fits-all” approach to services liberalisation, less priority had thus been given by developing countries on services trade as compared to trade in goods and agriculture.
GATS Rules
With regards to rules, progressive liberalisation was an in-built agenda in the GATS. The building blocks of the GATS were transparency and MFN. Transparency was rather weak and underdeveloped in the GATS and the WTO had to find ways to make transparency more operational. One way forward could be by examining the “Disciplines on domestic regulation for the accountancy sector”, which was adopted by the WTO Council in December 1998.
Unlike the GATT, the GATS rules involved examining domestic regulation in member countries. Domestic laws have to be least trade-distortive and burdensome. International standards would also have to be considered and examined, which might prove to be more burdensome for developing countries.
Given the flexibility in the GATS with regards to developing countries, there was a developmental dimension in the GATS. Even so, many developing countries were fearful of the negative consequences of services liberalisation.
Mode 4
Mode 4 (Movement of Natural Persons) in the GATS was a sensitive and highly politicised issue that was of major concern to many Members. For highly skilled labour, Mutual Recognition of professionals was a way to facilitate greater movement of people, which, however, might be biased against developing countries. For the less skilled workers, there were immigration concerns post 9 -11. Currently in Geneva, issues pertaining to Mode 4 such as visa work permits and economic needs test were being discussed. However, any conclusion had to be based on objective rather than subjective criteria.
RTAs
On the issue of RTAs, some had come to the conclusion that it was a catalyst for trade liberalisation at the multilateral level, while others were more sceptical, stating that RTAs were trade-distortive and trade-diverting. GATS Article V (Economic Integration) stated that RTAs were allowed as long as there was full national treatment in all sectors and modes. This essentially meant a ”negative list” approach for services, which many developing countries would be hesitant to be engaged in.
Panel Responses
Margaret Liang
GATS State of Play
The current state of play in the GATS as we head towards Cancun was that negotiations were generally on track. Since the June 2002 deadline, there had been around 30 countries (both developed and developing) that had tabled initial requests on a wide range of service sectors.
This was unlike the Uruguay Round, where the developing countries had a gentleman agreement not to request from fellow developing countries. In this light, the exchange of requests by both developed and developing countries was a positive development as this could lead to greater South-South trade. In addition, with such a good mix of countries in the requests, a more balanced outcome would result.
Whereas the request and offer process had gotten off to a good start, GATS rules were sort of at an impasse. As an add-on to Arkell’s paper where issues such as autonomous liberalisation, emergency safeguard mechanisms (ESMs), domestic regulation were discussed, there was a North-South Divide on the issue of ESMs. The fundamental question was whether there was a viability of a safeguard mechanism in the area of services.
Road to Cancun and potential obstacles
On the road to Cancun, there were a few possible obstacles.
Firstly, the next key milestone in services would be the tabling of initial offers by 31 Mar 2003. About 20 to 30 members were expected to participate in the process. It remained to be seen whether the initial offers would be substantial or whether countries would be holding out for parallel movement in other sectoral areas such as agriculture, which also had a deadline of 31 Mar 2003. There was a need to keep the momentum of the request and offer process going outside the difficult areas such as agriculture. Various sectors that interest developing countries such as professional services and Mode 4 should be put on the negotiating table.
Secondly, there might be an impasse of ESM, which might lead to a blockage on specific commitments for services. ESM was of great interest to LDCs as it was a safety valve for them to protect themselves from any unforeseen domestic problems. With the dateline of coming to a decision of ESM moved back again to Mar 2004, developing countries could also slant towards protectionism. One way forward for the ESM would be to find a “middle-of-the-road” solution, where there were vigorous standards for implementing safeguard mechanism such that ESM would not be abused for protectionistic use.
Thirdly, with regards to autonomous liberalisation, there was much interest among the developing countries. The key issue was how to give credit for services liberalisation undertaken autonomously. There had been much debate on this matter and members were pretty close to an agreement.
Lastly, the external environment could be a stumbling block on the road to Cancun. The current global environment was not conducive for the multilateral trading process. Thus, a successful Doha Round was all the more critical. Experience from previous trade rounds had shown that there tended to be more political will to move the negotiating process forward during times of recession. However, the threat of war against Iraq might detract the political leaders from the Doha round.
Overall, the road to Cancun would be quite bumpy. There might be a backloading of issues to Cancun (because of the single undertaking obligation) and countries were not willing to show their hands as yet. However, things were still optimistic as agriculture, new issues, services might hold up right to the end for trade - off. With regards to the 2005 dateline, it would be ambitious but still possible. After all, the very basis of the Doha round was about increasing market access for services and goods. Countries should lower their ambitions and take it step-by-step.
Andrea Spear
Broader Perspectives Highlight Complexity of GATS Negotiations
Returning to capital from Geneva, developed a more ‘wide-angle’ view of GATS-related issues in terms of broader WTO, APEC, FTA and other regional and bilateral perspectives.
Important to understand the complexity of managing domestic factors while endeavouring to act in the national and international interest. Not only a balancing act, but a constant rebalancing act involving many diverse factors and priorities.
A danger is that things can bog down in their own detail.
In some parts of GATS ongoing work, for example, things have bogged down due to such factors as the technical complexity of the subject matter, the need to constantly ‘educate’ newcomers, an unclear mandate in some cases, the build-up of exhaustion, delaying tactics, a dearth of fresh ideas, a lack of political will.
This has resulted in a ‘recycling’ of issues, ideas, questions and answers.
With regards to the GATS negotiations, agree with other speakers that we need to get over the current impasse and think of practical, realistic ways to move forward. The bottom line is that WTO members committed to pursue fair-trade rules, transparency and progressive liberalisation in services trade when they created the GATS.
It is important to focus on the do-ables and get some ‘runs on board’ for Cancún. Given the world situation, some positive messages must come out of MC5.
One positive message is that the GATS negotiations have been proceeding relatively smoothly, with good involvement by both developing and developed countries.
In exploring more specific potential ‘runs on board‘ – areas where Ministers could deliver encouraging messages – one could look at work that is well advanced; where the pluses outweigh the minuses; where the results to date reflect commonsense and underpin good governance. Such ‘mature’ items might include: transparency in existing regulation; the already-agreed Accountancy Disciplines; possibly other liberalisation related to professional services, e-commerce, financial services, telecommunications; the issue of notifications to the WTO; additional commitments on Mode 4. Many of these subjects are reflected in requests, and in many cases sufficient autonomous liberalisation has occurred since the schedules were written to allow commitments to be upgraded once negotiations finish.
Some GATS work is still in the embryonic stage, reflecting unclear negotiating mandates, lack of common understanding, concerns over administrative burden (eg, negotiations on government procurement, subsidies, recognition, equivalence, standards, monopolies, anticompetitive business practices).
And some GATS work – a mixture of mature and embryonic items - is not ripe for getting runs on board at MC5. It is too politically sensitive. This includes items such as emergency safeguards, technical neutrality, culture, audiovisual, air services, health, education, prudential regulation, subsidies, investment, some parts of Mode 4 negotiations.
Regarding the dynamic of negotiations, in key areas there seems to be a gap in understanding each other’s perceptions of the issues. In some cases, it may not be possible to achieve a common understanding, but where it is – via lots of hard work – then the likelihood of progress will be that much greater.
Christopher Findlay
Positives of Liberalisation and Domestic Policies
Liberalisation process had led to welfare gains, which was a positive side effect of promoting reforms. There were inter-sectoral effects of liberalisation too: liberalisation of the manufacturing factors might lead to the liberalisation of the transport industry.
Developing countries were intent in seeing some movement on the issue of Mode 4 (Movement of Natural Persons). The issue of contract work had been attracting more attention.
Reaffirming Dr Razeen Sally’s views from the morning session, it was noted that “trade policy starts at home”. There was a need for countries to know exactly what they wanted out of trade negotiations. Thus, developmental policies of developing countries would form their international trade policy stance.
Liberalisation of services trade might be haphazard and there was a need to avoid such a scenario, which could be seen in the current negotiation process).
Much more complicated issues could be expected in the area of trade in services as compared to trade in goods. For example, in the area of trade and investment, there might be a need to redesign current framework in certain countries.
Emphasis needed to be placed on the need to map out domestic strategies and the respective impediments to trade negotiations. This could be done through research co-operation and networking. There was also a need to consult with local businesses in this process.
With regards to capacity building, the process could be contracted out given that it was time-demanding and time-intensive. There was also a virtuous cycle between liberalisation and capacity in the local context as can be seen in the global market.
Market Access for services
The priority was for market access for services. With regards to the changes in regulation, there was a question on whether policy should be bound or should not be bound to reflect existing policies. Autonomous liberalisation was another issue. There should not be a formula to judge how much one country had liberalised because too much time would be spent and there was no need for it. He suggested that binding should be involved in autonomous liberalisation.
Summary of Discussion
Services and National Indicators
Services was under-represented in our national statistics and was not recognised as an “export industry”.
For instance, people who were engaged in the tourism or the education sector saw themselves as “providers”, but not “exporters”, even though these services contributed to a major proportion of a country’s GDP
It was important that countries that did not have well-organised services organisation get their act together, e.g. the Hong Kong Coalition of Services Industries
Current State-of-Play in GATS Negotiations
GATS negotiations was generally on track
Since June 2002, about 30 countries had tabled initial requests covering a wide range of services sector
Interestingly, developing countries had also made requests to fellow developing countries during this round.
This would lead to an increase in South – South Trade
The issue of safeguards and autonomous negotiations were of particular interest to developing countries
Challenge in GATS negotiations was to keep the momentum going irrespective of how the other areas were progressing
Key to this would be working towards balance and thinking of realistic ways to move the negotiations forward, i.e. focus on the “do-ables”.
If there was no significant deliverables between now and Cancun, result might be worse than Seattle
Safeguards
There was a clear North – South divide on the viability of the Safeguard Mechanisms
We would have to wait for the next milestone taking place in March 2003, when countries tabled their initial offers
However, a key concern was that whether these offers would be substantial would largely be dependent on outcomes in other areas – for instance, agriculture
Autonomous Liberalisation
The main issue laid in how to give credit to countries that were undertaking autonomous liberalisation
Some recently acceded members were concerned that since they had made more commitments in liberalisation of services than members at similar levels of development but with earlier accession dates, they should not be made to commit to further liberalisation.
Another issue was whether “negotiation credit” should be extended to only developing members or for all members.
The point of contention made by developing countries was that developed countries should not ask for “credit” as this might lessen their commitments to make more concession.
Services Negotiations and Developing Countries
It might be difficult for developing countries to make requests and offers during GATS negotiations as data was often unavailable
For developing countries, it was imperative that they co-operated amongst themselves to build up capability ^
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