Jan 23, 1990

SERVICES DRAFT FRAMEWORK TO BE COMPLETED BY JULY?

GENEVA, JANUARY 19 (BY CHAKRAVARTHI RAGHAVAN)— An agreed timetable for meetings of the Uruguay Round Group of Negotiations on Services till end July, and the agenda for the meetings suggest that participants have agreed to complete work on a draft framework by end July.

GATT sources who made available to the media on Friday the timetable and agenda agreed upon at this week's meetings of the GNS, said that this meant that there was now "a definite commitment" an the part of everyone to conclude a draft framework, which could still have some, but not many, square brackets.

If this be correct, it would appear to imply that the U.S. which is spearheading the drive for a services agreement, with some initial "liberalisation" commitments of signatories, has perhaps scored another point, notwithstanding the view of some of the Third World participants that this is just "a time table" and "indicative" agenda and implied no commitment and that unless Third World concerns are met Third World adherence would be doubtful.

The GNS meeting was the first of the Uruguay Round negotiating groups that resumed this week, after the Xmas-New Year holidays, and agreed on a timetable and agenda for the negotiations. With five four-day meetings scheduled over the next six months and agenda of negotiations delineated for each meeting, quite a hectic pace of negotiations sought by the ICs have been agreed upon.

If, over the next couple of weeks, the same pace of negotiations are agreed upon in other new themes, and if the Third World countries do not succeed in securing a similar commitment and demonstration of political will on the part of the ICs in other negotiating groups of particular interest to the Third World Countries (traditional GATT market access issues like non-tariff barriers, trade in textiles and clothing, safeguards, etc.) the asymmetries in the round would be further accentuated.

As long-time observers of GATT see it, any belief that Third World Countries could avoid taking stands now, but take an overall position at the end to ensure benefits for themselves, would be a serious misjudgement of the entire GATT processes and outcomes.

Any last minute compromises, offered by the ICs towards the end, to win over the Third World or make them less obstructive would merely produce empty concessions, like that on Tropical Products at the mid-term accord and help delegations and negotiators to sell to their peoples and their capitals an overall adverse package.

In the other meeting this week, the informal meetings of the negotiating group on tariffs, it was clear that there was a persisting deadlock in the approaches of the U.S. and the EEC - with the former insisting on a "request/offer" approach to the negotiations (which would enable the U.S. to continue to maintain its relatively high tariffs on textiles and other such items) and the EEC pressing for a general tariff cutting formula.

A meeting of negotiating group at level of heads of delegations did not break the deadlock. The informal efforts are to continue with another meeting to be held before the end of January.

But whatever U.S.-EEC disagreements, both are agreed that Third World Nations should cut their tariffs to result in at least a 33-40 percent reduction in the average weighted tariffs of each country. In effect they are ignoring the mid-term accord's reiteration in this regard of the concepts of special and differential treatment and the 1979 Enabling Clause, both incorporated in the Punta del Este Declaration and the General Principles of the negotiations.

Some Third World participants said that before the meetings of the GNS several of the leading ICs had informally made clear that the conclusion of a draft framework on services by July was imperative for their constituencies and that there should be a simultaneous start towards negotiations and exchange of concessions for initial liberalisation of trade in services in some key sectors of interest to the Northern TNC service enterprises.

While some of the Third World delegations would appear to have expressed reservations and had been unable to commit themselves, and had raised several other issues that would have to be tackled (the structure of the agreement, the question of statistics without which Third World countries would be unable to make a judgement an the concessions they were called upon to make and the "development" issue and "increasing participation of Third World countries" in "Services"), the final outcome would suggest a distinct gain for ICs.

While the GNS met from January 16-19, it would appear to have held only two formal meetings - an initial one where the paper presented by India in December last was introduced and discussed, with a number of Third World Countries reportedly expressing support for several of the points made in the Indian paper, and the final one where the timetable and agenda were agreed to.

GATT sources said that even while agreeing to this, a number of Third World participants had underscored the need for addressing the "development" dimension and the subject being a common theme that should be addressed under all the subjects, and the agenda itself being viewed as "flexible".

However, other participants said that the U.S. had made clear that there was no economic justification for special operational provisions in the agreement to deal with "development" or "increasing Third World participation" and that these could at best be a kind of preamble to the agreement.

The U.S. had taken such a position at Montreal too.

In the draft elements for a draft framework, agreed to in December last, even the agreed parts of the Montreal draft on increasing Third World participation, were put under square brackets at insistence of the U.S. and other ICs.

In the informal meetings to settle the work programme and agenda for further meetings, the leading ICs reportedly pressed for a faster pace of negotiations so that agreements could be reached by July on the various elements for the multilateral framework, to enable a legal text to be drafted and readied for signature and entry into force at the conclusion of the round in December.

At the same time, the ICs also called for simultaneous first round of negotiations for liberalisation of the trade in services so that there would be agreement on "an initial entrance fee".

Without an agreement on the definition and on the details of the multilateral framework, any initial round of negotiations for "liberalisation" would really mean that Third World Countries would be at a further disadvantage.

While Third World delegations suggested that what had been agreed to by them did not commit them to anything, and that the agenda was flexible, it was not clear whether issues on the agenda of the next meeting would be taken up irrespective of whether an agreement had been reached or discussions concluded on the previous one?

The agenda suggests that the "structure" of the agreement to be negotiated and settled is "part III" of the December draft.

This part deals with "coverage" of a future framework on trade in services, the modalities of progressive liberalisation and sectoral annotations.

This could mean that issues of concern to the Third World like the definition of "trade in services", the issue of development and increasing Third World participation would not form part of the structure of the agreement, but perhaps merely mentioned in objectives and preamble. If this prove to be the case, it would imply acceptance of the U.S. view.

A major issue under "coverage" (the services to which the agreement would apply) is the idea of "positive" and "negative" approach: agreement to apply only to those sectors or sub-sectors agreed upon, or agreement to apply to all "services" with each signatory enabled to "except" a sector or sub-sector at the outset.

Under the timetable and agenda agreed upon at the GNS, at the next meeting (26 February - 2 March), the GNS is to consider the "structure" of the framework, the issue of statistics and role of other international arrangements and disciplines.

The structure issue also figures on the agenda of the meeting set for March, which would also address the issue of mechanics of liberalisation undertaking including nature of initial commitments.

The statistics issue in the three years of negotiations so far, has been largely evaded and avoided by the ICs, with several of them, like the U.S. and the EEC arguing that building up adequate statistics was a long-term issue and the negotiations could not be held up on this account.

But as has been pointed out in the overview chapter in UNCTAD's latest publication (Trade in Services: Sectoral Issues), "It is difficult to envision governments accepting binding international commitments on trade for which the destination and origin could not be identified, nor a reasonable level of desegregation achieved".

But this is precisely what the U.S. and other ICs are pressing and have apparently succeeded in putting an the timetable and agenda of negotiations, namely, without any statistics and data, signatories to the framework should agree on an initial level of commitments to "liberalise" their service sectors.

In December, a draft text of elements for such a framework, bristling with square brackets, purportedly reflecting various viewpoints, was drawn up to be a basis for further work.

It is clear that the major ICs now view the task as merely one of cleaning up this text.

The Ministerial mid-term accord had called for measures to facilitate effective market access for services exports of Third World Countries. But in the December draft this, and the development issue mandated by the Punta del Este Declaration itself, have been put in square brackets, and some IC formulations suggest that they at best intend to allow some extended time-limitations to comply and with built-in concepts of graduation.

Though the mid-term accord in fact ruled out either permanent establishment and investment of capital as also permanent immigration, with both factors of production being treated symmetrically, the formulations of the ICS would imply that trade could involve permanent commercial presence or right of establishment, but only temporary movements of personnel, confining even such movement to "key" and "skilled" personnel as a matter of right.

Even more, such a broad and asymmetric definition, coupled with other provisions being sought to be put into the framework itself like "national treatment" and what it would imply, and market access restrictions to be frozen at current levels and other limitations for the would even leave the negotiations for future liberalisation unnecessary.

Under the timetable and agenda now agreed upon, at the March meeting, the GNS would consider the Structure (part III of the December draft elements), the mechanics of liberalisation undertakings including nature of initial commitments (part III of the December draft), parts I and II of the draft (definition and increasing participation of developing countries) and institutional issues.

At the 7-11 May meeting, the agenda calls for consideration of all aspects of parts I and II of the December draft, statistics and role of other international arrangements and disciplines, institutional issues, identification of sectors requiring annotations and nature of annotations, and initiation presentation of kinds of progressive liberalisation undertakings that may be pursued by participants.

At the 18-22 June, the same topics would be covered, while at the meeting set for 16-20 July, it is proposed to complete work on a draft framework, with submission to a legal drafting group, including consideration of a first set of sectoral annotations.