Feb 27, 1990

GRULA PROPOSALS FOR SERVICES FRAMEWORK.

GENEVA, FEBRUARY 26 (BY CHAKRAVARTHI RAGHAVAN) -- A group of Latin American and Caribbean countries have tabled proposals on the structure and approach of the Multilateral Framework for Trade in Services and the provisions of such a Framework relating to objectives, principles and rules and disciplines.

The basic principles of the Framework are to be transparency, unconditional MFN treatment, progressive liberalisation and increasing participation of Third World countries in international trade in services.

The proposal put forward at this week's meeting of the Group of Negotiations on Services (GNS) is cosponsored by Brazil, Chile, Colombia, Cuba, Honduras, Jamaica, Nicaragua, Mexico, Peru, Trinidad and Tobago and Uruguay.

The draft specifies among other things the principles and commitments of such a Framework, with provisions on "development" as a basic part of the structure and commitments, the definition and coverage of the Framework, provision for most-favoured-nation treatment, transparency, regulation of competition and obligations to enforce anti-competitive laws against suppliers, export subsidies, modalities for negotiations and market access commitments, the concept of national treatment, safeguards, the initial commitments and future negotiations and dispute settlement.

The draft framework envisages an institutional arrangement, separate from that of GATT for trade in goods - an International Entity of parties to the Agreement, with a Council and other organs, and an Executive Director and Staff.

International trade in services is defined to cover transactions involving cross-border movement of service, cross-border movement of consumers, and cross-border movement of factors of production under conditions of specificity of purpose, discreteness of transactions and limited duration.

Subject to this definition, the draft provides that "all existing and future internationally traded services" are to be covered.

The Framework provides for the application of most-favoured-nation treatment, immediately and unconditionally to all Parties.

Among the principles and commitments, the Framework is to provide that:

* The policy objectives of national laws and regulations applying to trade in services "shall be respected".

* Full account is taken of the development situation and development needs of Third World countries.

In particular:

* The principle of relative reciprocity "shall" apply to negotiations and is to be reflected in the market access commitments assumed by Third World countries which are not expected nor will be required to make contributions that are inconsistent with their development, trade and financial needs and shall obtain concessions with respect to modes of delivery where they enjoy comparative advantage.

* Individual Third World countries "shall" have the appropriate flexibility for opening fewer sectors or liberalising fewer types of transactions or in progressively extending market access in line with their development situation.

* Priority is to be given to the liberalisation of sectors and modes of delivery of interest to Third World countries and to measures to facilitate effective access to their exports.

* The measures for autonomous liberalisation undertaken by the Third World countries is to be recognised as a contribution to the corresponding negotiations and given credit in the negotiations.

* Third World countries are to have the right to provide incentives and take other appropriate measures to strengthen their domestic service capacity, efficiency and competitiveness, and increase their participation in world trade and expand their service exports.

* Third World countries may require that foreign suppliers to their services markets undertake obligations aimed at promoting the supply capacity of the service industries of their countries.

Reduction of the adverse effects on trade in services of all laws, regulations and administrative guidelines is to be part of the process of providing effective market access and in accord with the principle of progressive liberalisation.

Provisions under "transparency" would require publication of all relevant laws, regulations, administrative guidelines, including those of local government bodies and by non-governmental regulatory bodies, and international agreements on trade in services.

Also, parties to the framework are to have the right, including as a condition of market access, to require submission of information by all suppliers of a specific service to or in their markets.

Parties are also to promote exchange of information regarding global activities of service suppliers with a view among others to obtaining more information with respect to volume, direction and composition of service trade flows.

Another provision would require all parties to adopt and enforce such laws and regulations as may be necessary to prevent service suppliers of any origin from engaging in unfair trade, creating market distortions, acquiring undue market domination or otherwise obstructing competition, or frustrating the attainment of the objectives of the framework. They are also to provide effective remedies.

The parties to the framework are also to develop international standards and disciplines for the control of anti-competitive behaviour of service suppliers, and "endeavour" to agree upon multilateral disciplines and enforcement mechanisms in respect to these standards.

The general exceptions to the framework include measures necessary to protect public morals, social and cultural values, public order, safety or health, to protect national security, and that relate to environment.

But such measures are not to be used to circumvent the objectives, principles and disciplines of the framework nor as disguised restrictions to international trade in services.

The draft provides that on entry into force of the framework, ICs "shall not grant" any new subsidy or other forms of assistance to exports of services or their suppliers, nor increase the incidence or scope of those already in existence.

However, Third World countries "may" subsidise or provide other forms of assistance affecting, directly or indirectly, trade in services, "in a manner consistence with their development needs and consistent with the objectives and principles of the Framework".

Within three years of entry into force of the Framework, a common statistical base on trade in services, a comprehensive nomenclature of services sectors and sub-sectoral activities to which the framework applied, and criteria concerning origin of traded services are to be developed.

Pending elaboration of the nomenclature of the service sectors and subsectors to which the Framework applied, an illustrative list is to be provided in the annex to the Framework.

Parties to the Framework would undertake to enter into negotiations on specific market access commitments, and such commitments would be inscribed in individual country schedules to form an integral part of the Framework (analogous to be individual tariff schedules of concessions in GATT).

Such commitments may relate to sectoral coverage, mode of delivery, levels of protection or gradual application of rules and disciplines.

Where more than one delivery of service is available as a result of negotiations, the foreign supplier is to be free to choose his preferred mode of delivery, but subject to conditions of entry and operation embodied in the negotiated concessions.

Subject to the conditions of market access, service exports and/or exporters of any Party are to be accorded in the market of any other Party, in respect of all laws, regulations and administrative practices, treatment equivalent to, or equivalent in effect to, that given to domestic services or suppliers.

But government procurement and domestic subsidies affecting services or suppliers may be excepted from national treatment. But ICs are to bind the levels of protection granted through such instruments.

Within the scope of their market access commitments, Third World countries are also entitled to except from national treatment, export subsidies.

They could also except from national treatment obligations on foreign suppliers aimed at developing domestic supply capacity and international competitiveness of their suppliers. These measures could involve requirements about investments, domestic financing of the trade balance, training, transfer of technology, export development and promotion, improvement of access to distribution channels and information networks in ICs.

The "safeguard" provisions would enable total or partial suspension of a market access commitment on a non-discriminatory basis to address BOP problems, to avoid or remedy unforeseen injury arising from increased supply of services resulting from liberalisation commitments.

While no compensation will be required nor retaliation authorised for safeguard measures for BOP purposes, in cases of safeguard actions against "injury" either compensation is to be provided or retaliation authorised.

Safeguard actions are to be subject to agreed multilateral procedures requiring transparency, consultation, notification and surveillance.

On entry into force of the Framework, Parties to it "shall" enter into multilateral negotiations aimed at establishing a list of initial market access commitments. Such commitments may differ depending on the development situation of individual parties.

As a first commitment to liberalisation, ICs "shall bind" their existing measures affecting trade in services, and these are to be specified in their respective schedules.

In the course of negotiations, sectors and modes of delivery of services of interest to the Third World countries "shall" be given priority.

Not later than three years after entry into force - and on the basis of work on statistics, nomenclature and rules of origin) - the Parties are to evaluate the benefits accruing to them from trade liberalisation under and participation in the Framework.

On the basis of such evaluation they will undertake negotiations in pursuance of the progressive liberalisation commitment.

To ensure a balance of interests in specific sectors, Parties "may" negotiate protocols, open to all parties, providing for harmonisation and/or mutual recognition of regulations, standards and qualifications with respect to specified services, taking into account the development situation of individual parties.

There is also provision for multilaterally agreed sectoral annotations (consistent with the objectives, principles and rules of the Framework), to interpret or better apply the Framework to specific sectors.

There are also to be provisions, analogous to those in the General Agreement, for modification or withdrawal of concessions in a national schedule, and for consultations and negotiations for compensation with parties who initially negotiated the concessions or which have a principal or substantive supplying interest.

Other provisions include those for consultations and settlement of disputes.

The Framework is to be administered by "the Entity", consisting of all States who are parties to the Framework, and is to perform such functions as would facilitate operation and furtherance of the objectives of the Framework.

The Entity will have a Council, consisting of all parties to the Framework, and will have an Executive Director and staff.

There are also provisions for cooperation with other International Organisations - the UN and its organs, UNCTAD, and those with responsibility for particular service sectors like ITU, ICAO, GATT and other intergovernmental or subregional, regional and interregional bodies concerned with services.

Final provisions include those requiring Parties to take domestic legislative measures to implement the Framework and its instruments, for the UN Secretary-General to be the depository, and provisions for ratifications and entry into force, accession, amendments, withdrawal from the Framework and a "non-application" clause.