GNS TO TACKLE DEFINITION ISSUES AS PRIORITY

Mar 31, 1988

GNS TO TACKLE DEFINITION ISSUES AS PRIORITY

GENEVA MARCH 28 (IFDA/CHAKRAVARTHI RAGHAVAN)— The Uruguay round Group of Negotiations on Services (GNS) has reportedly agreed to tackle as an item of priority the problem of definition.

"Definitional and statistical issues" have been identified as the first of five elements on the agenda of the GNS, but acknowledgedly have received least attention so far.

The other four are: broad concepts for principles and rules on trade in services, coverage of the multilateral framework, existing international disciplines and arrangements, and measures and practices contributing to or limiting expansion of trade in services.

Industrial countries have been arguing that the definition and statistical problems could not be easily or quickly solved, and hence the GNS should proceed to negotiate a framework, setting aside these problems.

But a number of third world countries have been insisting that without a definition of what "services" are, what the "coverage" or sectors of services, and what "trade in services" means, no progress could be made in the GNS.

The issue was reportedly again brought up at last week’s meeting of the GNS (march 22-25), when third world countries insisted that without tackling the problem of "definition" the GNS would not be able to make any progress, and the issue just could not be put aside.

On the suggestion of the EEC, the other industrial countries reportedly agreed that this issue, posed repeatedly by third world countries over the last 15 months, should now be tackled frontally and on a priority basis.

As a first step, the secretariat was asked to prepare "a factual paper", compiling all views and opinions on the issue - presented in the GNS so far in proposals, discussion papers and interventions - and present them in such a manner as to bring out the "gaps" in the discussions, the "inconsistencies", and questions that need to be addressed.

If the paper is readied in time for consideration and comments of capitals, the definition issue to be tackled at the next meeting of the GNS from may 17-20. Otherwise, the GNS is to consider the issue at its July meeting, set for 18-20.

The GNS also agreed to focus attention on another neglected element - "existing international disciplines and arrangements".

The Punta del Este declaration has stipulated that any multilateral framework on trade in services "shall take into account the work of relevant international organisations".

The GATT secretariat has prepared a compilation of various international organisations and other activities in this area, but without a clear focus on the relationship of their activities to the negotiations.

In the GNS, the U.S. has been arguing that existing arrangements are merely "technical" ones, not covering "trade", and the Uruguay round negotiations should produce a framework, which could modify, in the trade area, existing arrangements.

According to decisions taken last week, the chairman of the GNS is reportedly to address letters to Executive Eeads of various International Organisations, enclosing a questionnaire, and seeking answers from these organisations, and asking them to nominate representatives to meet with the GNS.

At the next meeting, the GNS is planning to meet with the International Telecommunications Union, International Civil Aviation Organisation and the Liner Code in Shipping, a UN Convention negotiated under UNCTAD auspices and administered by UNCTAD.

Besides these decisions, the GNS reportedly received two documents - one a "discussion paper" from Sweden (on behalf of the Nordic countries) outlining a "possible structure for an agreement on services", and another from Argentina containing "elements for a possible framework agreement on trade in services".

The sponsors reportedly explained their papers, and these were commented upon by a number of countries. While industrial countries made comments on the proposals, a number of third world countries (Brazil, Egypt, India, Mexico and Yugoslavia) made comments during their discussion of the elements on the GNS agenda.

Canada reportedly said it would present in the near future a "services proposal", taking account of a number of papers already on the table including those of U.S., EEC, Switzerland, Nordics and Argentina.

The U.S. and a number of other industrial countries reportedly welcomed the Argentina paper for its contribution to the "development" issue. The Punta del Este mandates stipulates the objective of the multilateral framework as "promoting economic growth of all trading partners and the development of developing countries".

On the definition and statistical issue, Yugoslavia is reported to have noted that the Nordic paper sought to bypass these problems, and saw the framework as a way to embark an "substantial liberalisation of trade in services", which was not the Punta del Este objective and at best only a means for that.

Brazil, in this regard, commented that liberalisation of trade in services per se could not be considered an objective of the negotiations. Progressive liberalisation could occur "if and when it is not conflicting with the objective of growth and development".

The negotiating process, in the Brazilian view, should include rules to assure basic conditions for development - not as a temporary exception or by case-by-case solutions to unchangeable situations, but as general principles of a permanent character.

On the Nordic view that GATT had been negotiated without adequate statistics or solution to "definitional problems", India reportedly said that whatever the inadequacies in this area when GATT was signed, there never had been any question that "international trade" in goods meant anything other than movement of goods across international borders. Also, "trade" was never thought to include "manufacture" or "repatriation of profits" - as now sought to be included under "trade in services".

On the statistical issue, Yugoslavia reportedly said it was not interested in abstract issues of statistics and how to improve them. But without the basic data about "trade flows" in services, it was not possible for it to judge and test any proposed principle or rule in terms of how it would affect Yugoslavia as an exporter or importer of services.

Brazil said that any multilateral framework could cover only cross-border trade in services or activities associated with direct sale of services by enterprises or individuals in one country to enterprises or individuals abroad.

Service transactions between enterprises or individuals established in the same country were domestic transactions, and beyond the purview of multilateral framework.

Services sales by TNC affiliates or subsidiaries in a country to enterprises or individuals in the same country would be domestic transactions, outside the purview of the framework agreement, and could not be viewed as "trade in services", envisaged in several of the documents before the GNS.

Also, without broad and sufficiently detailed statistical information that would facilitate economic analysis, it would be impossible to identify the factors acting as barriers to expansion of trade in services, or the quantification of negotiating interests.

Improvement of statistics was hence a preliminary and essential step in the negotiations.

India reportedly noted that the Nordic paper had sought to present a structure for the framework agreement. For a structure, it was logical to take up the issue of definition and coverage first, then proceed to principles and rules, and then deal with institutional questions.

The Nordics had ignored the first two, and appeared to suggest layers of principles and rules for a general agreement and sector/activity specific agreements, and predetermine the institutional issue, which the Ministers had agreed to tackle at the end of the Uruguay round.

The Argentina paper was reportedly welcomed by U.S., Canada and other industrial countries, as also by Australia, Poland, Hungary, South Korea and Uruguay. It also received some favourable comments from Egypt, while a number of third world countries reserved their comments.

The Argentina paper has sought to formulate some ideas relating to the "development" objective, and what should be incorporated in the general framework agreement or the sector specific ones in relation to the needs of third world countries for development.

In some general comments on concepts and principles for an agreement, Brazil said that concepts like "national treatment", applied to trade in goods, could not be applied to cross-border trade in services, since there was no customs tariff at the border on service imports.

Extension of concepts in trade in goods to the framework for trade in services should be looked at with caution. International rules for trade in goods dealt with the product and not the producer, and such rules in goods had not abolished the jurisdiction of states in their national markets.

A framework agreement on services should have concepts adapted to specific nature of services transactions, and permit entry of new countries into the international services market.

To make expansion of trade in services compatible with the objectives of economic growth and development, the multilateral framework should assure third world countries of the maintenance of the compatibility of progressive liberalisation with development objectives, and preservation and development of their domestic service industries.

It should also guarantee access of third world countries to international high-tech services and high-tech markets on an equitable basis.

Liberalisation, Brazil argued should not be confused with deregulation, and the political objectives inspiring national laws and regulations should be respected.

Such objectives should include the disciplining of national service markets, and this meant national authorities having instruments to control foreign trade.

And since no tariffs could be imposed on trade in services, the framework should have provisions to reduce risk of market disorganisation.

The abuse of dominant market positions was one of the principal obstacles to expansion of trade in services, particularly due to the distortions it caused in price structuring and the restrictions imposed on access to markets by new participants, and the multilateral framework agreement should correct this through principles and rules.

These principles and rules should inhibit inter alia predatory behaviour towards competitors, abusive use of intellectual property rights, discriminatory price practices, mergers, associations or other forms of acquiring control to achieve a dominant market position, imposition of conditions to supply services, market sharing agreements, and other measures that reduce international competition and could have negative consequences to international trade in services and the participation of third world countries in that trade.