ICS FOR CROSS-LINKAGES WITH GOODS, BUT NOT WITHIN SERVICES!

Apr 3, 1990

ICS FOR CROSS-LINKAGES WITH GOODS, BUT NOT WITHIN SERVICES!

GENEVA, MARCH 30 (BY CHAKRAVARTHI RAGHAVAN) -- The U.S. and the EEC, while insisting in the Uruguay Round negotiations on "linkages" between trade in services and goods, and within and across different negotiating areas in goods, are not prepared to accept "cross-linkages" across different sectors of services.

At the meeting of Group of Negotiations on Services (GNS) this week, the two said they could not agree to provide market access in some sectors which they want to exclude on grounds of "sensitivity" in return for market accesses in other sectors of interest to them like financial services or value-added networks, etc.

However, in the round as a whole the U.S., EEC and other Ics have been insisting on linkages, saying that they could liberalise access to their markets for "goods", like Textiles and Clothing etc, only if they could get concessions in Services.

A Mexican paper, presented this week to the GNS, made clear that unless service sectors of interest to Third World countries were included, few Third World countries would be prepared to accede any Services framework.

It was apparently in reference to these that the U.S. and EEC made known their opposition to linkages across sectors inside the services negotiations at the formal plenary meeting on Friday of the Group of Negotiations on Services (GNS) in explaining why some of their "sensitive" sectors would have to be excluded.

Both capital and labour engaged in some of the "sensitive" sectors in their economies, they explained, were not prepared for "liberalisation" of trade in the sectors in question even if other sectors in the country gained by liberalisation of market access.

The U.S. wants to exclude maritime and transportation sectors. The ICs as a whole are against inclusion of labour-intensive services. The EEC has reservations on liberalising some other sectors.

The U.S. and EEC positions reportedly came in for some sharp and sarcastic comments from a number of Third World participants.

In other comments, Third World participants reportedly said that any services agreement to secure universal participation would need to be symmetrical as between the Industrial and Third World countries and that the development dimensions and an adequate balance of benefits would have to be incorporated in the framework of rights and obligations.

In its paper, Mexico underscored that unless the possible framework agreement and various rounds of negotiations (for progressive liberalisation) gave similar treatment, as regards trade effects, to different ways of delivering services and unless service sectors of export interest to all countries were included, "the opportunity to have an agreement of universal application will be lost".

It was necessary, Mexico said, to avoid the GATT experience where important sectors like agriculture and textiles were excluded from the scope of the General Agreement for the benefit of only a handful of countries.

The U.S. reportedly agreed on need to have a framework that would attract universal participation and that an agreement with limited participation would be of no use. It also agreed on the need to reflect the development issue, but seemed to think this should be in the preamble and not in the framework of principles and rules - a view that has not been acceptable to the Third World countries.

Discussions at the GNS this week centered on the structure of the framework, the mechanics of liberalisation undertakings including the nature of initial commitments, definitions and increasing Third World participation in the services trade and institutional issues.

On the institutional issue, while the U.S., EEC and other ICs are for an arrangement that, at the minimum, would closely link the future General Agreement on Trade in Services (GATS) with GATT, Third World countries said it would have to be a completely independent entity with no links with GATT, except in terms of cooperation with other international institutions.

Even here, they could not envisage any special links between GATS and GATT. The institutional cooperation arrangements of any future GATS would have to be with all relevant international organisations and arrangements - UNCTAD, ITU, ICAO, GATT, and IMF.

The U.S. tabled a proposal for "sectoral annotation" in respect of the telecommunications sector, providing for liberalisation of "enhanced" telecommunication services, and rights of such service providers for access to public telecommunication networks, etc.

However, in preliminary comments, a number of Third World participants as well as some ICs like Japan, opposed the U.S. paper. Japan reportedly said that it would have far-reaching consequences for the telecommunications sector. India and other Third World countries said that it was not really a sectoral annotation about telecommunications sector, but in reality about other service sectors and could not be dealt with in isolation.

The discussions both at the formal and informal sessions reportedly brought out the wide gap between the positions of the Industrial Countries, particularly the U.S. and EEC, and the Third World countries.

Parallel to the GNS discussions, according to participants, there have been U.S.-EEC talks to narrow their differences on the structure of the agreement. There have also been some informal consultations organised by the Swiss on "financial services" which have been attended by some participants, but with other leading Third World economies keeping out.

The Mexican paper, "Definition: Elements for inclusion of services provided by labour in the framework agreement and in further negotiations", has argued that there is no theoretical or practical justification, in a framework agreement, for giving preference to one mode of delivery over another (capital over labour) or to some services over others (capital-intensive over labour labour-intensive).

There should be symmetry in trade effects of each type and this was at the heart of the difficulties in reaching an agreed definition in the GNS.

Mexico however explained how labour services could be differentiated from immigration problems. For this, trade in services provided by labour had to include the concept of temporary movement of labour, both skilled as also semi-skilled and unskilled.

But such movement of labour should not be of individual providers of services (individuals seeking employment in the "importing" country). The temporary mobility of labour should be treated as an "organised import" which could only be achieved if the labour was part of an enterprise responsible for compliance by the individuals concerned with the policy objectives of immigration laws and regulations in the importing countries.

The Mexican paper has given some examples of a Third World country "A" providing a labour service and an Industrial Country, country "B", importing such services.

A construction company from country "A" temporarily established in country "B" to carry out a construction project could bring with it from country "A" all the personnel required for the project and who would stay in "B" until completion of the project.

The construction company from A would be responsible to the authorities of B for any breach of immigration laws and regulations by its personnel. The authorities of B could sanction the company by different ways ranging from a fine to temporarily or definitively suspending its operations in its market.

If a construction company from country B wanted to engage skilled, semi-skilled or low-skilled labour from country A, this would require in A or B a enterprise specialised in hiring different kinds of labour, with equity coming from A or B or a joint venture, and which would be responsible to authorities of B for any breach of immigration laws and regulations by the personnel subcontracted to the construction company from country B.

The foreign personnel should comply with all labour laws of B, including payment of taxes and (temporary) contributions to the social security system.

These examples of services in the construction sector, Mexico has said, could also apply to other services sectors where the international labour mobility would not be an immigration problem but would constitute trade in services, as defined in the mid-term accord and the GNS draft elements for a framework.

In the discussions on definitions, India reportedly pointed to the lack of symmetry in the proposals of the EEC or other ICs. The EEC proposal had no reference to "limited duration" in respect of movement of capital but only for labour.

On the structure of the framework, the U.S. and EEC reportedly felt that the balance of benefits and obligations should be left to the negotiating process, namely in the successive rounds of negotiations for exchange of concessions in a sector or sectors.

But India and other Third World countries felt this was not good enough. The rules and principles of the framework itself must reflect this balance and symmetry.

One way of doing this could be to do it on the basis of the share of a country in the international trade in services in a particular sector, India reportedly suggested. If a Third World country "A" had a "significant share" in the international trade in a particular services sector, it would have to liberalise access to its own markets. Otherwise there would be no such obligation.

Participants said that the U.S. was not prepared to mention or deal with the development issue except in terms of the preamble and objectives. This was again unacceptable to the Third World.

In respect of initial commitments and modalities of liberalisation, India and a number of other Third World countries have said that the only commitment they could undertake was signature of the framework agreement and acceptance of the obligations under rules and principles spelt out, but not any initial level of liberalisation of the access to their markets.

Any negotiations for liberalisation would have to await adequate data and statistics about the trade in services and directions of trade flows.

The U.S. and EEC would appear to have put forward an informal text about initial commitments that was rejected by the Third World participants, and even some of the Industrial countries.

The U.S.-EEC informal text would require that from the date of entry into force, some of the provisions "shall" be applied in full, subject to any sectoral annotations. The provisions to be applied would have to include "transparency", "MFN/non-discrimination", regional integration and institutional provisions.

On other regulations there would be so to say a "grand-father" clause privilege akin to that of GATT.

All other provisions of the framework would be applied by each signatory "to the fullest extent not inconsistent with existing legislation, administration regulations or international agreements". In modifying or replacing existing legislation, the existing degree of inconsistency should not be increased.

In effect this would mean that there would be a standstill and freeze on existing regulatory situation, with the result that ICS who have much more regulations and restrictions would be better off than Third World countries who have little or none now.

Signatories, as part of their initial commitments are also required to negotiate "additional commitments" in specific sectors or subsectors: to eliminate, totally or partially, immediately or on basis of a time schedule existing legislation or administrative regulations inconsistent with the framework provisions, and/or limitations and conditions on market access, and/or achieving effective market access.