SERVICES FRAMEWORK SHOULD INCLUDE LABOUR SERVICES.

Apr 15, 1987

SERVICES FRAMEWORK SHOULD INCLUDE LABOUR SERVICES.

GENEVA APRIL 13 (IFDA/CHAKRAVARTHI RAGHAVAN) -- Any future multilateral framework for "trade in services" must cover not only those in which industrial countries have now an edge but also those where third world countries have advantage, third world countries have argued.

This viewpoint was reportedly put forth at last week's meeting of the group of negotiations on services when it discussed the elements on its agenda for the initial phase of its work in 1987, participants said.

On the "definitional" issues, the U.S. is reported to have said the definition of "trade in services" should be such as to provide for "commercial presence" - establishment of a physical presence on the territory of a country to enable a supplier of services to deliver the service.

India reportedly said that the question of "establishment" was tied to "definitional and statistical" issues and these should be tackled first. Through definition, the GNS would arrive at the kind of "coverage" (various service sectors to be covered). The definition should be about "trade" in services and not "services" or the "right of establishment".

GATT, the Indian representative reportedly pointed out, only provided for non-discriminatory treatment at the border, and granted neither a "right to export" nor an "obligation to import".

The "right to establish" went beyond these, and covered the right "to establish, produce, distribute and repatriate earnings". It had much wider consequences than "trade", and was an issue of "relocation of factors of production", and thus not susceptible to multilateral determination.

The EEC felt that no clear distinction could be drawn between "trade" and "investment" in services, and a definition should be sought that would meet the negotiating objective of promoting economic growth and development. It would perhaps be best to begin by indicating an illustrative list of sectors to be covered.

Canada felt the definition issue could best be tackled through "coverage", specifying sectors to be covered and those to be excluded. In the Canadian view all public services (like administration and health) should be excluded, as also all personal services - hair-dressers, laundry, hotels and restaurants, etc. But business services, consulting, engineering, accounting, advertising, legal, computer, franchising and leasing should be included.

South Korea insisted that the definition and coverage must include labour-intensive services and "temporary labour relocating services" there had to be an equitable balance, the South Korean delegate reportedly stressed.

Hungary agreed that no sectors could be excluded on an a priori basis. An element of consensus would have to be found, taking care of individual concerns. The illustrative list of sectors should include tourism, workers' migration, international transport, and sectors directly connected with commerce and goods, like banking, insurance and freight.

Tanzania noted that like many other third world countries it paid for services whose costs were invariably included in the goods it imported. These services included banking, insurance, shipping, telecommunications, patent costs, technical backup, etc. Tanzania also paid, for the goods exported, for the necessary services like banking, insurance, shipping, telecommunications.

As other third world countries, Tanzania suffered from a net outflow on services, through transfer pricing practices of TNCS.

The only indigenous service Tanzania, like many other third world countries, had was its labour force.

This service could be provided:

-- Through labour-intensive production for exports, where government had to provide direct fiscal assistance to such producers,

-- through immigrant labour which industrialised countries would be required to accept to enable Tanzania to compensate itself for net outflows on services account, and

-- through tourism, over a period of time, when investments in physical and social infrastructures reach a critical magnitude to enable significant incremental returns on investment.

Over and above these, Tanzania would also need to build up its technological capacity and capability, since it had no intention of taking a backseat for ever in this area.

"Any international regime of services which threatens to keep U.S. that way will not receive any political support, and no democratic process will be able to sustain an administration which gives in such a manner", the Tanzanian delegate reportedly added.

Trinidad and Tobago noted that newly independent countries like it like it were already disadvantaged, and feared that its hard-won gains since independence could be jeopardised through a services agreement.

Any framework must respect national laws and policy objectives, which in the case of Trinidad and Tobago included control over the commanding heights of the economy and getting rid of the colonial vestiges from the economy.

Switzerland felt that broad concepts on which disciplines and rules could be framed should include the general principles of non-discrimination and national disciplines. But these would need exceptions, and there would also have to be different levels of commitment for different service sectors. There should be provision for concepts like "public order" and "development", and for "safeguards" against imports.

The Swiss delegate reportedly agreed with the Indian view that there was no warrant in the mandate to start an open-ended scrutiny on the appropriateness and legitimacy of national regulations. Such laws and regulations could not be questioned.

The U.S., while agreeing on the need to respect national policy objectives, reportedly argued that any multilateral negotiations involved sovereign regulations of governments, and the only issue was whether it would be of economic benefit. There was no reason why all national regulations should not be put on the table, and the GNS examine them for their "trade-distorting" effect.

In the EEC view, the disciplines and rules should be based on several concepts, like "mutual advantage" and "transparency of rules" affecting trade in services or perceived barriers.

The concept of "national treatment" for services trade had to be different from that in GATT article III, where such treatment is only for "goods" and not for "producers of goods", and is subsidiary to the existence and legitimacy of tariffs on goods.

National treatment for trade in services would have to be on an a priori basis, and should be used as a criterion for elimination of obstacles to trade, the EEC reportedly suggested.

The negotiations on services, EEC reportedly said, had to start on the basis that regulation of services was necessary and appropriate, and policy objectives of states, which could vary from sector to sector, should be respected.

Another concept in the EEC view would be increasing "international competition" as a stimulus to efficiency and growth. There should be a progressive opening up of national markets for international competition, with negotiations resulting in its increase rather than decrease, and ensuring there was no domination by a few suppliers. There should be progressive liberalisation, but not at too fast a pace.

The promotion of development, in the EEC view, should be tackled through various elements of the rules, and not separately.

India had some "logical difficulty" in dealing with broad concepts without prior agreement on definition and sectoral coverage.

The concept of national treatment being advocated implied a certain definition, and introduced a "revolutionary notion of equality of opportunity for producers of services". It visualised "a different world from ours, one where there would be 'equality of opportunity for foreigners in national economic endeavours".

India also had problems in discussions on appropriateness of national legislations, since it raised the question as to who would determine the appropriateness of a national law. It was hence best to start from the concept of "expansion of trade in services".

While India had no quarrel with the concept of international competition leading to growth and development, it was for third world countries to define "development" and not have this determined for them by others on some "theoretical considerations".

"Liberalisation" could take place only to the extent it was consistent with and promoted development, and "trade in services" should not constrain development.

"There can be no free field for TNCS and their growth in any system visualised for services", according to the Indian delegate.

The U.S. however argued that there could be no individual "country-determination" of development, and "national treatment" should serve as an important benchmark to determine the appropriateness of national legislations.

Rejecting this, India underscored that development had many common denominators. "While efficiency is one, self-reliance is another, and the test has to be applied by a developing country for itself, and not by someone outside determining it for them".

Egypt agreed that "transparency" should be one of the concepts, but said this applied not only to governments and their rules, but also to suppliers of services.

Like India, Egypt too had difficulty in accepting the concept of national treatment for "suppliers" and "producers" of services. Another concept of importance to Egypt was that of "infant industry".

Japan wanted all participants to notify the GATT Secretariat of all "measures and practices" relating to trade in services in their countries, so that the Secretariat could "categorise" them to enable the negotiators to tackle them for each type of service activity and transaction.

Among measures and practices that Canada saw as perceived barriers were barriers to movement of personnel, regulations on investment and establishment, exchange controls, government dumping, government monopolies and private monopolies and oligopolies sanctioned by governments, government procurement, government subsidies for production and for export, local supply requirements, and price regulations.

Brazil rejected such an approach that regulations per sec could be regarded as barriers. In fact the absence of regulations, the Brazilian delegate reportedly added, could inhibit or distort trade in services.

India also rejected the view that regulations could be seen as barriers. Also, in the Indian view, the measures and practices to be covered in any services framework must include those by TNCS.