May 31, 1988

SERVICES - UN FORA DEAL WITH ECONOMIC AND TECHNICAL ISSUES

GENEVA MAY 27 (IFDA/CHAKRAVARTHI RAGHAVAN)— A number of UN specialised agencies in individual service sectors not only deal with issues of setting technical standards and other norms, but also deal with economic and trade issues in their fields.

This has been brought out in the responses of several of them to a questionnaire addressed by the Uruguay round group of negotiations on services.

The GNS has been mandated 'to take into account the work of relevant international organisations'.

At its last meeting (May 17-20), the GNS received responses from the international civil aviation Organisation (ICAO), the international telecommunications union (ITU), and the UN conference on trade development (UNCTAD) to specific questions addressed to them.

The GNS, which reportedly discussed the scope of the work of these organisations in their areas, in relation to the mandate of the GNS, is to resume such discussions at its next meeting in the week of July 18, according to participants.

At the July meeting, apart from this, the GNS is also expected to discuss papers received from the U.S., Canada and Japan, all aimed at settling procedures to speed up the negotiations and/or address the substantive issues.

With the responses of the international organisations and the papers of the U.S., Canada, and Japan having been received by many delegations just on the eve of the meeting, several of them reserved their comments.

Several of them underlined the need for documents and proposals to be made available sufficiently in advance to enable their study in capitals.

One delegation reportedly noted that in other forums the same delegations insisted on distribution of documents at least eight weeks before the meeting to enable discussion.

The ICAO and ITU documents explained the scope of their work in the areas respectively of civil aviation and telecommunication services, and the economic and trade activities already covered or sought to be covered through multilateral agreements.

The UNCTAD responses related to the UN code of conduct on liner conference and on multimodal transport - two areas of shipping services' where international conventions have been negotiated under UNCTAD auspices and/or are administered by UNCTAD.

The ICAO document brings out that the 1944 Chicago convention (that became effective on April 4, 1947) is a multilateral international treaty with 101 contracting parties. It defines rights and obligations of member-countries in civil aviation matters. The convention recognises the principle of sovereignty over the airspace of a country and the need to obtain special permission to operate a schedule air service into or over a country.

The ICAO representative reportedly noted that it was relatively much easier to reach multilateral agreement in technical areas. But their experience was that it was more difficult to reach such an agreement in economic areas.

The Chicago conventions, though a multilateral treaty, gave no commercial rights. This was regulated between states through bilateral agreements, and there was now a network of more 1800 such bilateral air service agreements.

ICAO's effort to institute an international air transport agreement to deal with the totality of questions of market access, the ICAO representative reportedly noted, did not succeed.

Only eleven states signed the convention, and it has remained a dead letter.

At none of the recent air transport conferences (in 1977, 1980 or 1985) nor in any other context had any of the signatories or any other member of the ICAO had ever raised the issue of multilateral agreement on access to market or air transport services, the ICAO representative clarified in response to questions.

The ICAO representative did not agree with the suggestion from one of the participants that such bilateral negotiations and treaties did not permit of an acceptable balance of advantages for the participants. ICAO’s own experience in its field did not reveal this.

On the issue of shipping services, the UNCTAD document explaining the history of UNCTAD’s involvement in this from the first founding conference and subsequent formation of the committee on shipping, notes that prior to creation of UNCTAD, the shipping industry was outside global international economic regulation or action.

Only the creation of UNCTAD and its committee on shipping in April 1965 brought international shipping industry under discussion and examination, with the participation of all parties involved in maritime transport - governments, shipowners, shippers and port authorities - in one forum where they could meet, discuss, negotiate and elaboration international measures to meet concerns of bath third world and industrialised countries.

On the liner code itself, UNCTAD has noted that the liner conferences, functioning since 1875, were "cartel-type cooperative agreements" among ship-owners serving the same trade routes. There were now 350 such conferences.

In their traditional operations, the liner conferences tended to fix freight rates unilaterally at levels that would enable even high cost members to operate profitably, and freight rates at high levels even during periods of surplus capacity.

The closed nature of such conferences caused concern to third world countries, since their shipping companies wishing to participate in such trades were denied adequate opportunities to join these conferences.

It was in this context that the UN liner code convention was negotiated and entered into force on October 6, 1983.

The code ensured rights of participation in trade of national lines and their entitlement to carry a substantial share of their countries' foreign trade. It also balanced the interests of shippers and shipowners and facilitated orderly expansion of the liner trade.

Among other things the code specified the rules for participation by member lines in the trade carried by conferences.

Unless otherwise agreed, the group of national shipping lines of each of the two countries, whose foreign trade is carried by the conference, has equal rights to participate in the freight and volume of traffic.

Third country shippers or 'cross-traders' had the right to carry a significant part, such as 20 percent, in the freight generated in the mutual trade between two countries.

The UNCTAD representative noted that liner code covered only a segment of the world total shipping market, and accounted for about fifteen percent of the total world trade. He reportedly repudiated the idea that the liner code established a shipping cartel and froze shipping shares.

The cartel arrangements had existed for a long time. Before the liner code the third world countries did not have any possibility of participating in the rate-settling mechanism, and the operations of such conferences were totally non-transparent.

The liner Code introduced transparency in the operations of this trade, and gave an opportunity to increase participation of third world countries, and also a voice for users.

Far from stifling 'free competition', it was the only liner that enabled introduction of competition into a cartel-type arrangement that prevailed before, and established equity.

The liner code had not contributed to the over-supply capacity in shipping either. The latter was due to speculative ordering of capacity by owners and enterprises, based on considerations of tax-avoidance, and made without any possible backup by orders or users.

The code also outlined the 'rights' and did not force anyone to take a prescribed share.

The ITU document brought out that the entire basis of the multilateral treaties and regulations administered by the ITU was premised on the sovereign right of each country over its telecommunications.

In each country the telecommunication administrations or recognised private operative agencies provided and operated facilities and services to domestic as well as international telecommunications to meet the needs of the public and other special users.

It was for each country to decide in its sovereign right on the establishment and regulation of such services.

Apart from its technical and regulatory functions, the ITU's mandate also involved elements associated with "international trade in services, in particular when telecommunications transport is involving in arrangements for services other than those of a telecommunication character".

Modern technology had enabled growth of a range of new services necessitating communication or information transfer through telecommunications, and 'telecommunications transport' was hence a key ingredient for practical development of and support to many service industries.

The ITU had responsibilities in this area related to the telecommunication transport function.

This function however had to be distinguished from cases where 'the transport' served as an essential ingredient in and vehicle for provision of other services - such as those connected with banking, aviation, shipping, financial and business management.

However, the current and foreseeable evolution of integrated telecommunication and computer networks, including distribution of intelligence over various points in the network, would lead to traditional distinction between transport and information processing functions becoming increasing blurred.

After last week's meeting third world and industrial country participants seemed to differ on the outcome of the discussions.

While the industrial country delegations (pushing for services framework in GATT) viewed the specialised agencies efforts as vested interests against 'liberalisation', third world participants said that the presentations showed that these organisations were not mere technical norm setting fora but those involving in economic and trade functions in their respective areas.

Some of the participants underlined that the Punta del Este mandate nowhere made liberalisation of service trade per se an objective.

The two fundamental objectives for a multilateral framework they noted are economic growth of all trading partners and the development of third world countries.

A secondary objective of the multilateral framework, is "expansion" of international trade, and the rule making in a multilateral framework is to enable such expansion "under conditions of transparency and progressive liberalisation".

Some third world participants felt that some of the sectoral agreements, and perhaps even the UN convention on law of the seas, could provide same guidance for a future multilateral framework on services, since many of these paid mare attention to the crucial issue of 'development'.

Apart from the discussions with the three international organisations, Mexico reportedly raised the issue of labour and labour-intensive services, and the need to invite the international labour Organisation (ILO) to throw light on the movement of labour across borders and the barriers applied by different industrialised countries on such movements.

No decision was taken on this and further consultations are to be held.

The discussions on the U.S., Canadian and Japanese papers were reportedly postponed to the next meeting, with a few delegations offering some preliminary comments.

Participants later said that the three countries in their papers' were trying ' to force the pace' of negotiations, and they were doing so without any reference to the crucial questions of 'definition' (of services and trade in services), the 'coverage' (or service sectors to be addressed), and the goal of development.

The EEC reportedly commented that of the three major issues definition and sectoral coverage, progressive liberalisation and respect for national policy objectives, and development through expansion of trade in services - the U.S. proposal appeared to have dealt with only one-half of the second issue.

The EEC agreed on the need to do justice to the remaining elements and issues.

A U.S. proposal to enable signatories to have a non-application clause and reservations and for supplemental agreements was reportedly subject of some cautious but critical comments from other industrial countries like Australia, Switzerland and the Nordics.