Sep 24, 1987

"DEVELOPMENT" AS FOR SERVICES FRAMEWORK.

GENEVA, SEPTEMBER 22 (IFDA/CHAKRAVARTHI RAGHAVAN) – The only yardstick against which all proposals for a multilateral framework on services could be tested should be whether or not they promote the development of third world countries, according to leading third world countries participating in the Uruguay round negotiations on services.

This third world view was reportedly put forward at last week’s meeting of the Group of Negotiations on Services (GNS), when it discussed the broad concepts on which principles and rules for trade in services might be based.

The GNS was discussing Australian, Canadian and Japanese proposals for incorporating concepts like "national treatment", "transparency" in regulations and decision-making, and "non-discrimination", in a future multilateral framework on services.

In the absence of the chairman, Amb. Felipe Jaramillo of Colombia, the GATT deputy Director-General, M. G. Mathur is reported to have chaired the meeting.

Third world countries reportedly challenged the applicability or validity of some of the GATT concepts and ideas sought to be injected into the service negotiations through these proposals.

India, supported by Brazil, Egypt and Yugoslavia reportedly argued that the Punta del Este declaration and its mandate had spelt out the basic objective of a multilateral framework as "promoting economic growth of all trading partners and the development of developing countries", and all proposals and concepts would have to be tested against this criterion.

Concepts of "non-discrimination" between domestic and foreign suppliers of services (national treatment concept) or amongst foreign suppliers (unconditional or conditional MFN) were all premised on "liberalisation" and the GATT theology of "free trade".

But these were not the concepts of Punta del Este, and the most important criterion for services was creation of a multilateral framework ""s a means of promoting economic growth of all trading partners and development of developing countries".

Third world countries would test all proposals by the yardstick whether they would promote their development.

The European Communities, which reportedly agreed with this, suggested however that another important criterion in the mandate should also be considered, namely, the "expansion" of trade in services.

The next meeting of the GNS is to be held in November.

Earlier, on the issue of statistics, EEC and Japan would appear to have felt that the GNS should not waste too much time on this issue, and that the GATT secretariat should be merely asked to have liaison with other international organisations in their efforts to improve statistics on services.

India felt that while improvement of the data base was a long-term question, and depended on actions by national authorities, there could be efforts at increasing availability of existing statistics and information. The existing data base could be made more suitable for use through disaggregation in terms of sectors and countries.

Moreover, international trade in services was concentrated in the hands of a few TNCS, who had all the data and statistics, both sector-wise and country-wise. The U.S. paper showed that nationally it was trying to obtain the information from their TNCS.

Similar efforts should be made by other industrialised countries, and the information obtained should be shared with others.

The U.S. and EEC reportedly agreed to consider this.

India also raised the question of ad hoc meetings to improve statistics being organised by industrialised countries in cooperation with some of the international organisations including the UN Statistical Office. Third world countries too should be invited to participate in such meetings, India said.

The first such meeting was held last year in Netherlands, and the next is due to be held in November in Sweden.

Australia in its paper has suggested the application of the most-favoured-nation or non-discrimination concept to a service framework. Since the barriers to services trade would be mainly non-tariff barriers, Australia has also raised the issues of unconditional or conditional MFN, and the exceptions to these rules in accord with national policy objectives.

Canada, has called for the application of "transparency" to all statutes, subordinate legislation, administrative procedures, orders, guidelines, manuals, and administrative and quasi-judicial decisions of countries affecting services sectors through measures at the border or in the domestic market.

Canada has suggested that each country give advance notice of its intended regulatory measures, give reasonable time to other countries and other "interested parties" to make comments, and take these comments into account before final decisions.

In its paper, Japan has argued that "national treatment" concept in article III of GATT is one of the most fundamental and indispensable provisions, and this should be incorporated in the future services framework, but defining "national treatment" in line with the characteristics of the trade in services.

In this view, Japan has suggested that imported services, foreign service enterprises or sellers delivering the services, and their agents, should be accorded treatment no less favourable than that to domestic services, domestic service enterprises or sellers.

The Japanese paper also raises the question of applicability or "grandfather" clause to existing services regulations.

Contracting parties to GATT have agreed to apply all trade policy measures in part II of GATT, including the national treatment principle, only "provisionally" and to the fullest extent "not inconsistent with their legislation".

This is the so-called "grandfather clause" in GATT, and has been interpreted to mean that all existing legislation would be saved, but future changes should progress in the direction of compliance with GATT and not be regressive.

Japan has proposed setting up a mechanism for periodic negotiations to phase out national regulations inconsistent with the national treatment concept.

The U.S. reportedly viewed the Japanese proposals as "constructive" and wanted "creating thinking" within the GNS on these ideas. But the Nordics wanted to examine them carefully, and also spoke of the need to keep the concerns of third world countries in view.

New Zealand, Australia and Switzerland reportedly supported the Japanese ideas.

But India and other third world countries rejected the Japanese ideas as inapplicable to the service issue, arguing that the GATT concepts applicable to "products" could not be injected into "services".

India reportedly argued that the only relevant consideration for the GNS was the Punta del Este mandates. Ignoring that mandate, and injecting GATT concepts, was an effort at rewriting the Punta del Este mandates.

The Japanese proposals, in bringing in the GATT precedent, had made a quantum jump and equated the "product" with the "producer of the product" entitled to national treatment.

Neither in GATT, nor in any other framework of international relations, had countries agreed to abolish the distinction between nationals and foreigners, and could not be done for services alone.

While the Punta del Este declaration had mandated "respect" for policy objectives in national laws and regulations, some of the proposals in effect sought to phase out national sovereignty.

Also, the grandfather clause concept had meaning only to those that already had regulations in services. Third world countries were still in the process of framing such regulations, and by injecting this concept they would be precluded from future actions to formulate their policy objectives in national laws and regulations.

The concept of national treatment in GATT, it was further argued by India, was ancillary to the basic effort of GATT to negotiate reduction of tariff and other barriers to imports of products across boundaries. In the case of services, there was no question of tariff barriers at the border, and the idea of national treatment did not arise.

Hungary suggested that the national treatment concept was based on the economic homogeneity of participants, and this was not the case in services, and thus not applicable. In the Hungarian view, the non-discrimination concept was more applicable.

On the transparency issue, Canada reportedly argued that it was a liberalising principle good in itself, and the services framework should have provisions for transparency covering all these areas.

India and other third world countries however reportedly challenged some of these ideas.

If "transparency" was good in itself, they wondered whether the U.S. and Canada, now engaged in bilateral negotiations on services, would extend "transparency" to these matters and let other participants in the GNS know what was going on.

Several participants said that the vast array of information called for under "transparency" would involve expenditure of considerable human and material resources and administrative time and capacity, very scarce commodities in the third world, in gathering all such information and providing them.

This would be of interest merely to a few TNCS, and the whole exercise in making governments work for the benefit of a few TNCS appeared to be a curious approach to promoting "entrepreneurship".

As regard right of other countries, and interested parties abroad, to be given advance notice of regulations and right to make comments, etc., such rights did not accrue to their own citizens in their countries, and could not be provided to foreigners.

The U.S. expressed surprise at the objections to the "transparency" and "consultations" concepts. Even if the Canadian proposals were "ambitious", they were not new and were incorporated in GATT, and should figure in a services framework.

South Korea reportedly felt that transparency and national treatment ideas were good, but there should be no "unacceptable burdens" placed on third world countries. There could be "levels of transparency" modelled on GATT. But the concept of "advance consultations" was going too far.

Hong Kong however supported the ideas of national treatment and transparency.

Third world delegates also reportedly said that for them the "transparency" needed was in the operation of the TNCS involved in services.

The European Community felt that this was a valid point, but wanted India and others to spell out what they had in mind, and what would be appropriate in individual sectors.

In discussions of other concepts, India would appear to have sought clarifications from Australia, Canada and Japan as to how their proposals would apply in regard to labour and labour-intensive services.

When Japan suggested that labour services would involve factor movements, India argued that the Punta del Este declaration talked of "trade in services", and made no distinction amongst those involving factor movements, or between factors.

As regards relationship of any framework evolved with existing international arrangements, the U.S. and Canada reportedly said the GATT secretariat note showed that all the existing sectoral arrangements were not concerned with "trade", but were "technical" and the main objective of the Uruguay round and existing arrangements were different.

The United States would also appear to have suggested that if the existing arrangements affected expansion of trade, the proposed new framework agreement would in effect amend these restrictions.

This view was not acceptable to several of the third world participants, as well as some from industrial countries.

India reportedly underscored the Punta del Este mandate that the proposed multilateral framework "shall take into account the work of relevant international organisations". The view that agreements in the Uruguay round could amend or derogate from international agreements was not hence acceptable.

Also, "international organisations", and "international agreements" had a meaning under the Vienna law of treaties, and arrangements under OECD were not "international". Poland supported this view, and said that regional arrangements based on socio-economic conditions peculiar to them could not be considered as of universal application.

Sweden for the Nordics reportedly agreed that there should be no interference with work of other fora. Existing arrangements would have to be respected.