Oct 28, 1989

THIRD WORLD CONCERNS ON "DEVELOPMENT" ISSUE IN SERVICES.

GENEVA, OCTOBER 26 (BY CHAKRAVARTHI RAGHAVAN)— The development issue has been exercising the minds of many delegations in the discussions this week in the Group of Negotiations on Services (GNS), according to GATT sources.

The GNS, which has started the process of assembling elements for a draft agreement, has before it several drafts and papers. Switzerland and New Zealand have each put forward outlines for a framework, the EEC has tabled papers on some elements (definition and non-discrimination), and Singapore has outlined some preliminary views on approaches. The U.S. has put forward a draft legal text. South Korea and Peru are among who have also put forward papers or communications.

The GNS discussions were focussed on the Swiss and New Zealand papers. Under the 10-day rule, only papers that have been available at least ten days before a meeting would be discussed. All the other papers came in during the meeting, or just before as the U.S. text.

At this week's meeting, while some preliminary comments were offered on some others, including the U.S. text, substantive discussions would take place only at the next meeting in November, GNS sources said.

However, they added, some of the comments on the Swiss or New Zealand papers also had relevance to the U.S., EEC texts, particularly on issues of right of "establishment" or "commercial presence" for foreign service providers and capital.

GATT sources said that the Indian and Brazilian presentations and interventions made some substantial points relating to the development and other issues, and the views were shared by a number of other third world countries.

In comments outside, third world sources viewed the U.S. draft as going far beyond the scope of an agreement for "trade" in services, and a throwback to the U.S. pre-Punta del Este position for a general services agreement involving all aspects of service activities.

U.S. officials privately concede that the U.S. proposals probably raised some difficult issues of sovereignty and independence for third world countries, but that the U.S. had proceeded on the basis of its sincere belief that the best way to develop was through foreign investment.

However, the officials noted that the U.S. was open to negotiations, and would have lost the game if it got an agreement it sought but did not get adherents of the major third world economies.

Under the U.S. scheme, the GATS would have an annex of covered service activities (to which the rules and principles of GATS would apply). The GATT secretariat is to develop the annex, with the approval of the contracting parties to the GATS, with each signatory feel to specify in a schedule or column which sector or part would be excepted by it.

U.S. trade officials would not specify which sectors or sub-sectors the U.S. would except or exclude in respect of the "covered service activities" that would be covered under the scheme of the agreement proposed by them.

However, comments by them in the earlier GNS exercise of "testing" principles in selected sectors, as well as reports of differences in Washington amongst treasury and the USTR as well as congress, suggest that the U.S. would end up by excluding at least maritime and civil aviation transport, and banking and financial services.

GATT sources said that, in some extensive comments on the Swiss text, India, supported among others by Egypt, Brazil and Yugoslavia (as well as Singapore and South Korea in presentation of their own papers) had outlined some aspects of their concerns and views.

All of them felt that it was too premature to consider the relationship between GATT and GATS.

The GATS now could not go beyond a very general agreement on selected principles like MFN or transparency. It was too premature to make any other commitments beyond that in the mid-term accord on progressive liberalisation.

Brazil reportedly amplified that the GATS could at this point only have a general commitment to progressive liberalisation of "trade in services", according to agreed definition in the framework of this term, MFN treatment, and "transparency" or commitment to publish laws and regulations within acceptable limits of policies.

After the Uruguay Round is concluded, there could begin negotiations on which sectors could be opened up for liberalisation and compatible with development objectives and access to technology.

India reportedly insisted that the balance of interests between industrial and third world countries, recognised in the mid-term accord, should be recognised in letter and spirit in the proposed framework. The development issue should be translated into principles and incorporated in the framework, and not merely dealt with in terms of longer time periods for compliance.