Nov 25, 1989
SERVICES - THIRD WORLD PAPERS UNDERSCORE DEVELOPMENT.
GENEVA, NOVEMBER 24 (BY CHAKRAVARTHI RAGHAVAN)— The Group of Negotiations on Services this week received papers from a number of countries outlining their ideas on the elements of a possible multilateral framework agreement on trade in services. The proposals included those from Indonesia, Peru and Mexico, as well as from Austria and Japan. A Brazilian paper has formally incorporated the detailed views it had made at the last meeting of the GNS in October. The GNS discussed these papers, as well as hearing comments on papers that were tabled before the last meeting, including the U.S. draft of a legal agreement. Among the comments on the U.S. paper at this week's meeting was reportedly one from Brazil which dismissed the U.S. paper as so far out of the realm of the GNS mandate that it was more like "a piece of science fiction". The "development" dimension and the need to deal with it as a. central issue was a common theme of various interventions, papers and comments from third world delegations. Participants said that in the formal and informal discussions there was now a growing consensus that the "development" issue was one of co-responsibility, to be addressed by all countries and dealt with in the framework not as an exception, but as an integral part of the structure. In their papers or comments, third world delegations have been underlying the concept of "relative reciprocity", meaning the contributions from the third world could be less and related to their development, "transparency" having to involve obligations of private operators, and rejecting the concept of prior consultation by countries with enterprises or their governments before promulgating or enforcing regulations. Several of third world interventions and papers also made clear that there could be no discrimination in the agreement between factor mobilities of capital and labour, and labour and labour-intensive sectors would have to be included to gain participation of third world countries. Access to technology and provisions against various restrictions and practices of private operators were some of the other issues needing rules in the services framework. Some of the papers, as that of Austria, participants said also showed that as delegations get into details of the possible elements and issues of "liberalisation" there were considerable differences of approach even among the industrial countries. The Japanese paper calls for a standstill and rollback of existing regulations, but at the same time talks of many of the proposed principles and concepts as needing further study. Indonesia in its communication has called for a "flexible, process-oriented, building-block" approach that would fully take into account the special needs and circumstances of third world countries. For third world countries, the most important concept in trade issues was that of development, and the concept of special and differential treatment or special and more favourable treatment of third world countries. These had to permeate all the negotiations in the Uruguay Round. But S and D was "a means to an end", and the most fundamental end was that the new rules in international trade should be consistent with and not inimical to development objectives of third world countries. Any framework agreement in services must reflect these third world concerns. For third world countries to be actively engaged in the negotiations on trade in services, problems relating to their participation in service activities must be concretely dealt with. It was "the basic building block" before other aspects or principles. The participation of third world countries in a services framework could be more speedily attained only if their long-term considerations were reflected in the framework. For all countries the service sector was less well known than goods and a thorough grasp was needed of the economics and business of trade in services. Third world countries stress on definition of trade in services was an expression of "genuine concern" and not "trivial". While some general rules relating to goods trade might be relevant to services trade, other rules might not be, and there should be no "mechanical" transposition of rules in the goods sector to the services. "An overly legalistic approach" was also "undesirable". The framework agreement should first define the broader context of an international agreement on trade in services. Sectoral agreements or annotations could then be negotiated applying the general principles of the framework. The basic principles and concepts in the mid-term accord were only "illustrative" and were considered "open-ended". The mid-term accord on strengthening of domestic service capacities of third world countries implied strengthening capacity of their domestic corporate entities as an integral part of the framework. Hence, principles like "national treatment", "MFN" and "reciprocity" cannot be applied in an absolute and abstract manner. The sectoral testing exercise had shown that the third world countries were the principal markets for many of the trade in services. Virtually all the third world countries were importers. Liberalisation was in large part a process of opening up third world markets, and this had to be done under proper conditions and with adequate developmental provisions. No factor movements could be excluded. Since third world countries were competitive in labour-intensive services, there could be no permanent exclusion of labour as a factor mobility. In sectoral agreements, conditions for labour mobility could be specified, but it could not be excluded. Service sectors of export interest to the third world should be opened up to demonstrate the mutual benefit of this trade. "Any process of liberalisation that would only meet the needs of a group of service-exporting countries would not reflect a fair application of the concept of participation of developing countries". Foreign participation should help the development of domestic service-providing enterprises and make the domestic economy more efficient. Besides safeguards to ensure appropriate macro-economic management as in bop and other related matters, there should be safeguards at level of enterprise development to strengthen capacity of third world countries. This would have to be done through a "dynamic infant-industry approach". The concept of "gradual liberalisation" and strengthening of service capacities of third world counties implied the strengthening of their business entities and this would need, as part of the agreement, at least two provisions: The conditions of entry of foreign service providers to a third world country should have specific provisions to enable conditions to differ from sector-to-sector, depending on sectoral strength of third world domestic enterprises. Once Foreign Service providers enter a market, they could have "relative national treatment", with nationals of the country receiving more favourable treatment, but under transparent and predictable rules. Trade in service was a series of complex transactions. Hence liberalisation should not be perceived on a sectoral basis, but in the form of liberalisation of transactions. There should be no formal or direct linkages between negotiations in services and that in goods. Many third world countries had already taken unilateral liberalisation measures in services trade, particularly in banking and finance and they should be given credits for these. Peru, in its paper has said the framework agreement should be as wide as possible, and cover the majority of tradeable sectors and transactions, with some general rules and principles that would serve as a basis for successive rounds of negotiations for granting and receiving concessions. The rules for transparency should provide for publication of laws and regulations of sectors included in the agreement, with possibility of national enquiry points to be studied in greater depth. The transparency requirement should not merely apply to states, but also to economic operators. Those benefiting from market access should provide regular information on structure, policies, activities and operations, with reasonable safeguards to protect confidentiality of legitimate trade secrets or confidential trade information". But there could be no provisions for concepts like prior consultation, prior notification or counter-notification. Progressive liberalisation did not imply dismantling or deregulation of national laws and regulations, but rather reducing the negative effects of such laws and regulations. Third world countries would liberalise less sectors and types of transactions, and their offers would be in keeping with their national development objectives. As a general rule, third world countries would have a longer time-frame for adjusting their national laws in the sectors or transactions they undertake to negotiate. The concept of relative reciprocity implied that third world countries should not be expected to grant concessions inconsistent with their developmental, financial and trade needs. Since unequals could not be equals non-discrimination need not symmetric. National treatment was a long-term objective and not an automatic right, and subject to national requirements about public order and national security and without prejudice to national development objectives. It should also be equitable. Hence third world countries might temporarily grant more favourable treatment to their nationals in comparison with foreign suppliers, but without discriminating between foreign suppliers. In allowing market access, third world countries should be able to prescribe conditions relating to transfer of technology, training national personnel, access to information and distribution channels, and request reinvestment in the country of a percentage of earnings of foreign operators for development of national services infrastructure. In its paper, Mexico too has underscored the development d t mention and measures to attain balance of interests. Since competitive advantage and export potential of third world countries lay in labour and labour-intensive services, it was not possible to omit from the framework transborder mobility of this production factor and of labour-intensive sectors and activities, while favouring mobility of capital. At present third world countries were much more liberal on foreign direct investment and more so than industrial countries on labour. The inclusion of labour services was hence essential for the balance of interests of all participating countries. Also, there had to be balance in the negotiations between treatment of "temporality" of international flows of labour and capital. At present third world countries face a great array of obstacles in access to modern technology and particularly to information networks, where access is a priori being conditioned or influenced by financial factors, legal factors (like private systems, reserved access, discriminatory access) or technical factors. The framework agreement should provide for elimination of all such obstacles to technology transfer through provisions geared to: * Prohibition of measures and or practices limiting or impeding access to information networks and distribution networks for services as well as technological innovations relating to this sector, * Elimination of measures impeding or limiting free choice in acquisition of technologies or those that restrict access through price manipulations, * Facilitate training of local personnel, * Promotion of participation of national suppliers in r and d activities conducted by the foreign supplier, and * Establishment of "inquiry points" on services technology available in industrialised countries and on demand for services technology in third world countries. In terms of relative reciprocity on the demand side, the contribution of various signatories in the multilateral agreement must be in proportion to their respective levels of development. Third world countries should be able to open up fewer sectors or liberalise fewer types of transactions. On the supply side, it must be ensured that services of export interest to the third world are negotiated in this and future rounds on a priority basis. Liberalisation was not synonymous. with deregulation nor should it be interpreted as a process of gradual harmonisation of national laws and regulations. The Mexican paper opposed the U.S. idea of a negative list - an agreement with an annex mentioning all service sectors to which the agreement but enabling individual countries to exclude specific services sectors or parts of sectors. In Mexican view the approach should be of positive lists of concessions to be included in national schedules. National treatment could not be provided immediately on providing market access, but only gradually and according to a negotiated calendar that could be different for each service sector or transaction. While transparency provisions should require publication of national, state or local laws and regulations, there could be no provision obliging a country to consult with any government, individual or enterprise of another country prior to implementation (as suggested in the U.S. and other papers from some ICS).