Nov 29, 1988

"SUBSTANTIAL AND COMPLEX" POSERS FOR MONTREAL IN SERVICES.

GENEVA, NOVEMBER 25 (IFDA/CHAKRAVARTHI RAGHAVAN)— The Group of Negotiation on Services (GNS) of the Uruguay round adopted friday night a report for the Montreal meeting that is both substantial and very difficult for Ministers to handle at Montreal and/or give guidance for the future work of the negotiators in Geneva.

The report, perhaps the longest from any single negotiating group, has in effect put-together a whole series of concepts, principles and rules that could be a basis for negotiating a future multilateral framework on services.

The concepts, principles and rules - with alternative formulations in most issues put within square brackets - are often quite fundamental and even contradictory, if not mind-boggling, and cover virgin areas of international rule-making.

No one on friday night, after the GNS meeting ended, had any clear answers as how the ministers in a four day meeting at Montreal would be able to tackle what it has taken their negotiators, after two years of exploratory talks, to hammer together into a document in a week of intense day and night negotiations.

These negotiations, at an informal level within the GNS, has not in any way been on efforts to narrow down differences of substance on the principles and rules, but present all the alternative approaches that have so far figured in the discussions within the GNS.

As one of the negotiators put it, the document enables governments at capitals, and those going to Montreal, to have some clear ideas as to what the negotiations in services is all about, what the major issues and concepts and dangers are, and know the positions of each side and perhaps their bottom line too.

A GATT spokesman said the meeting of the GNS Friday when the report was adopted was "an extremely conciliatory meeting".

The report deals with a whole series of concepts and principles that would be the basis of a services agreement, including on definitions, coverage, development dimension.

On the definition issue, for example, the report poses the questions whether the agreement should cover "cross-border movement of services", consumers of services, factors of production essential for providing services abroad, capital and labour flows, and or facilities for foreign service providers "to establish" - setting themselves up in the foreign country to produce and sell services.

On the issue-of development, one of the two primary objectives in the negotiating mandate, the formulations range from the need for this objective to permeate all the matters to be addressed in the framework to the special and differential concept in the GATT (whereby third world countries have less obligations).

Under each of the headings in the report, the alternate formulations present some sharply differing concepts and principles.

The development dimensions and concepts posed include those of access to modern technology, the concept of "relative reciprocity" or third world countries not being expected or asked to make concessions inconsistent with their development, financial and trade needs.

Another development concept posed is that the agreement "shall be compatible" with the objectives of promoting economic growth of all trading partners and development of third world countries, including improvement of technological capacities and capacity to attract and generate higher levels of investment.

It also envisages third world countries opening fewer sectors or liberalising fewer types of services transactions, and measures to promote market access opportunities for service exports of third world countries.

The concepts and principles set out include ideas like "national treatment" - whether it should be for foreign services when they across the border, or foreign service suppliers and foreign direct investment?

Questions are also posed on the issue of non-discrimination.

Also posed are issues about what would be the concept of "transparency" - mere publication of laws and regulations, or opportunity to be provided to interested parties to comment before entry into force of regulations?

There are also concepts about "safeguards" and "exceptions" to the applicable rules and principles, and the various grounds on which these can be imposed.

Another range of formulations deal with the issue of activities and practices of market operators, their compatibility with national policy objectives of third world countries, regulation of the activities of such operators, and measures to ensure that "liberalisation" of trade in services does not result in an even greater concentration of market power.

There are also formulations about market access and competition policies (preventing cartels and monopolies) in the international trade in services. These have in a sense just been flagged and remain to be further developed.

One participant posed the issues in this way:

Would these involve provisions against restrictive practices and restrictive business practices of enterprises, and what would be the obligations of home governments to ensure that their enterprises do not indulge in such practices?

What would be the right of governments in countries where the services are supplied to act against practices of such enterprises outside their territory but that impact on its territory.

And what would be the obligations-of home governments in this regard?

There are also issues relating to sovereignty of national economic space, and the power and duty of governments to regulate all sectors of its economy in its national interests, and the autonomy of third world countries to pursue macroeconomic policies and their programmes of economic development.

The need for consultation, and dispute settlement mechanisms, in any future framework, is also flagged - the issue is mentioned without any formulations.

There is also a formulation for the recognition of the existing asymmetry in regulatory situation of industrial and third world countries in the services area, and for provisions that would enable third world countries to establish new regulations - without being challenged under the framework.

Another set of issues deals with provisions for "progressive liberalisation", after a services framework agreement has been concluded and brought into force.

There are also formulations as to the future work of the GNS - how it would proceed after Montreal?

With so many formulations based on a range of issues and sharply differing concepts, the major question in the week or ten days before Montreal is how the ministers would be able to sit down and do in a week what the negotiators have been unable to do?

And how would be the ministers be able to provide any guidance on how negotiators should approach the work in the period ahead?

One participant later noted that the U.S. efforts to push the negotiations and get commitments at Montreal on its vision of a future services agreement has now resulted in the Montreal meeting being faced with a very complex document that the ministers cannot handle at all.

Several participants said that in the private "green room consultations" held earlier this week by the GATT director-general (who is also the official-level chairman of the trade negotiations committee), Arthur Dunkel had clarified some of his press conference remarks earlier in november.

At that press conference Dunkel had spoken of a "general agreement an trade in services", and the negotiations being about either "nailing down" the principles at Montreal or agreeing on a process there that would help nail down these principles.

Several third world participants had reacted sharply to this, and the clarifications were reportedly to set their minds at rest that Dunkel was not pushing for an "agreement" at Montreal on the principles for a framework.

Dunkel reportedly clarified that in his view the end result of the Uruguay round negotiations on services would be a general agreement an trade in services, and that this would quite distinct from the GATT and not a part of it.

He also reportedly underscored that the process was very complex as complex as the prolonged consultations and negotiations for the Havana charter and its final outcome in the shape of the general agreement oh tariffs and trade (GATT).

The issues were very complex and one should not expect quick results.