OPTICAL PROGRESS IN SERVICES NEGOTIATIONS.

Dec 17, 1987

OPTICAL PROGRESS IN SERVICES NEGOTIATIONS.

GENEVA DECEMBER 15 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The Uruguay round Group of Negotiations on Services (GNS) ended its work this year with a claim of "progress" in the initial phase, but recognised that the work of examination of five elements in its negotiating plan would have to be carried forward.

An agreed summing-up Tuesday by GNS chairman, Pelipe Jaramillo of Colombia, said that during the examination of the elements and other issues arising from them, the submissions and statements of various delegations would be addressed in order to achieve concrete progress in accordance with the Punta del Este negotiating objectives.

The five elements that the group had agreed to address in the initial phase of its work, and which is to be carried forward are: definitional and statistical issues, broad concepts of a multilateral framework, coverage, existing international arrangements, and measures and practices contributing to or limiting expansion of trade in services.

In the stock-taking exercise which preceded the summing up the third world countries underscoring their view that some of the elements had not been dealt with at all and others only cursorily, and that the primary objective of a multilateral framework, namely development of the third world, had received very little attention.

Australia, New Zealand and the U.S. reportedly spoke, with varying nuances, of need for concrete progress and momentum to achieve "early harvest" in the negotiations.

However, a number of third world countries insisted that even n terms of stocktaking it was premature to look for "early results", and in any event the Punta del Este declaration had envisaged this possibility only in respect of trade in goods, and not in the separate exercise on services.

Mexico rejected the notion that "development" would be served by "import of cheap services". The GATT philosophy could not be applied to the services issue, and question of services and development needed through examination, as also existing disciplines and concept of "barriers".

The EEC claimed that the GNS had made "considerable progress", but more needed to be done in the future.

The importance of need to improve available data had emerged with great clarity. Some delegations had the short-term need to improve knowledge for their negotiating ability, while there was also a longer-term need for an improved statistical system to facilitate the operation of a service agreement.

The issue of definition of "trade in services" had not been dealt with in depth, and future discussions on this would have to be oriented to the "reality" of the services trade and its important characteristic, namely that the producer and consumer had to come together at least temporarily for the rendering of the service.

In the EEC view negotiators would need to free themselves from "this shackles of traditional modes of thought". While many of the ideas in GATT could be applied to trade in services, there was need to search for a new paradigm to provide the bridge between the Punta del Este objectives and the agreement to be negotiated.

It was no longer enough to talk in "generalities", and participants should explain the implications of their ideas in terms of individual service sectors, and whether the general concepts to be used were relevant and applicable to particular service sectors.

The problem of coverage had received little attention, and this issue was linked both to the definition and existing international agreements. The EEC itself favoured an agreement covering "all tradable services".

While the Secretariat had provided information on existing international agreements and arrangements, the GNS was still to deal with the delicate question of how these would fit together with a multilateral service agreement.

The discussions had also focussed exclusively with measures and practices that might inhibit trade, and the national regulations in this area. It was clear that in one form or another the national regulations of countries would have to be examined.

In the EEC view there was need to move towards a consensus on the types of "international transactions" to be included in the term "trade in services", reconciling the need to liberalise market access with full respect for policy objectives of national services regulations, ensuring expansion of trade by liberalisation without hindering development, and the relationship between the general provisions of a services agreement and the sectoral provisions.

India argued that the negotiating plan had not conceived of the "initial phase" in terms of 1987, and the stocktaking was only in terms of review of progress in the year.

The negotiating plan had taken a pragmatic, open and flexible approach to the issues, leaving their listing, their inter se importance and order wide open.

The five elements had been carefully formulated to avoid prejudicing the position of any participant, and they had to be addressed in conformity with the negotiating objectives.

Though at the first meeting, the chairman had specified the common understanding that the objectives of "growth and development" would permeate the discussion of all the elements, this was not reflected in the submissions.

Use of technical support for the negotiations, and the relevant international organisations, had not been so far dealt with seriously by the GNS.

While there were 30 working papers on the table, a large majority showed not only "serious inadequacy" on coverage and the treatment of the five elements, but a bias in their approach.

Except for the submissions by the third world countries, and to some extent the latest paper from the community, the "development" issue had not been touched upon in the papers of Japan, Australia and Canada, while the Nordics had just flagged the issue, without any further elaboration in their proposals.

The U.S. proposal did not touch the issue at all, but simply assumed that "availability of cheap services through opening of markets would bring about development of developing countries".

The development issue had been conspicuous by its absence when rules for international trade in goods had been framed. But the Punta del Este declaration had placed the issue at the heart of the negotiating objectives on services, and the framework should be geared towards this issue right from the start.

The issue of definition had received scant attention, and without a clear understanding of "trade in services", they would be talking at cross-purposes. Much of the lack of progress on substantive issues was due to this failure.

While there had been some progress on the dimensions of the problem of statistics, they were far from having even "approximate, desegregate data on trade flows and directions" in specific sectors. Without such data it would not be possible to weigh the costs and benefits of any possible outcome.

It was also necessary to identify the sectoral coverage, and without this it would not be possible to assess on overall balance of advantages.

The sectors alluded to by industrialised countries had "a distinct bias in favour of capital and technology-intensive services".

But as repeatedly made clear "these negotiations would have little meaning for developing countries unless they encompass free access of skilled and unskilled workers from developing countries into developed countries’ markets for services".

The discussions and examination of existing disciplines and arrangements had been deficient and perfunctory. India could not accept the view that existing arrangements were "too technical and not concerned with trade aspects".

Some of these arrangements as in civil aviation, telecommunications and liner conferences, had substantive economic and trade dimensions, and some of them had dealt with the "development dimension" in ways that would guide the work of the group.

Many participants in the GNS were parties to these agreements, and it was not possible to launch on a new framework in disregard of existing ones. Nor could India subscribe to the view that the outcome in the service negotiations would automatically abrogate or supersede existing arrangements. The outcome in the service negotiations would have to be compatible with existing obligations.

Much of the ground identified in the negotiating plan, India complained, still remained to be covered. But there was "a growing inclination" on the part of some to concentrate on elaboration of the elements of a multilateral framework, without addressing the basic issues, their inter se relationships, or their conformity with the central objectives of the mandate.

Concentrating on "broad concepts and principles", while ignoring other elements would be counterproductive, and it would be "clearly unwise to attempt to ignore, downgrade or jettison" the negotiating plan and the elements identified there.

India also complained about the way the calendar of meetings was set. With the Secretariat itself taking 4-5 weeks to prepare records of meetings, there was little time to send them to capitals, and for governments there to consider and react to them before the next meeting.

"Too much concern for the ‘optics’ on the part of some participants had led to too many meetings at short intervals, leaving little time for substantive process of examination in and inputs from capitals, and more productive deliberations".

Such a process and pattern as in 1987 would inevitably result in the "progressive marginalisation" of their world countries in these negotiations and "the GNS should seriously consider this implication", India added.

Argentina said the subject was new and needed in-depth examination. National policy objectives had to be respected, and a simple transposition of GATT rules to services was not possible. Any liberalisation of trade had to be progressive and subject to future negotiations. The issues of definition, existing disciplines and coverage, which had received scant attention, had to be addressed.

The U.S. agreed that there had been insufficient work on definition and coverage, and on perceived obstacles. The GNS should move to more focussed negotiations, and an inventory should be prepared of obstacles. There was also need for discussion on sectoral coverage and on the issue of development.

The central purpose of future work, the U.S. said, should be to encourage submissions from participants, and all aspects of the agenda addressed to enable the refining of concepts like "transparency" and "non-discrimination".

There should be concrete progress in time for the mid-term review, and before the end of next year they should agree on a binding set of rules and disciplines and determines their applicability to some sectors.

Sweden for the Nordics, said there was need for sectoral specificity, and the five elements should be addressed in their inter-linkages.

Switzerland agreed that there was much unfinished work on the elements. There was also need to better organise the technical support for negotiations, and form more work on statistics but not as a precondition for negotiations.

Egypt said that it would be unrealistic to devise general principles and rules without an agreed definition of services.

It was also imperative that the GNS should influence ongoing work in other organisations on improvement of statistics so as to respond to the negotiating needs of participants. Only an improved data could provide better understanding of the economic behaviour of various service sectors, and this was a negotiating necessity.

Also, without a clear understanding of "trade in services" and what it meant, it was difficult to discuss concepts for a framework or judge their feasibility.

A future framework on services could not be a stereotype of the GATT. The ultimate objectives of growth and development could not be mere by products of liberalisation of the trade in services.

Some of the proposals had ignored questions of national sovereignty and respect for national policy objectives. There was also a tendency to overlook the heterogeneous nature of the different services.

Yugoslavia felt it was too unrealistic to expect "an early harvest". To enable progress in negotiations, it was necessary to create an appropriate climate of confidence in multilateral action. Bilateral solutions and threats of retaliation on trade in goods for presumed threat to market access in services in a given country would not create the necessary atmosphere for successful negotiations.

The concept of reciprocity implied in the proposals would mean third world countries should give up development of their service sectors and economic development in general. Reciprocity could not therefore be expected from third world countries, and the principle of non-reciprocity should be worked out from the beginning, and not as exceptions to the rule.

In accord with the Punta del Este declaration, Yugoslavia would be interested only in "that liberalisation that would boost its own economic development".

When even GATT provided national treatment to goods only after crossing borders, it was unrealistic to provide for national treatment of local and foreign producers of services.

South Korea said the negotiations should be treated in broader terms. A balance should be struck between the provider and consumer of services, as well as capital, technology-intensive and manpower related services.

The definition and coverage issues should be dealt with in depth and all three elements of the mandate should be addressed –expansion of trade under conditions of progressive liberalisation and transparency, economic growth of all trading partners, and the development of third world countries.