Nov 17, 1982

WHAT US WANTS IN TRADE IN SERVICES AND INVESTMENT

Geneva Nov 15 (IPS/by Chakravarthi Raghavan) -- The large number of sectors and wide array of issues that the United States wants to bring into GATT under the terms 'trade in services' and 'trade related investment issues' have been spelt out in an occasional paper published by the International Monetary Fund. 

The IMF staff paper itself questions whether GATT would be the right forum to tackle the issues. 

Inside GATT, the US has been vague and ambiguous as to what it seeks to get through these issues. It has only been talking about their trade distortion effects and need for studies leading to negotiations to remove impediments in these areas. At Third World capitals it has been putting forward, what one diplomat here calls 'partial truths' in selectively spelling out in the country concerned the range of subjects under these issues. 

In discussions here, it has made clear that its ultimate objective is to have a code, and through it bring these sectors under Article I MFN treatment provision, and Article III 'equal treatment to national and foreign enterprises provisions' to these sectors, and thus enabling it (US) to retaliate against countries imposing restrictions by restricting their own exports of goods to the USA.

 Official US viewpoints from Washington, circulated around the world by the media, have projected the opposition from the Third World as coming mainly from India and Brazil, and that other Third World countries would not benefit from restrictions but only through GATT liberalisations. 

The range of subjects and impediments sought to be removed and thrown open to GATT 'liberal' free trade principles would however suggest that almost every country would be affected in one sector or another, and the only job for governments would be those envisaged by Adam Smith - law and order, and military to buttress it, and provision of water and sewage facilities. 

The IMF paper itself notes that in international discussions, the US priority in the services sector relates to areas of telecommunications, data processing and information services. 

Government regulations and restrictions in these areas, the IMF says, are motivated by a vast array of considerations and may serve legitimate domestic and social objectives such as protection of data an grounds of privacy or national security considerations, and in the telecommunications sector ensuring reliability of services at reasonable prices. 

The problems of identifying and limiting restrictions to trade in services, the IMF says, involves both technical and policy considerations, and 'it is far from certain whether the problems can or should be addressed primarily from the standpoint of trade policy in such forums as GATT or it should involve specialised agencies such as the International Telecommunications Union and the World Intellectual Property Organisation'. 

On the investment issues too, the IMF paper points out that several GATT members have questioned whether these could be dealt with in isolation from broader issues of private capital flows and role of TNCs - issues under study in various UN specialised agencies. 

The Fund-Bank task force on private foreign investments, it notes, concluded in July 1980 that the central issue with foreign investment incentives and performance requirements was "how to reconcile host countries' legitimate needs to pursue their national interests through their use with the need to ensure that investment capital was channelled to its most productive uses. Trade-related investment performance requirements, raise the additional issue of how to identify trade diversion or injury to third countries' trade interests and how to take steps to prevent or avoid it". 

The areas apparently covered by the term 'trade in services' would appear to be: accounting, advertising, automobile and truck rental and leasing, banking, building, construction and engineering, franchising hotels and motels, insurance, legal services, motion pictures, telecommunications, data processing and information services, air transportation and maritime transportation. 

On the investment side come performance requirements on domestic economic considerations, financial requirements, manpower requirements, trade-related requirements, and others. 

On the basis of the information provided by the US authorities, the IMF paper provides what is called 'illustrative summary of impediments in trade in services', which are even more interesting: 

-- Accounting. Requirements related to supervision of audits by locally registered firms: special examining requirements for foreigners. 

-- Advertising. Prohibition on foreign-produced Radio and TV commercials: minimum 51 percent local equity requirements for firms: lower commissions authorised for foreign advertising agencies: discriminatory censorship requirements: import duties on advertising materials. 

-- Automobile and truck rental and leasing. Domestic price controls on leasing charges: discriminatory capital requirements: restrictions on payments of intercompany accounts.

 -- Banking. Limitations on establishment of new branches or subsidiaries of foreign banks: maximum limits on foreign equity participation: limitations on lending activities of foreign banks: discriminatory taxation: limitations an employment of foreigners. 

-- Building, construction and engineering. Licensing and joint ventures requirements, requirements to retain a local representative: discriminatory taxation of foreign engineers, preferential treatment of local firms for government contracts: direct and indirect subsidies to local firms: limitations on employment of foreigners: examination requirements for foreigners. 

-- Franchising. Disclosure of trade secrets: licensing requirements to discourage foreign firms: inadequate trademark, patent or copyright provisions. 

-- Hotels and motels. Maximum limits on foreign equity participation: discriminatory taxation: restrictions on employment of foreign personnel: discriminatory tariff and customs procedures. 

-- Insurance. Maximum limits an foreign equity participation: denial of access to market: state monopolies: requirement that imports or exports must be insured with domestic firms: limitations on reinsurance by domestic firms with foreign firms: restrictions on types of insurance services offered: minimum statutory deposit requirements: obligatory use of national firms in some cases: limitations on choice of auditors: discriminatory taxation: preferential treatment for local firms for government insurance: limitations on employment of foreigners. 

-- Legal services. Limitations on types of law practised by foreign attorneys, restrictions on entry: examinations and professional standard requirements. 

-- Motion Pictures. Restrictions on rental terms of foreign films, state monopolies: required use of local laboratories: dubbing requirements: screen quotas: restrictions an imports of films: discriminatory taxation: direct and indirect subsidies to local firms. 

-- Telecommunications, Data Processing and Information Services. Limitations on foreign equity participation: restrictions an availability of leased lines: data processing required to be performed locally: licensing restrictions direct and indirect subsidies to local firms: restrictions an foreign personnel: discriminations in customs valuation between computer and data processing services transmittal through a telecommunications system or through physical software products: tax on imported microfilm documents: import duties an automated airline reservation system equipment: lack of patent and copyright protection. 

-- Air Transportation. Restriction on foreign carriers' participation in automated reservations and ticketing systems: limitations on use of airports by foreign carriers operating charters: monopoly an ground handling services to national carrier or government agency: preference to national carriers in airport facilities and services: discriminatory taxation: government employees' travel limited to national carrier: direct and indirect subsidies to national carrier: preferential user rates for national carrier: preferential marketing and sales practices (commissions, discounts) favouring use of national carrier. 

-- Maritime Transportation. Discriminatory bonding requirements: licensing requirements: discriminatory taxation: obligatory or preferential use of national flag vessels: bilateral cargo sharing agreements. 

The investment issues listed in the paper are: 

-- Performance requirements based on domestic economic considerations. Location in development areas: local content requirements: technology transfer considerations: restriction of foreign investment in certain sectors: encouragement of foreign investment in priority sectors: limitations on foreign acquisition of domestic firms: limitations on size of new investment projects. 

-- Financial performance requirements. Foreign firms required to put up a certain amount of own capital: local equity participation requirements: limitations on borrowing: limitations on remittances abroad. 

-- Manpower requirements. Job creation: registration and/or limitations of foreign employees: training of local employees: management participation. 

-- Trade-related requirements. Export requirements: import-substitution requirements: general balance of payments considerations. 

-- Others. Language, health, safety and environmental considerations, real estate and construction restrictions or permit requirements.