Mar 17, 1989

TNCS ROLE INSEPARABLE FROM SERVICES FRAMEWORK ISSUE – UNCTAD.

GENEVA, MARCH 15 (IFDA/CHAKRAVARTHI RAGHAVAN)— Issues relating to trade in services could not be addressed without examining the role of transnational corporations, a top official of the UN conference on trade and development has declared.

The Director of UNCTAD’s Trade Programmes Division, Bhagirath Lal Das was responding to the debate in the trade board's sessional committee on trade issues.

Issues relating to services, arising out of the UNCTAD-vii final act which asked the secretariat to analyse implications of issues raised in the context of trade in services, is one of the trade items before the Committee.

A secretariat report had highlighted the role of TNCS, both in their ability to provide services through advances in information and communication, as also possible negative effects because of concentrations of ownership and corporate policies and control over markets.

Trade liberalisation in services, the report had said, could further the development process if it were accomplished within a multilateral contractual framework which would enable third world countries to effectively implement policies to develop their service sectors and which would recognise legitimacy of such policies without being designated as "unjustifiable" or "unreasonable".

The Group B countries, in their intervention at the Committee had complained about the secretariat's recommendations on various issues relating to the multilateral framework now being negotiating in the Uruguay round.

It was not "appropriate" that the secretariat should have advocated positions on issues being negotiated in another forum, they said.

They were also critical of an approach, which they claimed suggested protection of domestic service sectors and import-substitution policies, arguing that liberalisation and import of services from the industrialised countries and foreign suppliers would be more beneficial.

The Group B countries had argued that TNCS in providing services to third world countries were contributing to the development process, and UNCTAD should not have suggested that any services agreement benefiting TNCS was "contrary to the interests of developing countries".

"Profitability and development", the OECD Group declared, "are not mutually exclusive. Some might even argue that profitable operations of companies can make significant contributions to development".

Das agreed that "profitability is certainly not inconsistent with development".

"The main problem", he added, "is who gets the profit and whether profit is gained at severe cost to the process of development?"

"The fact that services have become such a major source of value added and profits is clearly one of the reasons why the issues raised in the context of trade in services are the subject of such intense interest in international fora".

Responding to some of the other points raised, Das noted that the UNCTAD-VII mandate to the secretariat had specifically referred to "issues" raised in the context of trade in services, and it was not possible to discuss "issues" while avoiding those being discussed in the Uruguay round.

On the complaint that an "artificial division of interests along north-south lines", had been created, Das pointed out that both the current report and last year's Trade and Development Report (TDR), UNCTAD had not grouped third world countries into "one homogenous bloc".

The secretariat had examined services in the domestic economies and export sectors of both third world and industrialised countries as well as socialist countries.

But UNCTAD had found that the situation of third world countries had demonstrated a variety of common characteristics clearly differentiating them from those in the OECD countries.

Such characteristiques included weak infrastructures for telecommunication services, lack of development of advanced producer services, and deficits in bop on services trade, except in tourism and labour-related services.

UNCTAD reports had also stressed the differences among third world countries, with in-depth examination of some individual countries.

One of these groups of countries had their main export earnings from services provided by their nationals abroad.

Increased transfer of technology and access to information networks could permit these countries to eventually export services without needing movement of their labour abroad.

"But it remains difficult to imagine how, in the foreseeable future, these developing countries could effectively benefit from liberalisation of trade in services where such liberalisation did not extend to movement of persons".

Outlining also conclusions in respect of other groups of countries with large deficits in services trade, Das said there was no intention on the secretariat's part to imply that imports of services inherently constituted a loss for third world countries.

However, imports of expensive foreign services could exacerbate debt-induced balance of payments disequilibria.

The report had in fact suggested import of services could make a major contribution to development, but within a proper policy framework.

As to the TNCS, no one could deny they were dominant in the world markets for a number of services, especially the most technologically advanced information-based services.

The UNCTAD official added: "this is a fact. One cannot address issues arising in trade in services without examining the role of TNCS in such trade. This is reality, notwithstanding theories of free trade and pure competition."

Current and past UNCTAD studies had clearly recognised the potential positive contribution of TNCS to transfer of technology.

"A country, developing or otherwise, intending to liberalise its regime for trade in services will have to devise a policy framework for its relationship with TNCS," the UNCTAD official pointed out.

"A country wishing to increase its exports of services will have to confront competition from TNCS. Any country wishing to upgrade its technologically advanced services will have to take into account the potential contribution of TNCS."

Hence the opinion in the document that "an adequate policy framework at both national and multilateral levels will serve to ensure that the contribution of TNCS to development objective is positive and thus allay some of the inhibitions they might have in progressively liberalising their trade in services".

In other comments on protectionism and structural adjustment issues, Das said that, contrary to some observations, the UNCTAD report and its annexes had provided a complete list of information about, trade liberalisation in third world countries as well as "steps in the other direction".

However, the UNCTAD official added, there was a slight distinction in the trade measures of third world countries and those of industrialised countries.

In third world countries tariff and Non-Tariff Measures (NTMS) were applied for four main reasons: revenue considerations, infant industry protection, priorities in development process and priority in utilisation of foreign exchange since most of them suffered from foreign exchange shortages.

This was different from the protection in industrialised countries, where such protection was oft en for "uncompetitive industries".

Actions of third world countries, Das said, were interlinked with their development process and not related to protecting a particular uncompetitive industry.

Similarly, in industrialised countries structural adjustment related to trade was mostly for facilitating adjustment from uncompetitive industry to competitive ones.

In third world countries, on the other hand, structural adjustment related to trade was fully inter-twined with development. Preferring competitive industries to uncompetitive ones was only one of the aspects. "The major aspect is one of under-development".