NEED TO ENHANCE NEGOTIATING CAPACITY IN SERVICES

9:03 AM Oct 2, 1995

NEED TO ENHANCE NEGOTIATING CAPACITY IN SERVICES
Geneva 30 Sep (Chakravarthi Raghavan) -- The increased participation of developing countries in world trade in services is essential if they are to derive benefits from globalization and continue to participate actively in the process of progressive liberalization of trade in services, the UNCTAD Standing Committee on Developing Services sectors has affirmed this week.

The Committee, chaired by Mrs. Magda Shahin of Egypt, in agreed recommendations at the end of a week-long meeting, asked UNCTAD to focus its work on measures to overcome the impediments faced by developing countries in competing in this sector, and in particular enhance their negotiating capacity so as to obtain greater market access in services sectors and modes of supply of export interest to them, especially to the LDCs.

The Committee agreed on a future work programme focusing on:

* impact of subsidies, government procurement, safeguards and anti-competitive practices on development of competitive services sectors in developing countries and trade in specific service sectors as well as improvement on information on current practices in these areas;

* study and analysis of trading opportunities made available as a result of market access commitments on temporary movement of natural persons in the GATS and the effectiveness of such access, as well as barriers impeding effective temporary movement of service suppliers;

* sustained result-oriented approach in dealing with problems faced by developing countries in enhancing their access to and use of information networks and distribution channels;

* strengthening and making operational the Database on Measures Affecting Services Trade (MAST) with the cooperation of UNCTAD Member States, international and regional organizations and the private sector -- giving priority to (a) areas of ongoing negotiations at the multilateral and regional level, (b) responding to requests for cooperation from countries and regional and sub-regional arrangements and (c) disseminating the MAST, in particular to the private sector.

A secretariat report before the meeting noted that while for some services distribution takes place through movement of goods or persons, an increasing variety of services could be supplied through information networks since these not only provide information about services offers, but constitute the channel for distributing the service itself.

Article IV of the General Agreement on Trade in Services (GATS), provides for the possibility of facilitating the increased participation of developing in world trade in services through negotiated specific commitments relating to improvement of access to distribution channels and information networks. Art. XIX enables developing countries, in providing access to foreign suppliers, to attach conditions aimed at achieving the objectives of Art. IV -- such as providing access to information networks and distribution channels. The GATS Annex on Telecommunications also provides that conditions relating to the export of telecommunications services can be attached to the use of public telecommunication transport network.

However, the report says, "for developing countries to derive effective benefit from such provisions, it is essential that they determine what is to be negotiated and with whom, and how they can strengthen their negotiating position in such negotiations".

The secretariat report says that the GATS negotiations are the appropriate forum for pursuing effective access, where such access is impeded by government regulations and cites as an example the difficulties of developing country personnel to enter a country for the purpose of providing support services to software exporting.

This could be addressed in the negotiations on movement of natural persons, the report says.

[The recently concluded negotiations at the WTO on movement of natural persons has however been very meagre, and several of those making some concessions have incorporated several conditions that would enable them, through their visa rules, to make them less useful for the developing country exporters]

The underlying concept of the provisions of Articles IV and XIX of GATS and the Annex on Telecommunications Services is that negotiations on specific commitments should enable development of the developing countries' own domestic capacity in the telecommunications, information and distribution industries, and facilitate their access to networks and distribution systems as a condition for access to their markets.

A variety of such conditions could be attached, UNCTAD says. For e.g. foreign software and audio-visual service suppliers could be obliged to distribute national products in their world wide networks; hotel chains could be required to provide reservation services for domestic hotels etc.

"The problem is not in devising conditions, but to put them into effect, given the weak negotiating position of most developing countries in dealing with foreign investors, particularly when such conditions may be resisted by the home countries in the GATS context."

The report notes that while Article IV of GATS could be used by developing countries, "a failing of that article is that there is no obligation on developed countries to provide such access but only to negotiate specific commitments".

While developed country governments could argue that they could not oblige private firms to provide access to their proprietary networks, they could recognize the right of any developing country to request such access as a condition of market access, regardless of what might be written in the schedule of commitments and encourage their firms to cooperate, the UNCTAD report says.

The report also notes that quite often the barriers to developing country exports of services or access to networks is often due to the business practices of firms of developed countries.

In some cases, such practices may be contrary to competition or anti-trust laws and "there is a need to 'preempt' a 'new generation' of network related anti-competitive practices", UNCTAD says.

But other practices might not fall in this capacity and have to be dealt with through measures to strengthen the position of domestic service exporters such as in the case of computerized reservation systems,, where developing country practitioners could negotiate through intermediate bodies such as trade associations to represent the collective interests of small and medium enterprises.

Developed country governments could also be requested to ensure "good and fair practice", while the private sector could respond by developing self-regulatory codes of practice.

The report says that development of telecommunications and computer-related infrastructures remain a priority for developing countries. National governments need to pursue continuously the notion of "adequate infrastructure" which encompasses the issue of attracting foreign capital, maintaining adequate control over domestic telecommunications and encouraging technology transfer.

They also need to study the notion of "adequate regulatory environment". Policy-makers should be prepared for a host of legal and regulatory issues that might arise at national, regional and international levels, which will influence the way the telecommunications sector is restructured as well as other related developments such as software copyright, data protection, computer crime and electronic funds transfer.

However, UNCTAD says, there might not be too much scope for enhancing access to networks and distributional channels through intergovernmental negotiations. The main role of developing country governments could be to take measures designed to strengthen the negotiating position of their firms, including setting up national or subregional networks of service suppliers which could negotiate as a group with the foreign firms. "In any case, effective use of 'Information highways' to supply services could be a means of bypassing proprietary networks."