SUNS  4296 Wednesday 7 October 1998

Trade: UNCTAD to assess impact of GATS liberalization on South



Geneva 5 Oct (Chakravarthi Raghavan) -- The UN Conference on Trade and Development (UNCTAD) has been asked to prepare, with the World Trade Organization, an assessment of the impact on developing countries of liberalization under the General Agreement on Trade in Services (GATS), and convene three expert meetings on commodities, agricultural trade and air-transport services.

The mandate came from a meeting of the UNCTAD Commission on Trade in Goods and Services and Commodities that concluded on 2 October. The Commission's recommendations and agreed conclusions will go before the Trade and Development Board.

In terms of the WTO and the Marrakesh decisions, a new round liberalization talks under GATS is to be undertaken in 2000. Art. XIX of the GATS requires that, before each round, negotiating guidelines and procedures "shall" be established, and for this purpose, the Council for Trade in Services "shall" carry out an assessment of trade in services in overall terms and on a sectoral basis with reference to the objectives of the Agreement, including the objective (set out in Art. IV) of the increasing participation in services trade of developing countries through negotiated specific commitments.

This last is to include strengthening the domestic services capacity of developing countries, in efficiency and competitiveness, improvement of access to distribution channels and information networks and liberalization of market access in sectors and modes of supply of export interest to them.

Very little, if at all, has been achieved on any of these, and in the mode of supply of interest to developing countries, namely, supply of services through movement of natural persons, there has been at best some "token" commitments, hedged in by subjecting them to immigration and other border controls, needs tests etc.

Another issue relates to the problem negotiators face, namely lack of statistical data on services "trade flows" and directions of trade.

While trade negotiators on market access for trade in goods have data on the trade flows and directions of their export and import trade, and could thus estimate the costs and benefits of any concessions they make or get, services negotiators have been handicapped by lack of data.

During the Uruguay Round, at the instance of UNCTAD's chief statistician, the UN system's committee of statisticians, tried to address the issue, but they were discouraged from proceeding further. And in the wake of the many restructuring of the secretariat, the once separate statistical work became subsumed in other activities, and the services data issue almost disappeared from the agenda.

Statistical experts point out that data needed have to be collected and reflected in national income data, before they could be collated internationally to enable comparisons, and before statisticians could move in the matter, negotiators must agree on and define "trade in services". At that time the industrialized countries were pushing for a services accord on the basis of "investment" by service providers inside a country, but nothing was done even after an agreement was reached on defining trade in services involving four modes of supply. Ultimately, it was decided to go ahead with the GATS, in effect providing a framework for exchanging market access commitments, with developing countries making offers according to their capacity, and steps taken to resolve the problem and for data to be gathered, and modalities settled before the next round in 2000.

The IMF's balance-of-payments data, and its "residual" category used to arrive at a figure for services trade are generally not disaggregated, and even more cover cross-border and consumption abroad modes of supply, the secretariat's statistical annex to the Commission notes.
And with many services produced and supplied in the country by foreign suppliers, the national and international data collection do not capture them adequately.

An UNCTAD secretariat document notes that governments have not collected data in a systematic way, and data available are highly aggregated and not internationally comparable.

Apart from other problems related to use of IMF BOP statistics, the UNCTAD secretariat note points out that cross-border intrafirm electronic services transactions are not recorded in BOP statistics.
And sales and purchases of foreign owned enterprises established in host countries which are considered to constitute "trade" under GATS, are not recorded in the BOP data. Any in-house services (within a corporation) are recorded under the goods sector, and some of the services may not be reported at all to avoid or evade taxation.

"There is a need to improve statistics before the next round of services negotiations, and UNCTAD has jointed inter-agency efforts to improve statistics on trade in services, and is developing a data base on Measures Affecting Services Trade (MAST)," says the document.

But as set out in the document, this work appears to be related only to one mode, movement of natural persons.

Focusing on this aspect of supply of services through movement of natural persons, where various kinds of service suppliers and their incomes etc become relevant, the secretariat note also points out that the development of relevant statistical framework is limited by the costs associated with such capturing these flows. Problems of data reliability due to misrepresentation and missing information, incompatibility of definitions for location and time-periods render international data comparability difficult.

There are also no internationally harmonized employment figures by activity available in which foreign workers would form a sub-set. And information on some categories of service providers seem easier to collect.

The challenge says UNCTAD is to develop a simple tool for international comparisons of trade in services through movement of natural persons that will impose a minimum additional burden on national statistical institutions and avoid duplication in collection of data.

Any proposal for meeting the needs of GATS will have to take account of existing statistical frameworks and classification systems, principally those of the ILO and UN, including the system of National Accounts, the International Standardised Industry Classfication and the IMF's BOP statistics. All these have intrinsic data problems, but present efforts aim at building upon strengths of the existing international systems and devise a conceptual framework and methodology suitable for the GATS mode of supply by movement of natural persons.

The Trade Commission of UNCTAD has mandated continued work on the MAST with a view to supporting countries wishing to implement it so as to strengthen their negotiating capacity, and evaluate its functioning with a particular focus on the utilization of recent developments in
the field of information technology.

In recommendations on the wider issues of services exports of developing countries, the Commission has called for an examination of the effective implementation of Art. IV and XIX (negotiation of specific commitments) of the GATS, in the context of development of guidelines for GATS negotiations.

In terms of expert meetings, the Commission has agreed on one meeting on the impact of changing supply-and-demand market structures on commodity prices and exports of major interest to developing countries.

Another expert meeting has been suggested for examining trade in the agricultural sector, with a view to expanding the agricultural exports of developing countries and to assist them in better understanding of the issues at stake in the upcoming agricultural negotiations.

After some contentious debate and negotiations, the Commission also agreed to convene an expert meeting to clarify issues on air transport services to define the elements of the positive agenda of developing countries with regard to both the GATS and sector specific negotiations of interest to them.

For many developing countries, especially island or land-locked nations, air transport is key to escape their marginal existence and promote tourism development.

For the developed countries, and particularly the US, air transport liberalisation or the "open skies" approach figures high on the WTO services negotiations agenda.

But discussions at expert level and participation would be needed before developing countries, individually, and collectively, could assess benefits to them, and the expert group could help in this
process.

The US "open skies approach" is not favoured by several of the EU members. US airtransport companies, with large fleets, outnumber fleets of other countries and carriers and could easily overwhelm them. And developing countries are worse off, with many of them having fleets of
a score or less.

But the "open skies" air transport policy can also benefit the developing countries, due to its repercussions on tourism, according to a French academic and expert at the meeting. The industrial countries, he said, have some reservations about the total deregulation of air transport in order to protect their large internal markets.

An earlier UNCTAD meeting of tourism experts, after examining the two main modes of air transport that serve the South: regular and charter flights, found that excursion operators favour charter flights.

And developing countries are in a vulnerable situation as regular flights are subject to bilateral agreements for routing rights, which do not necessarily correspond to their needs for frequency, quality and quantity of seats in the tourist sector.

On the other hand, the charter flights are exploited by the tourism operators with high levels of benefits for them, really leaving very little for the developing countries.

Before the UNCTAD Commission agreed on an expert meeting on this sector, the EU countries objected to any commercial air transport study by the secretariat.