News and Analysis • Volume 12 • Number 20 • 4th June 2008

Disagreement on Content of Service Chair’s Report

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Potential WTO guidelines for the extent of future services trade liberalisation under a Doha Round agreement remained the subject of disagreement during a meeting of the negotiating committee this week.

The informal gathering of the Council for Trade in Services (Special Session) was held to discuss a report issued on 26 May by services chair Ambassador Fernando de Mateo (Mexico).

De Mateo’s report is meant to serve as a tool to further the services negotiations, alongside the ongoing push for framework agreements on agriculture and non-agricultural market access (NAMA; see BRIDGES Weekly, 28 May 2008, http://www.ictsd.org/weekly/08-05-28/story3.htm). Countries negotiate access to their services markets through a process of bilateral and collective requests and offers, not through mathematical formulae. Therefore, the services report simply provides some guidance for the negotiations, including the market access talks.

At the meeting, sources report, the chair invited delegations to comment on two bracketed clauses - clauses that have yet to be agreed - in paragraph 4 of the text.

The first states that “Negotiations must be driven by the same level of ambition and political will as reflected in the agriculture and NAMA modalities. While respecting the existing structure and principles of the GATS, Members shall respond to bilateral and plurilateral requests by offering commitments that substantially reflect current levels of market access and national treatment and provide new market access and national treatment in cases where significant trade impediments exist.”

The second bracketed clause reads: “Members reiterate that the next offers shall provide market access in sectors and modes of supply of export interest to developing countries, such as Modes 1 and 4, as indicated in bilateral and plurilateral requests.”

A wide range of developing countries argued that the brackets around the latter clause should be removed, since its mandate - access in sectors where developing nations have export interests - is already part of the WTO’s General Agreement on Trade in Services (GATS). Delegations expressing such views included Brazil, China, the Philippines (speaking on behalf of members of the Association of Southeast Asian Nations), Kenya, Barbados (speaking on behalf of the Small and Vulnerable Economies, or SVEs) and South Africa (speaking on behalf of the African group)

Another delegate claimed that the clause was already present in the Hong Kong Ministerial Declaration, which Members adopted in December 2005, save for its specific reference to ‘modes’ 1 and 4 (WTO parlance for the cross-border provision of services and temporary labour movement, respectively).

As for the first clause, however, many developing country delegates claim it goes too far in requiring countries to bind market access and national treatment at existing levels, and to remove restrictions on currently bound access. Several delegates maintained that it would run contrary to GATS provisions allowing developing countries to take control of the extent, scope and timing of their liberalisation commitments, in particular depending on their level of development.

India noted that a requirement to legally bind current levels of liberalisation would be unfair to those countries that had significantly opened up access to their services markets since the end of the previous Uruguay Round negotiations in 1995.

The contested clause was based on a proposal from a group of primarily industrialised countries including Australia, Canada, the EU, Japan, Korea, Norway, and the US. At the meeting, the group called for the brackets around it to be removed, saying that proposals from other countries had not been similarly bracketed. Clear guidance about removing impediments to market access was required, they argued. Furthermore, they claimed that the paragraph was necessary in order for them to sell concessions made in negotiations on agricultural and industrial goods to their domestic stakeholders.

The EU said that it had made a huge effort in the agriculture and NAMA negotiations, and that it expected some returns in services trade. Switzerland also emphasised cross-sectoral links, observing that the point of the upcoming ’signalling’ exercise was to assure services ‘demandeurs’ such as the EU and the US, which might make sacrifices on agriculture and industrial trade, that their services companies stood to gain increased access to overseas markets (see BRIDGES Weekly, 14 May 2008, http://www.ictsd.org/weekly/08-05-14/wtoinbrief.htm).

The tension between ‘bound’ minimum legal obligations and current (often quite different) ‘applied’ practice has surfaced elsewhere in the negotiations. The EU and the US insist that ‘real’ market access in the industrial goods talks would require cuts to the duties that key developing countries actually apply, not just to their theoretical maximum tariff levels. Many developing countries counter that proposed future limits on rich country farm subsidy spending remain billions of dollars above the payments that the EU and the US actually dole out.

Argentina made a similar argument on the potential provision in the services text calling for services liberalisation commitments to be of ’similar ambition’ to those on agriculture and industrial goods. Would the EU bind its cereals tariffs at zero (the current applied level)? Would the US repeal domestic legislation barring it from making maritime commitments?

Not all delegates agree that a strongly phrased services text could facilitate progress in the agriculture and industrial goods talks. Noting that the current round of trade negotiations was supposed to be focused on developing nations, one developing country delegate argued that the notion of having to provide comfort to developed country lobbies amounted to turning the issue on its head.

Chile, Hong Kong and Singapore stressed that the text was not an end in itself, but rather a means to the end of advancing the market access negotiations.

Sources reveal however, that some developing countries are worried about what might happen with the text if agriculture and NAMA negotiations conclude successfully, or even if they break down altogether. They fear that the draft text could be used as a starting point in the future, and that the still-bracketed ‘mandatory language’ could become a precedent.

Bolivia, Venezuela and Cuba reiterated their disapproval of the format of the chair’s paper. Instead of a report with some observations and explanations from de Mateo followed by an annex containing a potential text in agreement-style language, they would prefer a unified report without an annex.

Lesotho and Bangladesh, speaking on behalf of the group of least-developed countries (LDCs), called for the LDC-specific provisions to be strengthened. Specifically, they asked for more definitive deadlines instead of the non-mandatory exhortation that Members ’strive’ to develop mechanisms for granting ’special priority’ to LDC services exports before they submit revised market access offers.

De Mateo summed up the meeting by saying that he would hold consultations at the ambassadorial level in which all delegations would be welcome to participate.

ICTSD reporting.