Bridges Weekly Trade News DigestVolume 16Number 27 • 11th July 2012

Services Liberalisation Talks Among Group of WTO Members to Enter “New Phase”


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A group of WTO members involved in talks on a potential services liberalisation agreement have announced that their discussions are ready to enter a “new phase,” according to a joint statement released last week, with work set to “intensify” once members return to Geneva following the August recess.

The statement was signed by Australia, Canada, Colombia, Costa Rica, the EU, Hong Kong China, Israel, Japan, Mexico, New Zealand, Norway, Pakistan, Peru, South Korea, Switzerland, Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, Turkey, and the US.

Sources note that other members have also been involved in the discussions, and could potentially announce their participation formally at a later date, given that some were dealing with some domestic procedures in terms of timing before signing on to the statement.

The 5 July announcement follows months of exploratory talks among participating members that began early this year. “We believe it is time to bring this progress back to Geneva with the ultimate aim of reinforcing and strengthening the rules-based multilateral trading system,” the joint statement read.

Trade officials from participating countries lauded the announcement. “The services discussion is one of the most constructive and productive activities happening in Geneva right now - a hopeful counterpoint to recent years of impasse in the Doha talks - and it is good news that they are moving forward,” US Trade Representative Ron Kirk said upon the release of the statement.

“This reflects the EU’s goal to re-energise services trade liberalisation in a manner that is both consistent with and complementary to the WTO,” EU Ambassador to the WTO Angelos Pangratis said.

Aiming for an “ambitious” agreement

The group noted that any such services agreement should be comprehensive in its scope, adding that the deal would need to include substantial sectoral coverage “with no a priori exclusion of any sector or mode of supply.” There are “no red lines at this point,” one developed country source familiar with the talks told Bridges.

In addition, the group said, participating members should negotiate market access commitments that “correspond as closely as possible to actual practice and provide opportunities for improved market access; and contain new and enhanced rules developed through negotiations.”

A potential deal should build upon the existing WTO General Agreement on Trade in Services (GATS), the statement read, as well as the subsequent services provisions in preferential trade agreements since established among members.

“Any such agreement would aim to capture a substantial part of the liberalisation achieved in other negotiations on trade in services,” the statement said. “The outcomes of the agreement could then be brought into the multilateral system.”

“I think it’s important to clarify that this is an exploratory exercise for the moment,” one developing country official involved in the talks said. “What unites us is a search for a greater liberalisation in services trade and the goal of not doing any damage to the multilateral process. With these two objectives in mind, we are exploring different ways to potentially achieve this objective.”

Spectre of Doha services impasse in the background

Part of what spurred members to begin these discussions is that services have been “a little bit of an afterthought in the market access trinity,” one developed country official noted, with services taking a backseat to agriculture and industrial market access talks in the Doha Round.

During the July 2008 “signalling conference,” a 30-odd group of countries had made ambitious conditional offers in the area of services market access. Various WTO members had repeatedly complained that most offers tabled previously did not go far enough. However, emerging economies stressed that they would only be able to confirm the improved offers if an acceptable deal was reached in agriculture and non-agricultural market access.

Ultimately, no compromise was possible in this area, nor in the disagreements between developed and developing countries on mode 4 - where services are provided by foreign nationals abroad - effectively bringing the Doha services talks to a halt.

Technical discussions so far

Recent technical discussions among this WTO member subset have addressed issues such as how to possibly mutilateralise whatever result comes from this initiative. Whether or not to establish a positive or negative list has also come up, sources told Bridges. Under a negative list, all areas except those specifically excluded are liberalised; under a positive list, members only liberalise those areas that they sign up for.

In addition, the possibility of a “ratchet-in clause” has been raised by some members, one official familiar with the talks told Bridges; under such a clause, in cases where one participating member improves services market access on its own, that newly liberalised access would then be accorded to other parties to the deal, and become permanent.

Other proposals under discussion include a potential standstill commitment among participating members to not create new obstacles to services trade, and suggestions on how to set the level of market access commitments, such as by a “best FTA/best applied level of services liberalisation” approach, or if instead these levels should go beyond what has already been agreed in these contexts.

“There are a lot of open minds,” one developing country delegate commented. Another official noted that the discussions so far have been quite “frank,” adding that, “from now on, we can expect an intensification of work, with the goal of eventually reaching some conclusions - however, what these conclusions might be is too early to tell.”

“Generally speaking, though we haven’t committed to a roadmap of any sort, we will see by the end of year if there is any consensus on specific parameters before beginning negotiations,” a developed country source explained.

It is also too early to say whether and how exactly such a deal might be incorporated into the WTO framework, multiple sources have told Bridges. “You can’t put the cart before the horse,” one developing country official said.

Participation

The statement stressed that the group encourages other WTO members “who share a high level of ambition for the liberalisation of trade in services, including these objectives, to take part in this effort.”

“This is a process open to any member,” one developing country official commented to Bridges. “Whoever would like to join and shares our objectives can do so.”

Costa Rica, Israel, Peru, and Turkey are the four latest WTO members to join the discussions, sources noted. “You would expect that other countries with an interest in trade in services will soon follow,” one official said.

“This is like going on a dance floor - you need someone to get the party started, and people are always looking to see who’s there, and given that, they might get involved, or they might keep looking,” another noted.

Questions from emerging economies

When the talks began earlier this year, they received a “not very warm” reception among some WTO members, sources said. Emerging economies, such as Brazil, India, China, and South Africa, have repeatedly been among those to raise concerns over the systemic implications of adopting a plurilateral approach to negotiations.

At the March meeting of the GATS Council - the WTO body responsible for overseeing the functioning of the organisation’s existing services agreement - China and India both raised questions over whether this initiative could potentially undermine the multilateral trading system. South Africa, for its part, stressed the importance of the linkage between industrial market access, agriculture, and services.

Later that month, BRICS leaders at their annual summit in New Delhi reiterated their stance that WTO members should be wary of pursuing plurilateral initiatives during the Doha impasse. (See Bridges Weekly, 4 April 2012)

“We do not support plurilateral initiatives that go against the fundamental principles of transparency, inclusiveness, and multilateralism,” they said at the time.  “We believe that such initiatives not only distract members from striving for a collective outcome but also fail to address the development deficit inherited from previous negotiating rounds.”

Current members involved in the services discussions, however, have said that it would be ideal if emerging economies joined the talks. “There is no question that I think everyone’s preference is for the emerging economies to be part of all the discussions we have in Geneva because those are the markets that everybody is most interested in,” US Ambassador to the WTO Michael Punke told reporters back in March.

If the proposed agreement does materialise, the emerging economies could very well choose to take part, Sherry Stephenson, Senior Advisor for Services Trade at the Organization of American States, commented to Bridges. [Editor's note: Stephenson is also an ICTSD Senior Fellow; ICTSD is the publisher of Bridges.]

“China tends to be very pragmatic in its economic policies,” Stephenson said. “If the services agreement goes forward, then given its large and growing services exports, China will likely decide that it would be preferable to be on the inside rather than the outside, and then India would likely follow suit.” Stephenson is the co-author of a Peterson Institute for International Economics policy brief on a potential framework for an international services agreement.

ICTSD reporting.

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