TWN Info Service on WTO and Trade Issues (Mar17/18)
21 March 2017
Third World Network

Indian TFS draft faces sharp questions, intense scrutiny
Published in SUNS #8425 dated 20 March 2017

Geneva, 17 Mar (D. Ravi Kanth) -- Many developing and least-developed countries, including members of the African Group, sharply questioned India at the World Trade Organization (WTO) on Thursday (16 March) over its proposal to negotiate a standalone agreement on Trade Facilitation for Services (TFS) without any prior mandate, services negotiators told SUNS.

The Indian proposal also came under intense scrutiny from major industrialized countries on grounds that it would impose commitments in areas such as data flow of information, portability of insurance in Mode 2, and social security payments and economic needs tests in Mode 4 among other issues.

It faced difficult and sharply different questions from different members depending upon their overall trade priorities, said several services negotiators who asked not to be quoted.

At a regular meeting of the WTO Council for Trade in Services, India presented the salient features of the draft legal text on areas outside the domestic regulation disciplines such as cross-border services in Mode 1, consumption abroad in Mode 2, and several issues concerning improvements in the movement of natural persons in Mode 4.

The 14 articles set out in the Indian draft legal text cover a range of issues such as transparency-related provisions, administration of measures such as single window clearance, fees and charges, administration of economic needs test, cross-border insurance coverage for promoting medical tourism in Mode 2, and "provisions facilitating movement of natural persons (grant of temporary entry, multiple entry and social security contributions) in Mode 4."

India seeks better cooperation among competent authorities and institutional arrangements such as establishing a "committee on trade facilitation in services" and "national committee on trade facilitation in services."

In Article 14, it says the TFS Agreement when it is negotiated and agreed "shall" require the developed countries to implement the provisions as and when it enters into force.

But "developing country members shall not be required to apply the provisions for a period of [X] years from their date of entry into force." Further, the developing countries can ask for extension "before the end of this transitional period" for implementing the disciplines.

India explained "cross border insurance coverage" in respect of health related services availed in another member and "members shall endeavour to expedite the processing of immigration formalities in respect of service consumers who are seeking medical services or such other services that are urgent and/or essential."

In Article 9 concerning "provisions facilitating movement of natural persons," India is asking WTO members to negotiate on "grant of temporary entry," including "develop[ing] a scheme for GATS visa applicable for categories of natural persons committed in their schedule of specific commitments", granting "multiple entry" to services suppliers, and exempting short-term services providers from social security contributions in the foreign country where the services are going to be provided.

India also wants that where social security contributions are not exempted, then the member which has collected the contribution "shall refund such contribution, or the unused portion thereof, to the short-term services provider at the time such short-term providers return to his/her home country."

In response to India's proposal, there were two sets of questions from members. Many developed and some developing countries that took part in the failed plurilateral initiative on Trade in Services Agreement (TiSA) grilled India as to how it could come up with issues that ostensibly dealt with immigration, data flows of information, portability of insurance, and social security contributions - which failed to find any consensus over the years.

The second set of questions raised by the African Group and the LDCs revolved around lack of mandate and questionable long-term benefits for the African countries.

On the first set of questions, the European Union asked India about two issues, according to negotiators present at the meeting.

They include:

(i) the usefulness of a formal agreement on TFS when the format of such an agreement doesn't seem flexible;

(ii) the concerted attempt in the Indian proposal to address issues outside trade policy remit such as immigration, portability of insurance for the health sector, social security contributions and immigration procedures.

Australia said that it is ready to work for facilitating services in Mode 4 but posed sharp questions on how India proposed elimination of hurdles in cross-border supply of services, particularly data flow of information.

Canada drew red lines on issues concerning social security policies and immigration of services.

On behalf of the African Group, South Africa reiterated the comments it made during the meeting of the Working Party on Domestic Regulation on Tuesday (14 March).

The African Group acknowledged the constraints faced by Indian services suppliers in foreign markets, which was also the case with the African countries that have a comparative advantage in supplying lower skilled workers.

But the group sought to know from India whether it is realistic in "the current political climate" to present a proposal that would take away the right to regulate services.

South Africa said that members of the African Group are not clear about what the proposed TFS means for developing and least developed countries.

Moreover, the Indian proposal imposes several new and potentially onerous multilateral obligations on African countries, South Africa said on behalf of the African Group.

Significantly, the Indian proposal is "extremely broad" in its scope, particularly in an area such as trade in services, and inappropriately built on the lines of the Trade Facilitation Agreement for goods which deals only with customs provisions, the African Group said.

India is seeking an entirely new services agreement in which the long-term gains for African countries, who are net importers of services, remain few and far between, the African Group argued.

The African Group also maintained that there is no negotiating mandate for elements in the Indian proposal barring a sub-set of issues in the domestic regulation of GATS Article VI. 4 mandate.

The issue of mandate, South Africa emphasized, must not be taken lightly as developing countries want mandates to be adhered to in the rule-based WTO.

The African Group spoke about the enhanced transparency obligations that go even beyond GATS Article III despite the avowed goal of TFS to be a development-centered proposal. The reality, according to the African Group, is that for many African countries, in particular LDCs, there is no capacity or resources to comply with the transparency obligations proposed.

The African Group said that it is concerned about how the proposed TFS would impact on its Members' right to regulate.

The administration of measures enumerated by India seem "extremely broad and appears to expand the market access commitments Members have taken", the African Group maintained.

On behalf of the LDCs, Uganda welcomed the Indian proposal on TFS on grounds that the poorest countries want enhanced preferential treatment for their services exporters through reduction of fees and charges, including social security charges when supplying services through Mode 4.

Uganda said LDCs supplying a service on a temporary contract should not be charged social security deductions.

Uganda also welcomed "ways to reduce obstacles to Mode 4 market access such as multiple entry visas and a possible GATS visa are useful especially to our services suppliers", as proposed by India.

However, the LDCs raised the following preliminary questions:

* Can India clarify why the disciplines would apply to Article 2 on publication requirements and Article 8.2 - Facilitating Consumption Abroad emergency authorization, regardless of whether countries have scheduled the sector or not? If a Member schedules only a sub-sector, does that mean the entire sector is captured under the disciplines?

* On single window, India has made the distinction between competent authorities for authorization and immigration, respectively. However, is single window operable in services where Members could have scheduled a number of sectors and services in domestic regimes that are diverse with a number of specialized competent authorities? Has India conducted any cost analysis of how this would work in services?

* Does the TFS proposal involving market access areas such as ENTs, Modes 1, 2 and 4, modify the architecture of the GATS and the flexibilities for developing countries found in GATS Article IV and GATS Article XIX?

In a nutshell, when major industrialized countries are slamming doors on short-term services providers and denying medical tourism through portable insurance schemes, India ought to have assessed carefully about the timing of such a proposal and whether it falls in the mandate which is an imperative for negotiating any agreement at the WTO.

More important, at a time when the developed and some developing countries are pushing for electronic commerce negotiations without any mandate, which was opposed by India, it remains moot as to how it came up with a proposal that has no mandate, services negotiators argued. +