TWN Info Service on WTO and Trade Issues (May17/08)
8 May 2017
Third World Network

India's TFS proposal gets little support
Published SUNS #8456 dated 5 May 2017

Geneva, 4 May (D. Ravi Kanth) - Members of the African Group and least-developed countries on Wednesday (3 May) raised several systemic concerns over India's draft negotiating proposal for facilitating trade in services at the World Trade Organization.

In raising their systemic concerns, these members conveyed unmistakably that it was difficult to discuss the proposal due to lack of mandate as well as in the prevailing international political climate, services negotiators told the SUNS.

Major developed countries such as the United States, the European Union, Australia and Canada among others also expressed skepticism in varying degrees over the Indian proposal suggesting that the provisions in the TFS (trade facilitation in services) proposal are not ripe for discussion at this juncture, said several participants who asked not to be quoted.

Two countries - Turkey and Switzerland - welcomed India's proposal for starting discussions while Korea reminded India that there could be many more trade facilitation elements such as e-commerce and investment facilitation.

India however remains opposed to both e-commerce and investment facilitation as sought by China, Brazil, Argentina, Korea, and Australia among others.

But, in an unusual development rarely witnessed during a negotiating session, the chair for the Doha negotiating body for services Ambassador Hector Marcelo Cima from Argentina gave the floor to the head of the WTO's Services Division Abdel-Hamid Mamdouh to comment on India's TFS proposal.

Despite sharp concerns raised by many developing and developed countries on India's TFS proposal, Mr Mamdouh apparently praised India's proposal, saying "we have not seen lively discussion like this for some time," according to participants present at the meeting.

"From an institutional point of view, it [India's TFS proposal] is very refreshing," Mr Mamdouh said, suggesting that "a lot of issues have been raised of which there is a factual background within the Secretariat," and "in situations like this, (as) in prep[aration] for the Uruguay Round, the acquis to this kind of discussion is having an open mind and avoiding an all-or-nothing approach."

"A lot of rich elements [in the Indian proposal] are here; and what helps is finding the right methodology - and structure of a discussion - and taking this on a thematic basis helps to clarify a lot of the conceptual gaps that are there [in the proposal]," the WTO official maintained.

"There is a lot of energy - very important but I would suggest this would not be seen as the end of the line," Mr Mamdouh said.

During the three-hour special negotiating session, convened to discuss India's TFS proposal, an Indian official maintained that the proposal which is modelled on the lines of the Trade Facilitation Agreement (TFA) for goods, is not about new market access.

India said the proposal which is being introduced for the third time after it was discussed during the meetings of the Working Party on Domestic Regulation and the WTO's Council for Trade in Services contains issues on facilitation that ought to apply to all sectors even if members have not taken prior commitments.

TFS, India argued, should not be construed as a vehicle for market access and services liberalization but as an attempt for ensuring that existing commitments are meaningful, according to those present at the meeting.

In the face of increasing linkages being drawn in the Indian proposal for simplifying cross-border services in Mode 1 of the General Agreement on Trade in Services (GATS), India said the improvements sought in cross-border services are not about e-commerce.

The Indian official also suggested that the use of the word "immigration" by some members was misleading as the TFS proposal is seeking only improvements in Mode 4 of temporary movement of short-term services providers.

On behalf of the African Group, Rwanda raised three broad concerns. They include (i) lack of mandate, (ii) overly ambitious scope, and (iii) lack of balance.

The Indian proposal, according to Rwanda, contains few issues that are covered by the mandate and includes many new issues which do not fall under the Doha mandate.

The scope of the TFS proposal is extremely broad while the TFA is limited to customs procedures that cannot be extended to the entire new Services Agreement.

More important, on balance, the African Group said the core issue is agriculture given its important role in employment generation.

"In the absence of a discernible progress on elimination by developed countries of harmful subsidies that distort market prices - which undermined agriculture in Africa since many decades - and a lack of progress on the permanent solution for public stockholding programs for food security, we take a pragmatic view that there are extremely minimal realistic prospects for taking up the TFS," Rwanda said emphatically, according to a negotiator, who asked not to be quoted.

The African Group also maintained that there is little or no chance of the TFS delivering on Mode 4 in the current international climate.

Bolivia said that the TFS proposal will raise systemic concerns, suggesting that there is no mandate to discuss issues in the Mode 1 concerning cross-border services.

Canada issued a mixed comment, viewing TFS as a bold concept, suggesting that TFA was about trade in goods and domestic regulation (DR) is about services.

India wants to apply both TFA and DR, Canada suggested. Canada said sectoral approaches would be better at this juncture.

South Africa concurred with what Rwanda said about the overly ambitious scope and lack of mandate for discussing India's TFS at this juncture.

Apparently, South Africa said it is not in a position to agree with the Indian proposal given the commitments it undertook during the previous Uruguay Round under an apartheid regime.

Further, India's TFS proposal will widen the differences in commitments and obligations as it would reduce the scope for applying the right to regulate issues that fall in the domain of domestic policy-making.

South Africa reminded India that the DDA was launched on the promise of helping and assisting developing countries to integrate into the global trading system.

The developing countries, according to South Africa, were promised that the existing inequities, particularly in agriculture, will be addressed.

After 16 years of negotiations, there is no serious attempt to remove/reduce seriously trade-distorting domestic subsidies, South Africa said, adding that its participation in the services negotiations will hinge on the outcomes in agriculture, particularly in the reduction of trade-distorting domestic subsidies.

South Africa said it continues to have profound concerns about the Indian proposal as it goes well beyond the DDA, including the provisions in Article 19 of the GATS as well as Annex C of the Hong Kong Ministerial Declaration.

Moreover, at a time when countries remain opposed to both Investment Facilitation and E-commerce, the Indian proposal is raising these same new issues in a different context, South Africa said.

India's TFS proposal, according to South Africa, includes Modes 2 and 3 as well as elements of e-commerce.

It reminded India about paragraph 34 of the Nairobi Ministerial Declaration which has acknowledged that some members do not agree to identify or discuss new issues for negotiations.

In short, South Africa said while it would consider improvements in Mode 4 as part of a development round, the improvements sought in Modes 1, 2, and 3 in the Indian proposal and by including new issues lack an overall mandate.

On behalf of the least-developed countries, Uganda raised fundamental concerns on India's TFS proposal while welcoming the improvements in Mode 4.

Uganda said "trade rules are primarily designed to ensure market access, and not directly defined to promote efficiency or social welfare," suggesting members are concerned about adoption of disciplines that are highly intrusive in the domestic domain.

Uganda said the LDCs which are the weakest members of the global trading organization will only adhere to ministerial decisions, and declarations, and mandates.

Uganda said what is proposed by India in the TFS has no "MANDATE", suggesting that the LDC group seeks improvements in the Mode 4 for assisting its services providers.

But the Indian proposal could initiate the negotiations on e-commerce "with neither an explicit mandate from our ministers, nor consensus from all members," Uganda said.

For LDCs, issues such as duty-free and quota-free market access, rules of origin, cotton, services waiver as contained in the mandate along with trade-distorting domestic subsidies in agriculture are vital and not TFS that has no mandate, Uganda said.

Several other countries such as Cuba and Venezuela also expressed the same concerns while Kenya asked India to clarify how the issues in TFS could be negotiated without a mandate, according to participants present at the meeting.

Argentina and Brazil welcomed India's proposal suggesting that they are ready to discuss the provisions while China sought clarifications on technical issues.

The US, the EU, and Australia among others made ambiguous statements on the Indian proposal. The US acknowledged that the current environment has made known sensitivities harder to achieve, arguing that India's proposal will take a long time for any resolution.

In crux, India has made itself vulnerable by introducing the TFS in the Doha services negotiating group after adopting strong positions on e-commerce, and investment facilitation.

By raising TFS at this inappropriate time, India is unwittingly undermining the likely outcomes on the permanent solution for public stockholding programs for food security and the special safeguard mechanism for developing countries, trade negotiators said.