No new commitments before GATS problems redressed, says new book

Penang, 2 July (Lean Ka-Min) - Trade in services is an area rife with gaps and inequities which have been detrimental to Third World interests, according to a new book which calls on developing countries to cease undertaking further services liberalization before these deficiencies are remedied.

The focus of trade analyst Chakravarthi Raghavan in his just published book, “Developing Countries and Services Trade: Chasing a Black Cat in a Dark Room, Blindfolded” (Penang: Third World Network, 2002), is on the World Trade Organization’s General Agreement on Trade in Services (GATS), which lays down multilateral rules governing services trade and sets the framework for liberalization of services by member states.

Raghavan, who is the Chief Editor of the “South-North Development Monitor” (SUNS), points out that GATS, one of the outcomes of the Uruguay Round of trade talks which established the WTO, was formulated without the aid of data that would have allowed negotiators to assess the costs and benefits of the myriad commitments they were entering into. He identifies this lack of proper data on the direction of services trade as one of the key problems in services negotiations, and says that it is a problem which persists even till now, more than seven years after GATS came into force and with a round of further services liberalization already underway at the WTO.

Due to this absence of data, developing-country negotiators at the WTO and policy-makers in capitals, states Raghavan, not only are unable to evaluate the effects of prior commitments undertaken under GATS but also cannot estimate the future costs and benefits of any new concessions given and received in the currently ongoing round of services talks. Such uninformed negotiation can only be akin to, as the title of the book suggests, “chasing a black cat in a dark room, blindfolded.”

Indeed, when it comes to services, developing-country diplomats have been negotiating ‘in the dark’ ever since the inception of the Uruguay Round services talks. According to Raghavan, the services negotiators were all too aware of this problem as far back as 1987, and were briefed by statistical experts from the UN system on the need to redress it. However, the developed countries repeatedly, throughout the Uruguay Round, stymied efforts to promote a system of internationally comparable services data, and the matter was effectively sidetracked while substantive commitments were being undertaken by developing countries to open up their services sectors under the agreement being negotiated and that was to become GATS.

It was only last year that a manual on “Statistics of International Trade in Services” was finally approved by the UN with the recommendation that national statistical offices adopt it and begin to collate data along the lines prescribed therein. However, Raghavan points out in his book, the basis for data collection and collation prescribed by the manual does not conform to the definition of services trade set out in GATS; otherwise, according to the task force which prepared the manual, it would “fail to ensure compatibility with international statistical systems ... and demand excessive resources for implementation.” Thus, on ostensible grounds of statistical conveniences, developing-country negotiators in the multilateral services talks effectively end up no better informed on the data front now than they were when they began the Uruguay Round negotiations on GATS!

In his book, Raghavan charts a concise history of the “data problem”, unearthing, as former Indian Ambassador to GATT SP Shukla puts it in the preface, “the unsavoury tale of sidetracking, procrastination and obfuscation practised by those very interests that were demandeurs of the services negotiations in the first place.”

While hard, in-depth data may be lacking, available analysis and qualitative assessments have brought out that the liberalization of services trade has thus far benefited the service suppliers of the industrialized countries while yielding hardly any gains for their Southern counterparts. This imbalance, says Raghavan, is the result of the vast differential in service supply capacity between the developed and developing countries, and the latter’s almost complete lack of capacity for exporting services to the industrialized world.

It is in this context that developing countries are being asked by the developed countries to throw open their services sectors to free-market precepts and foreign competition in the ongoing round of WTO services negotiations - all this, without proper data to navigate them in the course of the talks. “If the industrialized countries and the WTO secretariat are trying to ensure that developing countries make commitments and agree to market openings without a full realization of the implications, they cannot be going about the job better,” Raghavan declares.

The liberalization pressures developing countries are being subjected to in the current GATS talks have been criticized by civil society as many vital and basic services are targeted for coverage by GATS’ free-trade rules. This in turn has prompted responses by the likes of the WTO secretariat which claim that, by stating that member states need only liberalize progressively and to the extent they desire, GATS is a “development-friendly” agreement.

Raghavan demolishes this “myth” that has become prevalent even among many developing countries themselves as well as several international organizations.

He stresses (in a previous article of his which has been annexed to the book):

“The right to liberalize progressively has to be weighed against the facts of the real economy, namely, that once an undertaking to liberalize has been entered into the country’s schedule of commitments, there is no retreat or scope for rethinking if the policy fails to achieve the expected objective, which is not unlikely since there are no data to enable the country to even make an assessment in mercantilist terms. Moreover, the entire process of market access negotiations is a bilateral one where the powerful countries, in promoting the interests of their corporations, can and do exercise considerable power, and the only option for developing countries is to yield domestic space and autonomy to industrialized nations and their corporations.”

But this “development-unfriendly” state of affairs facing Third World countries in the services negotiations must not be permitted to continue, lest the developing world find itself ‘recolonized’ by a GATS treaty that is “one of the main instruments of transnational corporate economic globalization.”

“Making commitments in GATS on the basis of ignorance - commitments that cannot be later changed or withdrawn without compensating others - cannot be a public policy option in any country,” Raghavan emphasizes.

What CAN be options for developing countries to remedy the current inequitable situation, Raghavan suggests, include reaching agreement for national-level collection and international-level collation of services data which reflect the GATS definition; pushing the developed countries to liberalize in service sectors and modes of supply (particularly the “movement of natural persons”) of export interest to the South; and making sure that proper safeguards are agreed upon against services imports to avoid injury to domestic service sectors.

“[O]ne thing seems clear: developing countries would do well not to undertake more WTO/GATS commitments without proper study and answers to these questions,” suggests Raghavan. “In the present state of knowledge, and given the fact that [current] international statistics ... will not be able to provide detailed data on trade in services (as defined in GATS), developing countries would be well advised not to make any more commitments.” – SUNS5152

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