Chimeral benefits of market liberalization

Geneva, 16 July (by Chandrakant Patel*) - A timely addition to the growing body of literature on the implications of the on-going GATS negotiations for developing countries is the most recent study**, “Developing Countries and Services Trade” by Mr. Chakravarthi Raghavan.

With rigour, the study addresses an almost forgotten - and yet central - issue in the negotiations, namely: the concept, definition, measurement and tradability of services. Whilst these are essential building blocks in any conduct and evaluation of the General Agreement on Trade in Services (GATS) negotiations, near-complete absence of a methodology for analysing requests and offers or evaluating liberalization measures so far committed or undertaken unilaterally (under the IMF/World Bank conditionalities) has not prevented the demandeurs the OECD countries - from seeking deeper and wider market opening commitments from developing countries.

The breakneck speed at which the services negotiations are now proceeding suggests that few have the time, the patience or the wherewithal to address basic questions on services data and measurement. So far, the GATS process is somewhat analogous to crafting nuclear, biological and chemical weapons non-proliferation treaties - without agreed definitions of ‘nuclear’, ‘ biological’, ‘chemical’, ‘weapons’ or ‘non-proliferation’.

It is against this background that the collection of papers in the book acquires importance. The pressures exerted and promises made to developing countries for their acquiescence in agreeing to include services in the Uruguay Round (UR) negotiations provides an immediate point of departure for the study. An underlying theme of this work (and of much of Mr. Raghavan’s recent writings) has been the chimeral benefits of market liberalization for developing countries, a process that he rightly argues is being driven by transnational corporations (TNCs) and promoted by international agencies.

The monograph is useful for both scholars and policy makers to better understand how (and why) time and again empty promises have suckered developing countries into the ever growing web of WTO obligations in return for empty, best endeavour commitments of Special & Differential (S&D) treatment, more of the so-called capacity-building assistance and hortatory declarations of support for development, vide the WTO secretariat’s self-proclaimed Doha ‘development’ agenda.

It is the analysis of the inadequacy of services data and their treatments by international statistical agencies that give the present study its real value.  At the beginning of the UR negotiations in 1986-87,developing countries were assured that their widely held concerns about lack of reliable data on services would be addressed as a matter of urgency. At that time, the then Director of the UN Statistical Office had warned the UR negotiators that the field of services data was “ mostly terra incognita”. After seven years of intermittent work, the task force set up to improve data collection in the area of services and lend credibility to GATS has compiled a manual whose main, if not unexpected, conclusion is that conceptual and definitional problems as well as cost of data collection at the national level “ ..limit in a very real sense the amount of detail on international trade in services that is practical to provide.” In similar vein and more recently, the WTO secretariat has observed, “ Such problems continue to seriously hamper the description or, even more ambitiously, the analysis of trade flows in services “(S/C/W/27/Add.1). It acknowledges, for example, that the sectoral and modal structure of commitments under GATS does not coincide with the existing structure of trade statistics.  The activities of host companies in their host country markets - covered by mode 3 dealing with commercial presence are not reflected at all in conventional statistics.

It is likely to be years before an acceptable body of data become available; in the meantime, the main substantive recommendation of the UN General Assembly sanctioned manual consists of further reliance on EBOP (the IMF’s Extended Balance of Payments Statistics) and FATS (the US-based approach of Foreign Affiliated Trade in Services). As Raghavan points out, FATS data cover only the ‘affiliates of US corporations and that few countries produce similar (let alone comparable) data. Even the authors of the GA-recommended manual conclude with the bland observation that in critical areas such as telecommunications, financial services, professional services and environment related services “ some further development work beyond their treatment in the manual is recommended.”

Even before the launch of the UR negotiations, it was known that the measurement of trade in services presents a unique set of challenges for statisticians. In documenting these difficulties, Raghavan has also drawn our attention to the real intentions of the demandeurs for the inclusion of services in a multilateral trade framework. This is no less than a license for developed country suppliers of services - enjoying monopoly rights - to seal the fate of any future national development or competition from developing countries.

The inclusion of services in the UR Agreements and the debate that preceded it have also raised other issues: Firstly, the applicability of trade rules and disciplines such as MFN principles, non-discrimination, derogations, reciprocity and safeguards to services negotiations. Secondly, the implications of liberalization of services trade for development. In each of the areas, the response and the results have served to undermine the interests of the developing countries. The outcome of trade liberalization so far has been so asymmetrical that further unrequited and non-reciprocal liberalization may be the final straw in WTO-engineered efforts to ‘globalize’ the South.

At the outset of the UR negotiations, developing countries were assured that their concerns regarding statistics, the tradability of services and indeed the applicability of the multilateral rules to the services regime would be adequately taken into account and addressed. In the event, most of the concerns about data and concepts have been brushed aside with further promises of technical assistance and capacity building to meet their concerns. The real intentions of the European Union in this regard have become quite clear through a public expose of their negotiating strategy for the on-going round of GATS.

The denouement in the wake of the financial services agreement in particular point to the real intentions of the demandeurs: forcing developing countries to pry open markets at any cost. Against the combined pressures of the developed countries and secretariats of WTO and UNCTAD (which has willingly ceded all analytical and policy work in the trade field to WTO) for market opening, the stage appears to be set for the final conquest of the resources of the South.

Equally certain, however, is the unravelling of the current phase of globalization. The only question is, when and at what cost. Disengagement from the WTO processes now does not appear to be as far fetched as appeared only a few years ago.

Much of the credit for educating the governments but more importantly the peoples of the South against the dangers of unchecked globalization must go to Non-Governmental Organizations and analysts such as Mr. Raghavan. Single handedly, he has fashioned a formidable and unique genre of economic reportage that combines expert analysis, critical scrutiny of the official thinking, and real-time reporting of international economic issues from the frontlines of the North- South divide.

[*Chandrakant Patel who contributed this review article is an Ugandan economist and former official of the UNCTAD secretariat; he is a representative in Geneva of the Southern and Eastern Africa Trade Institute.]

[**Chakravarthi Raghavan (2002), “Developing Countries and Services Trade: Catching a Black Cat in a Dark room, Blindfolded,” Third World Network, Malaysia; ISBN: 983-9747-56-8; pp126]. – SUNS5162

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