by Chakravarthi Raghavan

Geneva, 27 Feb 2000 -- A new round of negotiations for liberalisation of trade in services was kicked off Friday at a special session of the WTO Council on Trade in Services (CTS), but it became clear that progress in these talks is linked to progress in agriculture, mandated reviews and implementation concerns of developing countries.

The CTS is chaired by Amb. Sergio Marchi of Canada.

Though Marchi and the secretariat tried to set the services talks on its own track, with meetings at 4-5 week intervals and for some work to be done in regular sessions of the CTS, and others at negotiating sessions, this approach did not fly, participants later said.

The Mercosur countries made it clear that they expected parity and parallelism in all aspects (procedural and substantive) of the services negotiations and that on agriculture.

A number of other developing countries, including those belonging to the like-minded group (LMG) said they too expected some parity and parallelism between the negotiations on services, and progress on the mandated reviews of other WTO agreements and the implementation issues and concerns.

Another issue that was brought up related to the inadequacy and lack of data on trade in services - an issue raised in connection with the services talks as long ago as 1987, but on which there has been very limited progress.

Thirteen years after the issue of paucity of data was raised in the trade talks, and five years after the entry into force of the WTO and the GATS, an inter-agency task force is still in the process of agreeing on a common basis for collection of data for what is called "Extended Balance of Payments" (EBOP) data, that would be needed by negotiators and governments in countries.

At the present rate, even a common agreed basis of classification and manual would not be ready before two years, and actual collection of data and analysis and assessments would take probably five years.

Without adequate data -- disagregated in terms of sectors, modes of supply and countries -- it is difficult to see how an assessment would be made (mandated by Art.XIX.3 of GATS) by the Council for Trade in Services, in overall terms and on a sectoral basis, with reference to the objectives of the Agreement, including on measures to ensure increased participation of developing countries in the services trade.

Trade officials Friday confessed that though the question had come up as early as April 1987 (in the Uruguay Round Group of Negotiations on Services), the negotiators would still have only data derived from the IMF's Balance of Payments statistics - which admittedly are very deficient (as shown by the annual imbalance of billions of dollars at global level, where in theory it should be zero) and do not even conform to the WTO/GATS definition of trade in services.

If the trade officials, and the principal beneficiaries like the United States and the European Union have their way, developing countries would be entering into another round of services negotiations, and undertaking more obligations, without knowing the costs and benefits.

They may, in effect, be once again in the position of being blindfolded and asked to catch a black cat in a dark room.

But if they do, developing country trade negotiators would only have themselves to blame.

In a somewhat lower key at the CTS, the EC, Japan and Korea (all having high levels of agricultural protection and resisting liberalization) also flagged the issue of a 'comprehensive round'.

In accordance with the decision in the General Council on 7 Feb, the regular session of the CTS and the Special Session devoted to negotiations were held back-to-back. Apart from the insistence on parallelism raised by Argentina on behalf of the Mercosur countries, a number of developing countries also brought up questions of lack of data on services trade, and the mandated requirement for the CTS to conduct, before every round, an assessment of the trade in services, on an overall and sectoral basis, with reference to the objectives of the Agreement and the provisions for increasing participation of developing countries in the services trade.

Though the definition of trade in services, and hence of the services trade flows among countries, under the WTO/GATS, is different from the definitions used by the IMF (of transactions between residents and non-residents) used for collection of balance-of-payments data, negotiators are still being asked to negotiate on the basis of the IMF's BOP data.

Developing countries were persuaded during the Uruguay Round to put aside this question, and negotiate the GATS framework, in the implicit assurance that before the next round of negotiations, the problems of the services data would be resolved. But they have not been, and trade officials talk of going ahead with the new round on the basis of the inadequate data from IMF's BOP statistics.

At the CTS meeting, Marchi tried to delink the services talks with other talks, and suggest more frequent meetings and the issues being dealt with both in the regular sessions of the CTS and subordinate bodies, and the Special Sessions.

But many developing countries, including the Mercosur, made it clear that while they could agree to fix the next meeting sometime in April, the frequency of future meetings would depend on the pattern to be agreed on agriculture, and for other reviews and processes.

As the CTS Special Session got under way Friday evening, and before it concluded after about 2-1/2 hours, trade officials had talked of "we can't allow unnecessary linkages", though it was not clear who the "we" were in such comments.

But trade diplomats said that the attempts of the secretariat and the chair did not fly.

A number of participants made it clear that progress in services negotiations would require parallel progress on agriculture, as well on the implementation issues and mandated reviews, including in terms of frequency of meetings and formats for reports on progress to the General Council.

While Mercosur made such linkage with agriculture specific, others appeared to have been more oblique - to avoid this being used to promote a "new comprehensive round".

The special session of the CTS was preceded by the regular session of the CTS.

At the regular session, the chairman referred to the General Council mandate for the services talks, and issue of having a vice-chair to run the regular work of the CTS and the Chair to run the negotiations. The negotiations, Marchi said, was the touchstone of the WTO's ability to stay in business after Seattle and restore confidence. He called on members to be flexible and "not to make too much distinction between negotiating and non-negotiating modes." He also referred to the ongoing work on a multilateral agreement on emergency safeguards in GATS (called for by Article X of the GATS)

At the suggestion of Pakistan supported by India and the Dominican Republic among others, it was agreed that the "assessment" of trade in services should be taken up in the Special Session and should be on the agenda of every meeting of the CTS Special Session. This would also be useful for setting guidelines for the negotiations, both of which are mandated under Art. XIX.

At the special session of the CTS, members generally gave an assessment of what the services negotiations should be about. The assessment, several of the developing countries said, must be an ongoing exercise.

The chair suggested that not too sharp a distinction should be drawn between the normal work of the CTS and the special session in negotiating mode, and that the CTS could meet at intervals of 5-6 weeks, with the chair holding consultations in between. Also, instead of the annual report from the CTS to the General Council, the chair could make oral reports to every session of the General Council (usually held once every three months).

But Argentina, for the Mercosur countries, said the same thing should happen for agricultural talks too, while India and Pakistan said this pattern should also apply to implementation concerns.

On substance, Argentina, speaking for the Mercosur, said the launch of the negotiations was part of the process of building confidence in the WTO. There was need to ensure parity and parallelism in speed of negotiations in agriculture and services. The CTS and the Agriculture Committee should meet at same intervals, and report in parallel to the General Council.

The negotiations in services should be based on the principles of progressive liberalisation, flexibility for developing countries, and industrial countries opening their markets to all modes of supply and in sectors of particular interest to the developing countries. No sector should be excluded from negotiations and there should be special priority to sectors of interest to developing countries. Argentina also called for benchmarks to be set for the development of disciplines in GATS rules.

Argentina also suggested that the next meeting of the CTS should be after Easter in May, but later agreed to schedule the next meeting for April - but leaving the calendar for subsequent meetings to be fixed in light of what happens in the Committee on Agriculture.

[The agriculture committee to start the agricultural talks is set for end March, and clearly Argentina wants to ensure that the CTS and agriculture committee meet at same intervals.]

The Dominican Republic supported several of the points made by Argentina, and called for taking up and settling the guidelines for the next round of negotiations, based on what had been achieved at Seattle.

The EC called for negotiations on market access to be done on a sector-by-sector basis. There was also the need to maintain the momentum of the negotiations. The market access and rule-making could go on in parallel. The EC wanted the next CTS meeting before Easter (which falls on 21 April).

Australia, the leader of the Cairns Group, called for a clear work programme for substantive negotiations, and meetings of the special sessions every 30-45 days. It made no mention of linkage to agricultural talks.

But New Zealand (like Argentina for Mercosur) said the agriculture and services talks should be held in tandem.

Mexico stressed the need for progress in all four modes of delivery of services, and proceeding on the principles set in Art XIX -- progressive liberalisation based on request and offer, autonomous liberalisation to be taken into account, and the results of the review (of MFN exemptions) in Annex II of GATS.

There should be clear distinction between the routine work of the CTS in the regular sessions and the negotiating mode in Special Sessions.

The US stressed the importance of work on domestic regulations, safeguards and work in various areas of services negotiations to be done in four subordinate bodies (meeting back to back) with CTS special sessions monitoring progress, and setting benchmarks for progress.

Venezuela and Chile supported Argentina on the frequency of meetings, to be in parallel with agriculture talks.

India also stressed the importance of settling negotiating guidelines and priorities.

Indonesia, speaking for the ASEAN, supported India and called for establishing guidelines and procedures for negotiations, building on the consensus achieved so far (in the run-up to and at Seattle) (SUNS4616)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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