Trends by Martin Khor
Monday 3 October 2005
South fights back on services at WTO
At a meeting on services
at the World Trade Organisation on 28-29 September, developing countries
fought back against a proposal by the rich nations to open up their services
markets through a new method. Among the countries protesting the moves
were Malaysia and several other Asean countries.
countries have fought back against plans by the rich countries to open
up their services markets at a meeting at the World Trade Organisation
last Thursday and Friday in Geneva.
groupings of the South, including most Asean countries, the Africa Group,
the Caribbean countries and many Latin American countries led by Brazil,
spoke up strongly against the developed countries' proposals to change
the rules in the WTO to accelerate the liberalisation of services in developing
the proposals, developing countries would no longer be able to liberalise
at their own pace and in their own chosen sectors, but would have to commit
to open up a certain number of key sectors out of a list to be agreed
meeting of the WTO's Services Council was a battleground last week between
developed countries (led by the European Union and Japan) and most developing
countries over the pace of liberalisation and the policy choices that
developing countries will have in future.
stake is the future of local enterprises in areas such as banking, insurance
and other financial sub-sectors, telecommunications and other utilities,
distribution, and professional services.
to now, countries are allowed to choose whether to open up to competition
from foreign firms and to what extent in the various sectors, under the
General Agreement on Trade in Services (GATS).
is known as the positive-list approach where liberalisation is committed
only in sectors inscribed by a country in its services schedules in the
countries can request that a particular WTO members open up in more areas,
but it is up to that member to respond in the way it wants through offers
made in the WTO. This is known as the request-offer method of negotiations.
rich nations' plans to change this through a multilateral benchmarking
approach (where developing countries have to open up in for example six
out of ten selected sectors) came under heavy fire at last week's meeting.
major Asean countries were among the most vocal critics. A joint statement
by Brunei, Indonesia, Malaysia, the Philippines and Thailand was presented
by Philippines Ambassador, Manuel Teehankee. They said the request and
offer method should remain the main method of negotiations.
many other members, we are still not clear how this will not in effect
eventually replace the bilateral request-offer process or reduce it to
a mere monitoring process,” they said. The proposals also may not adequately
cover the developmental dimensions of flexibility for developing countries.
for policy manoeuvre is very crucial, said the Asean countries, especially
since countries are unable to change their liberalisation commitments
once they are made, unless they are willing to pay compensation which
can be highly punitive.
member has scheduled its own limitations in sectors, and is allowed to
gradually liberalise at its own pace, which takes place when it corresponds
to domestic policies. Services liberalisation should also be accompanied
by sound macroeconomic management and appropriate regulation and supervision.
authorities continue to carefully consider the pace and sequencing of
further liberalisation in sectors together with a comprehensive review
of our existing regulatory regime to secure the soundness of our services
sectors, especially sensitive systems such as financial services and telecoms.”
countries said they are concerned that the proposed approaches may undermine
such GATS flexibilities. “A member may be caught in situations where
it has no choice but to undertake commitments prematurely to fulfil the
targets. This may undermine the principle of progressive liberalisation.”
five Asean countries added that the “scoring approach” (a proposal to
give scores to countries, with high scores to those that have liberalised
more) could send a wrong message. It does not help increase the comparability
of schedules but generalises Members’ commitments into a simplified value.
scoring approach will transgress negotiations into viewing services negotiations
akin to goods negotiations where one plus one is equal to two,” they said.
A fair and accurate method to translate commitments into indices is lacking.
is dangerous to request for an agreement on the desirability of complementary
approaches before the design is fully fleshed out. It is comparable to
asking for a blank cheque."
African Group, represented by Egypt, said that establishing any targets
would reduce the flexibility inherent in the GATS. Though the proposals
claim to be complementary to the request-offer approach, they in fact
seek to replace it.
least developed countries said they face structural weaknesses in their
local service sectors which would be compounded by the proposals which
they therefore rejected.
Caribbean countries, represented by Jamaica, rejected the proposals, saying
that these undermine the flexibility, and “policy space” allowed by the
also attacked the proposals for not respecting the structure of the services
agreement and the flexibilities given to developing countries. The proposals
would also burden mainly the developing countries, while the rich countries
would get off free because they had liberalised more of their services
before and thus did not have to do more.
severe criticisms by developing countries have put the developed countries
on the defensive for the time. But they are expected to continue to pile
on the pressure on this issue between now and December, so as to get a
favourable decision at the Hong Kong Ministerial of the WTO in December.
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