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Info Service on WTO and Trade Issues (Apr24/01) Geneva, 29 Mar (D. Ravi Kanth) — The United States has blocked a proposal from India at the World Trade Organization’s Committee on Trade in Financial Services for launching a dedicated work program on reducing the cost of remittances, suggesting that if New Delhi wants to take it further then it could launch a plurilateral initiative, said people familiar with the development. At a meeting of the WTO’s Committee on Trade in Financial Services (CTFS) on 26 March, the US appears to have said somewhat sarcastically that India can pursue the issue of reducing the cost of remittances with a group of countries that are similarly interested in the issue, said people familiar with the development. For some time now, the US has been advocating plurilateral initiatives at the WTO, including the so-called concept of “responsible consensus”. Though the US has not joined the proposed Investment Facilitation for Development (IFD) Agreement, it seemed to favour the IFD proponents’ demand to integrate the IFD Agreement into the WTO Agreement’s Annex 4 schedule as a plurilateral agreement. The US stand against a dedicated work program on reducing the cost of remittances came after India blocked the agenda of the CTFS meeting, said a person familiar with the meeting. The annotated agenda issued for the CTFS meeting on 26 March covered several topics such as “financial services: trade, inclusion, and accessibility”, “reducing costs of remittances,” “WTO reform: functioning of the Committee on Trade in Financial Services,” and “reinvigoration of work on trade in financial services”, among others. It remains to be seen whether this item will be taken up at the next CTFS meeting, which will be held in two or three months. “It will certainly come up in the next CTFS meeting,” a person said, on a background basis. Surprisingly, the CTFS convened a thematic session on remittances issues on 25 March, a day before the regular meeting, where many WTO members as well as experts from the World Bank took part. Several members who took part in the seminar concurred with the observations made by the experts from the international financial institutions, said people familiar with the meeting. India had flagged the remittances issues in the run-up to the WTO’s 13th ministerial conference (MC13) and had raised it prominently at the Abu Dhabi ministerial meeting that concluded on 2 March. COST OF REMITTANCES In a restricted paper on the cost of remittances (Job/SERV/CTFS/9), seen by the SUNS, it is argued that “the significant positive contribution of remittances, towards the socio-economic development of households and communities, especially in developing countries, including LDCs (the least-developed countries), is well recognized.” Citing World Bank estimates, the CTFS showed that “out of total remittances of USD 794 billion in 2022, USD 626 billion (about 79%) went to Low and Middle [Income] Countries.” It is well known that “the remittances service is a critical financial service used by the sender and receivers, thus providing a point of contact with the financial sector that can be leveraged to increase access to other financial services and inclusion in the financial services trade.” The CTFS acknowledged that due to “the close relationship between such international money transfers and sustainable development, policymakers have promoted initiatives to support such transfers. In particular, the need to reduce the cost of sending remittances has become one of the key issues on the international development agenda.” Consequently, it said, “If the cost of sending remittances could be reduced by 5 percentage points relative to the value sent, remittance recipients in developing countries would receive over USD 31.30 billion more each year than they do now.” Unsurprisingly, the United Nations has included a target for remittance cost reduction in the Sustainable Development Goals (SDGs), particularly in Goal No. 10. SDG Target 10.C states: “By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent.” According to the CTFS note, “the remittance industry can be supported with appropriate regulation and improved cooperation”, given that the “digitalization of remittance flows is growing and has the potential to increase financial inclusion and reduce the cost of remittance services.” It said, “the COVID-19 pandemic has accelerated the trend towards the digitalization of retail financial services. However, cash-based remittances remain the most prevalent payment instrument in most [receiving] markets.” INDIA’S PROPOSAL In a proposal (WT/GC/W/926), titled “Reducing cost of remittances”, circulated ahead of the CTFS meeting on 26 March, India said, “cross-border payments and money transmission service is a critical financial service used by the sender and receivers for cross-border remittances, thus providing a point of contact with the financial sector that can be leveraged to increase access to other financial services, achieve financial inclusion and enhance participation in financial services trade.” According to India, given the “close relationship between such services and sustainable development, we underline the need to reduce the cost of cross-border remittances.” India reaffirmed its commitment “to the UN SDG Goal 10.C to reduce to less than 3 percent the transaction costs of remittances and eliminate remittance corridors with costs higher than 5 percent by 2030 with a view to achieve the primary goal target, that is, “Reduce inequality within and among countries” which is aligned to the WTO’s development agenda.” It pointed out that though the global average cost for sending remittances declined over time, it still “remains high at 6.18 per cent – more than twice the SDG target, and the experience varies across countries and regions.” Against the backdrop of the expansion in international remittances, India argued that “one of the means to achieve cheaper, faster, and more transparent and accessible cross-border payments including remittances is promoting interoperability and inter-linkages of digital payment infrastructures including fast payment systems.” “The global average cost for digital remittances at 4.84 percent is significantly lower than the cost for non-digital remittances,” India noted. India underscored the need for the WTO’s General Council to direct the Council for Trade in Services and the Committee on Trade in Financial Services to undertake a Work Programme consisting of efforts to: * Understand the development impact of cross-border remittances. * Review the cost of cross-border remittances, trends and developments. * Consider how technology, emergence of new market players, different types of providers and new channels, and consumer behaviour are impacting cross-border remittance services. * Examine the drivers of cost of cross-border remittances and challenges associated with reducing it. * Identify the opportunities created for lowering the cost of cross-border remittances including on account of digitalization, and emergence of new technologies. * Explore ways to address the challenges and utilize the opportunities related to lowering the cost of remittance services. India called upon the CTFS “to maintain a standing agenda item in its meeting, and hold dedicated sessions, to implement the work program with a view to recommend steps that could be taken towards reducing the cost of remittances to the Council for Trade in Services.” With the US having blocked India’s proposal for dedicated CTFS sessions on reducing the cost of remittances as well as for having the issue to be taken up in a plurilateral setting, it is not clear how India’s proposal will progress in the coming months, said people familiar with the discussions. +
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