TWN Info Service on WTO and Trade Issues (Feb08/03)

2 February 2008

Please see below an article on the high demands that developed countries are making on developing countries in services, through a draft text.

The article also reports on a proposal by some small economies on elements of a services text.

This article was published in the SUNS of 30 Jan 2008.  Any reproduction requires the permission of SUNS (sunstwn@bluewin.ch)

Best regards
Martin Khor (TWN)


SUNS #6403 Wednesday 30 January 2008
Trade: Developed countries make high demands in their draft services text
By Martin Khor, Geneva, 29 Jan 2008

Developed countries have presented a draft of a text on services as part of the WTO's Doha negotiations. The draft, which according to trade diplomats was made available last week, have placed in text form the points that have previously been made by the United States, the European Union and other developed-country members in the second half of last year.

At a small-group consultation meeting on 23 January at which this draft was presented, another paper was also circulated by 18 members of the small economies group.

Another small-group services meeting is scheduled for this Thursday. At this meeting, other papers on a services text are expected to be presented, including one from a group of developing countries including Brazil.

The developed countries' paper is in the form of a "contribution" by the members to the consultations being conducted by the Chair of the services negotiations, Ambassador Fernando de Mateo of Mexico, on the possibility of WTO members formulating a "services text".

Since last year, developed countries have been demanding that a services text be formulated which would then be placed alongside the modalities being prepared for agriculture and non-agriculture market access (NAMA). This was for some time resisted by a wide range of developing countries, which argued that there was already a services decision in Annex C of the Hong Kong Ministerial Declaration, and that therefore another text is unnecessary.

Amb. De Mateo then started a consultation process on whether to have a services text, which then led to the developed countries making proposals on what a text should contain. Some developing countries also then made suggestions on what a possible text can and cannot include, while a few other developing countries (including Bolivia and Venezuela) continued to oppose there being any services text at all.

In November 2007, the US issued a detailed proposal on "Elements for a text" whose main point included that "services market access ambition must be comparable to the ambition in agriculture and NAMA." (See SUNS #6370 dated 21 November 2007). It was an attempt to create a new "template" for the Doha negotiations, at this late stage. Most developing countries argue that agriculture is the leading factor driving the Round, with NAMA to follow, and services only a third factor, at least in terms of sequencing. The US paper was an outright attempt to put services on the same basis as agriculture and NAMA.

In its key operational demands, the US paper also asked that a services text sets "guidelines instructing Members" to positively respond to bilateral and plurilateral requests with a view to achieve higher liberalization, and reducing or eliminating adverse effects on services trade as a means to provide effective market access by offering commitments to (a) reflect current levels of market access and national treatment; and (b) provide new market access in sectors where trade impediments remain.

At an informal services meeting on 15 November, Brazil had made a detailed criticism of the US proposal. In particular, it attacked three components of the paper: (i) that services market access ambition should be comparable to the ambition in agriculture and NAMA; (ii) a factual assessment of the market access negotiation should be made, reflecting the range of Members' views and providing concise, non-attributed summary of the responses to collective request; and finally, "to add insult to injury", (iii) that Members shall undertake commitments which reflect current levels of market access and national treatment, as well as provide new market access in sectors where trade impediments remain. Brazil then warned that if such an approach is insisted upon, it may cause the "complete collapse of the negotiations."

It is obvious that the US did not take the Brazilian warning seriously, as it has now led nine other WTO members to issue a new paper, this time in the form of a text, that repeats the points in its November paper. The co-sponsors of the paper are eight developed members (Australia, Canada, EC, Japan, New Zealand, Norway, Switzerland, USA) as well as Korea and Taiwan.

The new paper requires WTO members to make commitments in services that (1) reflect current levels of market access and national treatment, and (2) provide new market access and national treatment in sectors where trade impediments remain.

The paper also repeats the US earlier demand to place services on the same and comparable level as agriculture and NAMA. The paper states: "The same level of ambition and political will as reflected in the Ag and Nama modalities is required for services."

The paper also calls for differentiating the commitments of different developing countries, by introducing the criterion of "size of economies." The paper states: "Negotiations shall have regard to the size of economies of individual Members, both overall and in individual sectors, Due consideration shall be given to proposals on trade-related concerns of small economies."

It also states that a second round of improved offers shall be submitted two months after the adoption of the agriculture and non-agricultural products market access modalities and the services text.

The paper, in its non-operational part, reveals the frustration of the developed countries that they have so far not received the offers they have been demanding in recent bilateral and plurilateral talks.

It says that the state of play of market access negotiations reveals that in most groups "only a few Members have indicated flexibility to offer commitments to reduce or eliminate barriers with a view to meeting key aspects of bilateral and plurilateral requests in order to achieve the GATS Article XIX objective of providing effective market access.

"Co-sponsors expressed concern and disappointment that, notwithstanding the resumption of negotiations early in 2007, many recipients provided no indication that future offers would reflect any existing liberalization or provide new market access opportunities in response to the bilateral and plurilateral requests. Moreover, some recipients indicated explicitly that future offers would neither bind existing conditions nor create new market access."

In its most significant operational paragraphs, the draft text in the paper states that the WTO members agree that "Services is an essential part of the Doha Development Agenda. The same level of ambition and political will as reflected in the Ag and NAMA modalities is required for services."

It also states that: in order to advance these negotiations, in responding to bilateral and plurilateral requests, the next offers will adhere to GATS Article XIX and other aspects of the negotiating mandate by:

(a) Achieving a progressively higher level of services liberalisation;

(b) Reducing or eliminating the adverse effects on trade in services of measures as a means of providing effective market access, by offering commitments, with limited exceptions, that: (i) reflect current levels of market access and national treatment, and (ii) provide new market access and national treatment in sectors where trade impediments remain;

( c) Securing an overall balance of rights and obligations under the Agreement;

(d) Increasing the general level, of specific commitments undertaken by Members under this Agreement.

Other points covered briefly in the paper include the issue of LDC modalities, on domestic regulations, and on S&D treatment.

The developed countries' paper was circulated at a small-group services consultation last week. At the same meeting, 18 small, vulnerable economies also presented a paper entitled "Outline of an SVE position on Possible Elements of a Services Text." According to diplomatic sources, some members of the SVE group (Bolivia, Cuba) did not sign on because they are opposed in principle to there being any services text.

The co-sponsors of this paper are Antigua and Barbuda, Barbados, Dominica, Dominican Republic, El Salvador, Fiji, Grenada, Guatemala, Honduras, Jamaica, Mauritius, Mongolia, Papua New Guinea, Paraguay, Solomon Islands, St. Kitts and Nevis, St. Vincent and the Grenadines and Trinidad and Tobago.

In its first part on "General Considerations", the paper said that a possible services text should only be tabled after the release of final modalities in Agriculture and NAMA have been tabled.

The process of developing a text should be multilateral, fully inclusive and transparent, with regular open-ended sessions, added the paper. The development of a text must moreover respect the current architecture of the GATS and its positive list approach.

"We will therefore not support any attempts that propose to bind current levels of market access and national treatment, nor to introduce any further notion of benchmarks within these negotiations. We are also not supportive of the desire that some delegations have to establish a level of comparability among the Services, Agriculture and NAMA," said the paper.

Referring to the Hong Kong Declaration and Annex C, the paper says: "As such, we believe that the level of ambition for the services negotiations has already been established, and is based on a very delicate balance... SVEs consider that there is a need to be cautious in the preparation of a text in services in order not to reopen the delicate balance achieved in the Hong Kong outcome through the negotiating process. SVEs further consider that the objectives of a services outcome at this stage should be related to the unfinished business remaining from the July 2006 suspension and shall take into account developments which have taken place since the Hong Kong Ministerial."

In its second part on "Possible Elements", the paper lists 11 points:

1. Reaffirmation of the Hong Kong Ministerial Declaration and Annex C.

2. Dates for the tabling of revised offers and final schedules, which should reflect time-frames developed for the overall round (i. e. no less than 90 days following the establishment of modalities and presentation of draft schedules in Agriculture and NAMA respectively), and should be in accordance with the Hong Kong timelines, including through sequencing.

3. Developing country participation in services trade shall be facilitated through the liberalisation of market access in sectors and modes of supply of export interest to them, particularly as reflected in their specific requests.

4. The process of liberalisation shall take into account the level of development of individual Members both in overall and individual sectors, and accord developing countries the flexibilities provided in Article XIX of the GATS for opening fewer sectors, liberalising fewer transactions and extending market access in line with their development situation.

5. Within the context of paragraph 5 of Annex C and the mandate to develop disciplines on domestic regulation, a factual account of the progress attained, should be registered.

6. For GATS Rules, a factual account of the state of play should be registered as well as the need for continued focused discussions in this area.

7. Further to the mandate of paragraph 7, recognition of the number of collective requests established, the number of participants, and the number of meetings undertaken, may be provided.

8. Reflection of para 8 Members shall continue to give due consideration to proposals on trade related concerns of small economies.

9. Revised timelines should also be developed for the operationalisation of LDC Modalities prior to the tabling of final offers as provided in paragraph 11 (e) of Annex C.

10. S&D proposals should be addressed with appropriate recommendations to the General Council.

11. The importance of technical assistance and capacity building should be underscored through Members' request to the Secretariat to provide a report of targeted technical assistance, and providing further guidance, if required. +