by Suparna Karmakar
Net Gains in
Services – A Status Report
Arguably, the current deadlock in the WTO stems
from a lack of convergence on the agriculture modalities pertaining to the
phase-out of domestic farm subsidies (including export subsidies) in developed
countries. However, the main stumbling block in the ongoing negotiations under
GATS is arising from the lack of satisfactory quality of offers from Members
vis-à-vis intra-modal asymmetries as well as continuance of MFN exemptions.
While initial expectations from negotiations (the so called ‘ambition’) were
high, in view of the lukewarm nature of the offers made by Members, narrowing
down on any viable and generally acceptable deal is becoming impossible.
Despite contributing a share of world GDP, the fact that services are not as
actively traded as goods is a clear indicator of the extent of protection that
countries accord to the domestic stakeholders in the sector; internationally,
services is the second most protected sector after agriculture. The reflection
of the above is in the weak offers that Members have made in GATS. Progress of
liberalization under the bilateral request-offer approach, as experienced so
far, has been rather slow. Members are of the view that the two rounds of
request offers has not resulted in satisfactory quality of offers, and merely
having another round of the same without more specificity and direction will
not bring desired results.
Also, the asymmetries between different modes
and sectors had not been addressed in the revised offers. Recognizing that gaps
still exist between the offers and levels of autonomous liberalization in
Member countries, that there have been very limited offers of new market
openings, and large numbers of MFN exemptions still remain, the Draft
Declaration has set out guidelines and objectives for scheduling of
commitments. The main text and the Annex C on Services in the final Draft
Ministerial Declaration reaffirms that while the objectives and principles
stipulated in GATS and in the Doha Declaration will be followed, in order to
achieve a progressively higher level of liberalization of trade in services,
Members should make commitments in modes 1 & 2 to bind ‘existing’ levels of
market access, de-linked from the commercial presence requirements, and under
mode 3 for Members to make commitments on ‘enhanced levels of foreign equity
participation’, allowing greater flexibility on the types of legal entity
permitted and removal or substantial reduction of economic needs tests. In mode
4, in paragraph 1, the objectives and scheduling guidelines indicate that ‘new
or improved’ commitments are to be made in select categories of temporary
service suppliers de-linked from commercial presence, to reflect inter alia
removal or substantial reduction of economic needs tests and indication of
prescribed duration of stay and possibility of renewal, if any.
However, how far these
will contribute towards actual improvement of offers by Members remains to be
seen, especially in view of the fact that Members are cautious even to take
commitments that match their domestic levels of liberalization, or lock-in existing
domestic regimes. Developing countries are in a peculiar
quandary; while services liberalization offer larger gains than in any other
pillar of market access, given that domestic regulatory regimes are rather weak
in most economies, it becomes difficult for them to open up aggressively for
fear of being unable to rise to the regulatory challenges that such an action
would entail.
But, to address the concerns of Members as
regards the weak ‘quality of offers’ and ‘slow progress’ of multilateral
negotiations under the bilateral request-offer approach, the Draft Declaration
retained the possibility of engaging in the ‘plurilateral’
request-offer negotiations, the results of which however ‘shall’ be extended on
a MFN basis. In the run-up to the Hong Kong Ministerial, India along with some
other like-minded Members had formed a ‘Friends’ group on Services, which
supported the usefulness and need for such complementary approaches in an
effort to increase the ‘modal coverage’ and gather the ‘critical mass’ required
to achieve a more comprehensive liberalization of the services sector under the
DDA. This complements
The Way Forward
In the months leading up to the WTO
Ministerial Meeting in
Recognising
that bilateral negotiations through requests and offers tends to slow down the
pace of liberalisation in the services sectors, it
was decided at the Hong Kong Ministerial meet that voluntary plurilateral negotiations would also be carried out
simultaneously. And as expected this is an area where one has seen traction.
For
The other area of focus and push would need to
be in Services Rules. Members have been deliberating on different elements of
Rules under GATS since the beginning of the Doha Round, but progress so far has
been rather slow. Even in areas like Domestic Regulation (DR) where convergence
had been largely achieved at
While
it is possible that an ambitious multilateral deal in GATS may be unattainable
in the current round of negotiations, it is quite feasible that the plurilateral agreement be made as comprehensive as
possible. Towards that end, the fact that the present mandate on plurilateral negotiations is very narrowly focused on only
market access seems counter-intuitive. WTO Members should certainly consider
incorporating at least the most critical of the GATS Rules negotiations, namely
the DR, as a part of the plurilateral negotiations
for market access in services.