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Background Note
Thematic File: Post-Doha Agenda
The WTO General Agreement on Trade in Services (GATS): Scope and Negotiations
Introduction
The Initial GATS Negotiations Process
The Negotiations Framework
A) Specific commitments
B) Negotiations within the GATS framework
The Fourth Ministerial Conference in Doha and the Future of Negotiations
I. Introduction
1. This note reviews the evolution of negotiations relating to the General Agreement on Trade in Services (GATS). It outlines the initial stages pursuant to Article XIX of the Agreement, and summarises the present situation resulting from the outcome of the Fourth Session of the World Trade Organization (WTO) Ministerial Conference, held in Doha from 9 to 14 December last.
II. The Initial GATS Negotiations Process
2. Negotiations take place in pursuance of Article XIX of the GATS concerning progressive liberalisation. These form part of the Built-in Agenda including unresolved issues from Uruguay Round negotiations, as well as general negotiations required under specific agreements, such as the Agreement on Agriculture and the GATS, which allow for the stipulated negotiations to start no later than 1 January 2000 [Note 1].
3. Initially, some members wanted negotiations on services and agriculture to be dealt with at a similar pace. However, negotiations on services have, in effect, advanced more quickly than those on agriculture, and countries exporting agricultural products have since abandoned their demands for a strict correspondence between the two negotiation time frames. Indirectly, negotiations on services have thus become the impetus behind not only the debates on agriculture but also the adoption of a new wider programme of work for the WTO, culminating at Doha.
4. All the WTO members have made specific commitments with regard to trade in services. In accordance with Article XIX of the GATS, these specific commitments were either negotiated during the Uruguay Round, during subsequent additional negotiations carried out in some sectors - like basic telecommunications or financial services - , or indeed, for the most recent members, during the actual accession process. Negotiating these specific commitments has enabled all members to modulate not only their level of obligation sector by sector, but also the mode of supply for each service concerned [Note 2], including which restrictions governing market access and national treatment to retain. Within the framework of these negotiations, Article IV of the GATS decrees that increasing participation in world trade of developing country members be facilitated through specific negotiated commitments. These specific commitments relate to strengthening the domestic services capacity of developing countries or to liberalising market access to sectors and modes of supply of export interest to developing countries. Article IV places special priority on least-developed countries (LDCs).
5. The negotiations on services allowed for under Article XIX of the GATS have a broad mandate. This article states that negotiations should be conducted with a view to achieving a progressively higher level of liberalisation. This process aims to promote the interests of all participants on a mutually advantageous basis and to secure an overall balance of rights and obligations. Article XIX also sets forth that the process of liberalisation shall take place with due respect for national policy objectives and the level of development of individual members, both overall and in individual sectors. Furthermore, it allows individual developing country members appropriate flexibility 'for opening fewer sectors, liberalising fewer types of transactions' and 'progressively extending market access' according to their development situation.
6. Negotiating guidelines and procedures. According to Article XIX, the Council for Trade in Services (CTS) must, firstly, establish guidelines and procedures for organising negotiations. The CTS met this objective on 29 March 2001 [Note 3] when it adopted a document containing guidelines and procedures for forthcoming negotiations [Note 4]. These are the salient points:
(a) Objectives and principles: Negotiations must take place in accordance with the objectives and principles set out in the preamble to the GATS and Article IV, and according to the directions of Article XIX (see paragraph 5 above). In addition, the LDCs shall enjoy special priority (art. IV.3).
(b) Scope. The negotiations extend to all sectors and modes of supply, but special attention will be paid to sectors and modes of supply of export interest to developing countries. Horizontal aspects will also be taken into account, including exceptions to the MFN clause, emergency safeguard measures (art. X), government procurement (art. XIII) and subsidies (art. XV).
(c) Modalities and procedures. These include the following aspects:
i. Negotiations will be conducted in special sessions of the CTS, open to all members and in total transparency;
ii. The principal method of negotiation will involve presenting offers and requests on a bilateral, plurilateral and multilateral level;
iii. Autonomous liberalisation will be taken into account and will receive credit during negotiations;
iv. Developing countries will be allowed appropriate flexibility, in that they will be able to liberalise fewer sectors and transactions, and impose conditions restricting access to their markets, in order to promote their own development;
v. The assessment of trade in services already undertaken will be continued and its results will be taken into account. It should be recalled that Article XIX allows for the CTS to carry out an assessment of trade in services for each round of negotiations, both in overall terms and on a sectoral basis, with reference to the objectives of the GATS, including the increasing participation of developing countries. To this end, and since 1998, the WTO Secretariat has produced 17 sectoral notes [Note 5] analysing the evolution of exchanges with a view to preparing the ground for negotiations launched in 2000. It should also be noted that the assessment of trade in services has been treated as one of the standing items on the agenda of the special sessions of the CTS.
III. The Negotiations Framework
7. As well as discussing the guidelines and procedures for negotiations, the CTS has simultaneously developed guidelines for establishing lists of specific commitments within the framework of the GATS [Note 6]. These are based on the procedures used in the Uruguay Round [Note 7] and on the experience gained during additional negotiations, since carried out in other sectors - financial services, basic telecommunications, maritime transport, etc. The document containing the guidelines explains how specific commitments should be presented in the lists. It specifies which details are required to make these clear and precise. In addition, the document shows members how to construct lists and, to facilitate the task, annexes a whole series of relevant documents (notes from various working parties with details of how to draw up lists for sectors such as basic telecommunication or accountancy services, for example). All these explanations are illustrated with precise examples.
8. The guidelines and procedures adopted by the CTS will need to be carefully analysed by all developing countries and in particular by those who joined the WTO after the Uruguay Round. Mastering the technique for preparing and interpreting the lists of commitments is undeniably of great advantage to any member in the current negotiations. This mastery is not accessible to the un-initiated, owing to the abstract nature and advanced level of legal sophistication behind the lists of specific commitments. Insofar as commitment lists will henceforth constitute the heart of negotiations on services, it is now critical that all developing countries meet the required standard.
9. Since the adoption last March of guidelines for negotiations (S/L/93) and for establishing lists of specific commitments (S/L/92), the work of the CTS has concentrated on the actual content of these negotiations. Members have presented an important number of submissions, both on horizontal and on sectoral issues. The vast majority of these submissions originated from developed countries and participation from LDCs has remained very limited [Note 8]. We will consider sectoral and horizontal proposals in quick succession.
· Sectoral submissions. Sectoral liberalisation may be of interest to developing countries either directly or indirectly. It may be of direct interest for those sectors in which a country has a comparative advantage arising from its own natural resources or other national characteristics. Among the sectors mentioned in approximately twenty submissions, developing countries direct interest may lie in tourism [Note 9], energy [Note 10], information services [Note 11], telecommunications [Note 12], construction [Note 13] or professional services [Note 14]. Indirectly, the liberalisation of some service sectors may improve or strengthen the national or commercial infrastructure of a country. For example, a country that exports agricultural products may benefit from the liberalisation of the transport sector, enabling freight costs to be reduced and improving the position of its products on international markets. Among those sectors where liberalisation could indirectly benefit the economy of a country, proposals were made regarding distribution [Note 15], maritime and air transport [Note 16], telecommunications [Note 17] and financial services [Note 18]. Concerning indirect benefits, all the countries underline the key role played by financial services in the domestic economy, whilst at the same time advocating great prudence when considering their liberalisation.
· Horizontal submissions. The most important horizontal issue for developing countries is the movement of natural persons, which constitutes the fourth mode of supply considered by the GATS. Mode 4 deals with the particular situation where a worker temporarily leaves his country of residence to work in another country. This mode is obviously of paramount importance for developing countries with a large well-qualified labour force able to supply services in other markets (developed countries or not), and is reflected in certain submissions, particularly those from India [Note 19]. This is of course a controversial issue, especially for developed countries, given the problems relating to migration and the pressure brought to bear by trade unions. Generally, however, it should in fairness be noted that the specific commitments made up to now by both developing and developed countries are equally restrictive in this field.
B) Negotiations within the GATS framework
· Domestic regulation. Domestic regulation is defined by the GATS (Article VI.4) as covering qualification requirements and procedures, technical standards, and licensing requirements. In these three areas, as in all others, member governments remain free to legislate in order to meet legitimate political objectives. Paragraph 4 of Article VI of the GATS however stipulates that a member's domestic regulation should not be more restrictive than necessary in order to attain these legitimate political objectives, and therefore mandates the CTS to develop disciplines on domestic regulation. An initial attempt at this was made in the accountancy sector, in the four years following the entry into force of the GATS, leading to the adoption in December 1998 of disciplines relating to domestic regulation in the accountancy services sector [Note 20]. Following this sectoral experiment, work was continued horizontally by the Working Party on Domestic Regulation (WPDR). The working party has thus concentrated its efforts in two main directions: the horizontal applicability of disciplines developed for the accountancy sector to professional services as a whole (lawyers, architects, engineers, etc.), and the strengthening of the legal principles underlying these disciplines, to be translated into universal values. On the first point, the answers received from the various professions consulted by members were fairly positive. It therefore seems a reasonably straightforward matter to extend the disciplines developed initially for the accountancy sector to all professional services. Regarding the strengthening of the legal principles, discussions within the WPDR are focused on two main aspects: transparency (how to ensure the transparency of domestic regulation, without placing an undue administrative burden on members?) and the necessity test (how to prove that a measure is necessary in order to attain a given political objective?). In its work on these two aspects, the WPDR has encountered particular problems of definition (the notion of legitimate objective for example) and scope - interaction with Articles XVI and XVII of the GATS on access to markets and national treatment for example. These problems, added to the great legal and practical complexity of the discussions, explain the lack of progress made by the WPDR to date.
· Negotiations on the GATS rules. Since the end of the Uruguay Round, these negotiations have addressed the following three areas, which are not covered by the GATS rules: emergency safeguard measures (Article X of GATS), subsidies (Article XV) and public procurement (Article XIII). The Working Party on GATS Rules has discussed emergency safeguard measures for five years without, so far, reaching any agreement. Some members from developing countries consider that their services sector needs protecting from the vagaries of unforeseen circumstances, which could have negative consequences for their economies, and that only an emergency safeguard mechanism can adequately protect them. The deadline for closing these debates has just been put back, for the third time, to 15 March 2002. And at the first Post-Doha special negotiating session (3-7 December 2001) it became clear that this deadline might be difficult to meet. In addition to emergency safeguard measures, the Working Party on GATS Rules deals with matters linked to subsidies and public procurement, where no progress has been achieved to date. For a variety of reasons, some developed countries have long-standing reservations concerning the implementation of a mechanism allowing safeguard action in the services sector: difficult to apply in practise, such a procedure would increase the instability of the commitments made in relation to market access and national treatment, and would duplicate other GATS mechanisms, etc. Constructive proposals from the advocates of such a mechanism have been a very long time in coming. In March 2000, ASEAN (Association of South East Asian Nations) countries finally presented a text detailing the different possible components of a horizontal safeguard mechanism [Note 21]. The Working Party has since exclusively concentrated its discussions on the ASEAN text. More recently, the United States presented counter-proposals suggesting a sectoral approach to safeguards [Note 22] linked directly to members' specific commitments (similar to the safeguard in the Agreement on Agriculture). India and Pakistan, potential exporters under Mode 4 (the movement of natural persons), have expressed doubts as to the possible application of this type of measure to labour force movements.
IV. The Fourth Ministerial Conference in Doha and the Future of Negotiations
10. Services were, by no means, the most controversial issue under negotiation at Doha, among others agriculture, TRIPS and public health, implementation, and the Singapore questions. This is because the guidelines for negotiations in this area had been agreed beforehand. The Ministerial Declaration contains only one paragraph (para 15) on services. This reaffirms that the guidelines and procedures must be the basis for continuing the negotiations and stipulates that initial requests for specific commitments be submitted by 30 June 2002 at the latest and initial offers by 31 March 2003.
11. Since negotiations began nearly two years ago, some developing countries, and in particular LDCs, have been relegated to the margins of the process. To end this situation and prepare themselves to participate in an appropriate manner, they now need to determine what their interests in these negotiations are. An analysis can and should be carried out on several fronts. A first step is obviously to assess trade in services as per Article XIX (see para 6). A group of developing countries - including two LDCs [Note 23] - recently underlined the importance of this, stating that the process in its present form was inadequate and that negotiations should not continue until this assessment is finalised.
12. However, the absence of accurate and reliable statistics on the trade in services in most countries makes it unlikely that this exercise can be taken much further than the point it has already reached. Therefore it would be pertinent that the analysis be completed with two further important steps. First of all to identify within the specific commitments of the target markets any obstacles that significantly hamper the member's export of services. This analysis should start with those sectors which present strong export potential for the member country. Secondly, members would also be advised to attempt to identify within their own specific commitments, any limitations to market access and to national treatment that are to their disadvantage and therefore have a negative effect on their own economy. This analysis will be crucial for the next stages in the negotiations, during which each member will have to present requests and offers to economic partners. It should be possible for increased technical and financial assistance to be made available to prepare more effectively for this part of the negotiation, as has already been requested by some developing countries.
13. The CTS met for four days during the week commencing 3-7 December 2001 in order to consider the submissions received to date, both on horizontal and sectoral issues (see para 9). The subsequent meeting is scheduled for March 2002, for an update on the progress in negotiations. Given the participation problems outlined above, these meetings will take on a great deal of importance for developing countries.
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Note 1: One year after the Marrakech Agreements (1995) came into force, setting up the WTO and putting together the results of the Uruguay Round, the members of the Organisation, in the knowledge that many elements of the multilateral trading system had still to be negotiated, discussed or improved, decided that the activities of the Organisation required a more rigorous structure and planning. This became known as the Built-in Agenda. See AITIC Brief Information Note on the WTO Built-in Agenda, 28 July 2000, available on AITIC's website (www.aitic.org). (return to text)
Note 2: Indeed, this agreement distinguishes between cross-border trade ('Mode 1'), consumption abroad ('Mode 2'), commercial presence ('Mode 3') and the movement of natural persons ('Mode 4'). (return to text)
Note 3: See document S/L/93. (return to text)
Note 4: The adopted guidelines bear a strong resemblance to the proposal by a group of developing countries, the G-24: Argentina, Brazil, Cuba, El Salvador, Honduras, India, Indonesia, Malaysia, Mexico, Nicaragua, Pakistan, Panama, Paraguay, the Philippines, the Dominican Republic, Sri Lanka, Thailand, Uruguay, the members of the Andean Community (Bolivia, Colombia, Ecuador, Peru and Venezuela) and Guatemala. The African Group and the members of CARICOM also supported the proposal. (return to text)
Note 5: Contained in documents S/C/W/37 /38 /39 /40 /43 /44 /45 /46 /47 /49 /50 /51 /52 /59 /60 /61 /62. Document S/C/W/65, dated 6 November 1998, groups together all these notes. (return to text)
Note 6: See WTO document S/L/92, 28 March 2001. (return to text)
Note 7: See documents MTN.GNS/W/164 and 164/Add1 of 1993. These documents cannot be found on the WTO website but are referred to in document S/L/92 as being the first guidelines produced by the WTO Secretariat relating to the registration of lists of commitments. (return to text)
Note 8: One of the submissions involving two LDCs was that forwarded by Cuba, Haiti, India, Kenya, Uganda, Pakistan, Peru, the Dominican Republic, Venezuela and Zimbabwe: S/CSS/W/114. (return to text)
Note 9: See documents S/CSS/W/107 (Bolivia, Ecuador, El Salvador, Honduras, Nicaragua, Panama, the Dominican Republic) and S/CSS/W/109 (Kenya). (return to text)Note 10: See documents S/CSS/W/69 from Venezuela and S/CSS/W/88 from Chile. (return to text)
Note 11: See document S/CSS/W/95 (MERCOSUR). It is generally recognised that India has an advantage in this area, but has yet to present a submission. (return to text)
Note 12: See document S/CSS/W/88 (Chile). (return to text)
Note 13: See documents S/CSS/W/109 (Kenya), S/CSS/W/88 (Chile) and S/CSS/W/113 (Brazil). (return to text)
Note 14: See documents S/CSS/W/98 (Colombia), S/CSS/W/109 (Kenya) and S/CSS/W/88 (Chile). (return to text)
Note 15: See documents S/CSS/W/80 (MERCOSUR) and S/CSS/W/88 (Chile). (return to text)
Note 16: See document S/CSS/W/88 (Chile). (return to text)
Note 17: See document S/CSS/W/119 (Colombia). (return to text)
Note 18: See documents S/CSS/W/96 (Colombia) and S/CSS/W/109 (Kenya). (return to text)
Note 19: See documents S/CSS/W/12 (India), C/CSS/W/88 (Chile), C/CSS/W/109 (Kenya) and C/SCS/W/97 (Colombia). (return to text)
Note 20: Document S/L/64 adopted on 14 December 1998. (return to text)
Note 21: Document S/WPGR/W/30 of 14 March 2000. (return to text)
Note 22: Document S/WPRG/W/37 of 2 October 2001. (return to text)
Note 23: See document: S/CSS/W/114 (Cuba, Haiti, India, Kenya, Uganda, Pakistan, Peru, the Dominican Republic, Venezuela and Zimbabwe), cited above. (return to text)
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