[ssf] Interesting article: [GATScrit] Geneva update: SERVICES NEGOTIATIONS: THE AGE OF CRISIS?

[Chris Malins]

Sorry that I keep posting these articles, but I think that this is a 
very interesting one. it is apparent that developed nations are pushing 
for liberalisation under all modes of supply specified by the 
GATS(General Agreement on Trade in Serivces) except mode 4, which deals 
with cross border movement fo people. As I have commented before, the 
pro-liberalisation rhetoric comes to an abrupt halt where any migration 
issues are involved. This is in many ways more important in terms of the 
future  openness of borders than anything happening at the domestic level.

Also notice the emphasis on the use of corporate lobbies by the 
developed world to argue in favour of liberalisation. Its a standard 
tactic that uses the economic power of business to dwarf the resources 
of developing countries, and bias negotiations. Its very analogous to 
the recent victory of the McLibel 2 over legal aid, there can't be a 
fair process between Uganda on one side and Europe with a pantheon of 
corporations wealthier than Uganda anyway on the other.

Chris


Geneva update

3^rd March 2005



SERVICES NEGOTIATIONS: THE AGE OF CRISIS? – DEVELOPED COUNTRIES PRESSURE
FOR REVISED OFFERS AND THE ESTABLISHMENT OF BENCHMARKS IN SERVICES
NEGOTIATIONS

By Alexandra Strickner, TIP/IATP

* *

  From February 7- to 25 a three-week cluster of services negotiations
took place at the WTO. This negotiation cluster has been the last formal
cluster before the deadline for the submission of revised or new offers
in May 2005. The main message from the Chair of the Services Negotiating
Committee Chilean Ambassador Jara and the WTO Secretariat, is that there
is a crisis in the services negotiations.



During the services negotiating session in December 2004, the demandeurs
for services liberalization – mainly developed countries plus a few
developing countries such as India – issued a call to accelerate the
negotiations. The Chair of the services negotiating committee and the
WTO Secretariat backed this up by stating publicly that services
negotiations are lagging behind and are in crisis. At the same time
there has been no move on issues of concern to developing countries - in
particular in agriculture. Also Non-Agricultural Market Access (NAMA)
negotiations are not particularly moving fast. Thus the artificial
creation of crisis can only be assessed as an effort to increase
pressure on developing countries to table first or revised offers. When
it is still very unclear what developing countries might gain in
agriculture, why should they now move quickly in services negotiations –
an area, in which most of them have a lot to lose and little to gain?





MEGA SERVICES NEGOTIATION CLUSTER – UNTRANSPARENT, UNBALANCED PROCESS
WITH HEAVY PRESENCE OF THE CORPORATE LOBBY



During the three-week cluster of services negotiations, a range of
activities took place including several multilateral meetings debating
issues around domestic regulation, government procurement, subsidies and
safeguard measures. There were also a large number of bilateral meetings
between members to discuss requests and existing offers. As in the past,
some WTO members such as the EC and U.S. with particular interests in
far reaching market access commitments, booked rooms for corporate
groups to lobby WTO Members, particularly developing country Members.
During this cluster, some 40 representatives from Financial Corporations
– Banks, Insurance groups, Pension funds among others – lobbied
developing countries on the benefits of liberalizing their financial
services sectors under GATS. For smaller developing country delegations,
this often involved one delegate meeting a large numbers of persons
pressuring them to liberalize their services sector.



Countries negotiate market access commitments on a bilateral level,
despite the fact that commitments are ultimately multilateral and thus
offered to all WTO members. This certainly raises the question about why
market access negotiations are not held multilaterally. If they were, it
would allow developing countries to form alliances and strengthen their
negotiating power. To date, resisting the pressure of developed
countries and their lobbies, is difficult because developing countries
negotiate individually. Very often, one developing country negotiator
has to sit down opposite a large team of developed country negotiators.
The resulting power imbalance in the process does not allow for a fair
and balanced agreement and should be changed.



Services negotiations are among those negotiations at the WTO which are
the MOST untransparent, secretive and undemocratic. Several developing
country negotiators in Geneva say, that if they would have known during
the Uruguay Round what the GATS agreement was about, they would never
have agreed to it. The democratization of these negotiations in
particular by including stakeholders back home is necessary to avoid new
services liberalization commitments with unwanted negative consequences.



NEW AND REVISED OFFERS – WHAT TO EXPECT



Indonesia and Uganda have announced during the last services cluster
that they will table their initial offers. To date only the EC and Japan
have tabled revised requests in writing, the rest of the demandeurs
presented revised requests orally. The U.S. has already indicated that
it will not table a better offer in Mode 4 (the temporary movement of
natural persons). Given the unemployment rates in many other developed
countries such as the EC which are on the rise, it is difficult to
believe that these countries will table better offers in Mode 4 – in
particular in the area of low skilled labour. 45 Members are still
expected to make offers, without counting LDCs which definitely should
be exempted.



CONTINOUS ATTEMPTS TO CHANGE THE NEGOTIATION PROCESS IN SERVICES: FROM
FLEXIBILITY TO BENCHMARKS



Part of the developed country strategy to move services negotiations
forward is to change the negotiation process in services. To date, the
GATS allows WTO members to freely choose whether they wish to commit
their services sector or not. Until now, the proponents of the GATS
stressed this flexibility, in many way to dilute concerns among others
of NGOs. However, since services accounts for two thirds of the economy
of developed countries and their economies continue to face problems,
they wish to secure new markets for their services industries to boost
growth. The quantity and quality of offers tabled so far do not promise
for this to happen. This is one of the reasons why major trading
partners are now pushing for the establishment of so called benchmarks –
a minimum level of commitments which any WTO member would have to make
within this round – in order secure an outcome of these negotiations.



A first attempt to specify and push for this, is a communication on the
Liberalization of Financial Services (see attachment or go to
www.tradeobservatory.org <http://www.tradeobservatory.org/>) which was
tabled among others by the EC, Switzerland, Australia, Japan, the U.S.,
Canada, Singapore, Norway but also Oman, Panama, Bahrain and Tawain. In
this document, the proponents – besides praising the benefits of
financial services liberalization for economic growth, stability and
development – propose so called “Liberalization Targets for Doha
Negotiations”.



They propose the following benchmarks:

     * To use the agreed definitions in the GATS Annex on Financial
       Services for scheduling commitments
     * To ensure commitments for all sectors in particular in Mode 3
       (commercial presence). This includes the right to establish new
       and acquire existing companies… and to ensure appropriate
       commitments in cross border supply (mode 1 and 2)
     * To remove for the mentioned modes of services delivery,
       discrimination between domestic and foreign suppliers regarding
       the application of laws and regulations (national treatment) and
       to remove non-discriminatory limitations such as monopolies,
       numerical quotas or economic needs tests and mandatory cessions.



This basically means, that developing countries should remove any kind
of barrier that currently allows them to regulate the establishment of
banks, securities, insurance companies, asset management, pension funds
and financial advisory services. In the view of the proponents, any
restriction is considered bad for growth and development, as they impede
competition and consequently raise the cost of financial services. The
World Development Report 2005 of the World Bank, “Finance for Growth” is
quoted to give proof for this theoretical consideration.



However past experiences hardly support this position. On the contrary,
increased competition, for example in the banking sector by allowing the
establishment of foreign banks in a country, has often lead to “cherry
picking”. Foreign banks are primarily interested in clients with low
risks and high profits, essentially the rich (High Net Worth Individuals
in banking language) and large (often transnational) companies. The
consequence is that local banks loose these clients and are left with
higher risk clients, such as small entrepreneurs or less wealthy
individuals. While these higher risk groups are often in greater need of
credit, the fact that they lose their low risk clients means they are
less able to offer credits to the higher risk clients. The banking
sector consequently loses its vital function in providing credit for
economic activity of small and medium-sized enterprises. A fully
liberalized banking sector does therefore not guarantee pro-poor growth.



The tabled communication also needs to be analysed in relation to
possible impacts for social security systems, which are still publicly
organized in many developed countries.



MOMENTUM BUILDING UP IN DOMESTIC REGULATION



Domestic Regulation together with Government Procurement, Subsidies and
Safeguard Measures are discussed and negotiated multilaterally within
the services negotiations. These are all important areas as they set the
rules for the scope of market access commitments. Making market access
commitments without knowing and defining these rules beforehand, can be
quite fatal. A commitment can turn out to be quite useless, in case
these rules limit the commitment made or make them more far-reaching
than intended.



According to Geneva delegates, only in the area of domestic regulation
momentum has built up. In the last few months, various countries and
groups of countries have tabled proposals for domestic regulation. This
area is key to the GATS negotiations as it outlines the scope of policy
space to regulate a services sector once it is commited under the GATS.
Developed countries seek to protect via these negotiations rights of
services investors which are based in their countries (e.g. banks,
insurances, water companies, retailers etc). Regulations negotiated in
this ares shall ensure that future legislation in a sector liberalized
under the GATS cannot hurt investor rights. The North American Free
Trade Area (NAFTA) gives a flavor of what countries committing services
sectors can expect. Several national or regional laws put in place by
authorities to protect either its population or the environment after
NAFTA came into place were challenged as burdensome and thus trade
restrictive.



The so-called “necessity test” (the criteria for necessity, the list of
legitimate measures etc.) which is also negotiated within domestic
regulation, is crucial in this context. In general there seems to be an
emerging consensus that a necessity test is needed. Whether it is
developed or developing countries, each of them sees this instrument as
a crucial one to be able to ensure that given market access is not
diluted by national or local laws.



Recently tabled proposals are attached to this information or available
at www.tradeobservatory.org <http://www.tradeobservatory.org/>.



SERVICES NEGOTIATIONS – PROCESS FROM NOW UNTIL THE JULY GENERAL COUNCIL
MEETING



According to Geneva based sources the mini-Ministerial in Kenya, which
takes place from 2 to 4 March in Mombasa, will be used to increase the
pressure on services negotiations. With the current dynamic of creating
a public image of a crisis in services negotiations, the proponents of
accelerated services negotiations in particular developed countries will
try again to blame the slow progress on developing countries – when in
reality it is the EC and the U.S. who do not want to move in areas where
they have defensive interests.



Before the May 2005 deadline for first or revised offers and the next
services negotiation cluster (from June 20 to July 3), several informal
meetings will take place. In March an “energy week” is scheduled. At the
end of March an informal discussion on domestic regulation will take
place. From 27-28 April, a Workshop on Cross border Supply will be held.
During the services cluster in June/July a special session shall be held
on Least Developed Countries.



For the June services cluster, developing countries expect a first
proposal for the “Modalisation” of services negotiation, i.e. a more
specific proposal for benchmarks. The demandeurs of services
liberalization will use the next months to find some kind of formula or
benchmarks to set parameters. It is to be expected that the scheduled
mini-Ministerial Meetings (May in Paris, next to the OECD meeting, June
in Korea, next to the APEC meeting and July in China) will also be used
to maintain or increase the pressure and to discuss such “services
modalities”. With a few exceptions, all developing countries are against
the development of such modalities. It will completely change the nature
of the GATS and force developing countries to liberalize services further.



JULY APPROXIMATION



The July General Council meeting (27 to 29 of July), will be a first
important step towards the Hong Kong Ministerial Meeting. Currently
services negotiators indicate that as a result of this General Council a
July approximation should come out. For services this would mean a draft
document on domestic regulation. The proponents of a change of the
negotiation mode in services will aim for an agreement in July to set
benchmarks for services negotiation.



CALL FOR ACTION



Civil society groups need to gear up with their work on services
liberalization. In the event that developing countries are pressured
into commitments and into establishing benchmarks, much of the needed
policy space for development will be lost. Key areas in which developed
countries will push for commitments on existing autonomous
liberalization or further WTO liberalization are among others in
financial services, telecommunication, energy, distribution services,
environmental services (in particular water distribution) and to some
extent essential services such as health and education. Developed
countries are also pressuring developing countries to make commitments
under the GATS in sectors which are already autonomously liberalization
(mostly due to pressure from the World Bank and IMF). While this might
sound logic at first sight, such a decision implies to lock in
liberalization policies into a legally binding system with no real point
of return. Taking back liberalization commitments in the future would
imply to compensate trading partners, either by liberalizing other
sectors or pay compensation.



Furthermore, given the fact that GATS is the hidden agenda for the
Singapore issues, in particular investment, and that market access
commitments lead to serious loss of policy space, it is highly
problematic that to date almost no WTO Member has discussed tabled or
possible requests and offers back home with the large number of affected
stakeholders.



In large part, developing countries have little to gain from services
liberalization and consequently should carefully assess the “cost” of
losing policy space versus the potential “gains”. In its essence, GATS
is an investment agreement. After successfully preventing negotiations
about an investment agreement within the Doha Round, developing
countries need to think twice, before allowing such an agreement in
through the backdoor.





*Documents accessible as of Monday on www.tradeobervatory.org*

Joint Statement on Liberalization of Financial Services (US, EC et al)

Statement of Switerzland on Educational Services

Domestic Regulation – Communication from Brazil et al, Communication from US





Alexandra Strickner

Institute for Agriculture and Trade Policy (IATP)

Geneva Office

15, rue des Savoises

1205 Geneva

Switzerland

Tel: +41 22 789 0724

Fax: + 41 22 789 0733



www.iatp.org <http://www.iatp.org>

www.tradeobservatory.org <http://www.tradeobservatory.org>







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