[ssf] [Fwd: THE GREAT GATS SCANDAL (by Aileen Kwa)]

[Chris Malins]

from: FOCUS ON TRADE      NUMBER 114, NOVEMBER 2005 (see webpage and 
details down the page)
THE GREAT GATS SCANDAL
Aileen Kwa *

Over the past six weeks in Geneva, the demandeurs in services
liberalisation have been maneuvering the process to engineer a radical 
change in the
current more "flexible" GATS (General Agreement on Trade in Services)
architecture. The teamwork amongst a group of countries and players - 
spearheaded by EC,
and also with India (and the US) - together with the Chair of the 
Council for Trade in
Services (CTS), Mexican Ambassador Fernando de Mateo, and supported by 
the WTO
Secretariat, has almost been flawless.
The academy award must be presented to Mateo - but he could
only have played out his role if fully endorsed by some powerful 
Members, and the WTO
Secretariat, the latter being the hand that writes the negotiating texts 
for Chairs.

The practice of Chairs of negotiating committees abusing their
authority, and presenting negotiating texts which reflect the positions 
of the powerful players,
but not the majority, has been performed many times in the WTO. Combined 
with calls,
threats and complaints from Washington, and intense lobbying from Brussels,
this is one of the most effective ways of sidelining the less powerful 
players, and
silencing them.

The new element that Mateo has so flamboyantly added, is the
extent to which he has nonchalantly told Members, as if he were the one 
writing the rules
of the WTO, that he cannot remove what he has decided without consensus 
to put into
the text, unless there is complete consensus to take them out!

The more "development" friendly aspects of the GATS agreement are now 
being written
over in Geneva. If the majority are not able to torpedo this - and they 
are fighting
against major interests - the impact would be serious. Unemployment will be
exacerbated since small and medium sized players will be squeezed out of 
a more
concentrated market, the capacity for countries to regulate would be 
gravely weakened
and across the developing world, access to services for the poor will be 
eroded, as the
weight of WTO rules merge with the interests of the biggest services 
corporations.

SETTING THE STAGE
Those with aggressive interests in services liberalisation have been 
waiting for some
time now, to completely undermine the more flexible character of the 
GATS. Its "positive
list" approach (liberalizing what a country chooses) was mandated in the 
Uruguay
Round, only because the developing countries did not want a GATS 
agreement in the
first place, and by allowing such an agreement, had made a huge 
concession. The
GATS has built-in "flexibilities" which takes into account countries' 
development
objectives, requiring Members to open up their markets at their own pace.

At the start of the GATS negotiating round, when the Negotiating 
Guidelines were being
knocked together (early 2001), the developed countries - US, EC and 
Japan - pushed
hard for a formula approach to the negotiations, along the lines of the 
"benchmarking"
now being raised. This was strongly opposed by developing countries and 
the issue
was dropped.

For most of the past year, the EC, US, Japan et al, have bemoaned the 
low quality of
"offers" they have received from their negotiating partners, even 
terming this a "crisis".
>From the majority of developing countries' point of view, there was no crisis. The
promise of assessment of the impact of the last round of negotiations 
had not been
delivered. In fact, the results of the last Round have been very 
disappointing for
developing countries. According to UNCTAD's assessments, the developing 
countries
had undertaken a higher share of full bindings under the cross-border 
and commercial
presence modes of supply. But in contrast, they did not receive 
concessions of any
meaningful economic value to them under the movement of natural persons 
mode of
supply (Mode 4). Access under Mode 4 was mostly linked with commercial 
presence,
and only limited to professionals. In addition, services trade remains 
highly
imbalanced. Markets are densely concentrated, with 80% of trade 
dominated by the
major corporations from the developed world. (1)

As of July 2005, due to the persistent pressures on countries to present 
initial and
revised offers, 74 Members had made offers (counting the EC of 25 
members as 1). Of
these 64 were developing country Members. According to the CTS Chair, 24 
developing
non-LDC countries in July had not tabled an offer. (2)

In the attempt to speed up market opening, an avalanche of proposals 
from EC, Japan,
Switzerland, Australia, Hong Kong, Korea and Taiwan were tabled formally on
September 13 on complementary approaches (i.e. "benchmarking" as they 
were called
earlier). From then into October, more papers were presented by Canada, 
India, Chile,
Hong Kong, China and Pakistan. The EC has also submitted a second more 
ambitious
proposal on 27 October. (3)

The proposals suggest a complete change in the negotiating modality of 
the GATS.
Members at the start of the GATS round of negotiations, pushed by the 
developed
countries, had agreed that liberalization could be advanced through 
"bilateral,
plurilateral or multilateral approaches" (paragraph 11 of the 
Negotiating Guidelines
S/L/93). However, the guidelines also state that "the main method of 
negotiation shall
be the request-offer approach". The current moves go against what has 
been agreed
since any more aggressive approach adopted, would supplant and replace 
the request
-offer approach.

Furthermore, these more aggressive methods would contravene Article XIX 
of the GATS
on progressive liberalisation, allowing countries to open "fewer 
sectors" and "liberali
(ze) fewer types of transactions" according to their "national policy 
objectives and level
of development".

THE COMPLEMENTARY APPROACHES TABLED
The more aggressive negotiating methodologies suggested include:

1. Quantitative Targets (numerical targets and indicators)
This approach has been pushed particularly by the EC. It is essentially 
putting the GATS
negotiations on super fast track "formula" approach. In its latest 27 
October proposal, it
suggests that developed Members should include new or improved 
commitments in at
least 139 sub-sectors (or 85% of the 163 services sub-sectors). 
Developing countries to
include new or improved commitments in 93 sub-sectors (2/3 of the 139 
subsectors for
developed countries).(4)

This approach to negotiations falls under the "multilateral" mode since 
it is formula
based, paralleling the market access negotiations in Agriculture and 
Non-agriculture
Market Access (NAMA), and all Members are supposed to apply the same rules.

2. Qualitative Parameters
In order to ensure that the liberalisation are of some quality, the 
proponents have asked
that the opening up of sub-sectors be accompanied by "qualitative 
parameters" - i.e.
making "model" commitments across the 4 modes of supply. This is not 
only an EC
initiative, but has also been pushed aggressively by India, Taiwan and 
Japan.

The following has been suggested:
Mode 1 (cross border supply of services - the service is delivered 
without the presence
of the service supplier in the territory of consumer eg. outsourcing): 
proponents have
asked for Members to take on commitments at existing levels of openness, 
and to do
away with any requirement of commercial presence.

Mode 2 (consumption abroad e.g. people seeking medical treatment 
abroad): To have
no limitations.

Mode 3 (commercial presence - or granting a foreign service supplier the 
right to
establish an investment within the territory of another country): The EU 
has asked for
authorizing at least 51 per cent foreign ownership i.e. making it 
impossible to
differentiate between treatment to foreign investors and local 
companies. The Indian
proposal asks for "enhancement [substantial] in the levels of foreign 
equity permitted".
Both India and EU want the removal or substantial reduction of economic 
needs tests
(ENTs), (5) and flexibility in the types of legal entities permitted. 
That is, allowing easier
access, for instance, for corporate subsidiaries, trusts, joint 
ventures, partnerships,
sole proprietorships, associations, representative offices or branches. 
This is the area
where the developed countries have the greatest offensive interest.

Mode 4 (movement of natural persons): Here, the proposals are much more 
limited. The
Indian proposal has asked for "new/improved commitments particularly in 
categories
delinked from commercial presence, such as CSS (contractual service 
suppliers) and IP
(independent professionals)" and the substantial removal of ENTs for 
such categories;
more relaxed rules regarding the length of stay; and improved 
commitments in already
existing categories including intra-corporate transferees and business 
visitors. (6) The
EC proposal echoes the Indian one, although it is even less ambitious - 
asking for
Members to commit to only "make(ing) one or more of the following improved
commitments" in the items described above.

3. Plurilateral Negotiations
The other approach to negotiations suggested are through plurilateral 
requests. This
idea was mooted by the European Commission. With the plurilateral 
approach, a group
of countries with an export interest in a sector can make a joint group 
request to a
Member. The EC proposal of 13 September suggests that the "critical mass"
participating would agree to a core set of commitments for a sector. 
This idea was
discussed in the EC 133 Committee meeting of 6 September as follows:

"The aim of the suggested plurilateral approach in the services 
negotiations was to
negotiate, a higher level of commitments in a number of 
sectors/subsectors of particular
interest to a critical mass of WTO members.  For this purpose, the 
interested members
could use model schedules setting out a core set of commitments for 
sectors concerned
(italics inserted)" (7)

The EC then floated the model schedules within the "Friends" groups. (8) 
The idea of
plurilateral negotiations has since been promoted by other Members 
including Canada,
Australia, Chile, Taiwan and also India, in its 10 October submission.

What does the EC want by way of "model" schedules? The EC's model 
schedule (see
e.g. EC Ref132/05(Services), 31 August 2005) is mainly focused on 
gaining access
under Mode 3 (commercial presence). In all services sectors, it calls 
for no limitations
in market access to be scheduled under Mode 3. Where there are limits on 
foreign
ownership, it wants these to be removed by a date to be negotiated. In 
contrast, it is
completely defensive in Mode 4, where the EC wants to make no new 
commitments
except what they currently allow in the categories of ICT 
(intra-corporate transferees),
BV (business visitors), CSS (contractural service suppliers) and IP 
(independent
professionals).

REACTIONS OF THE MAJORITY
Mid-September into October saw many countries collectively and 
individually stating
forcefully in the Services Council meetings, their opposition to these 
complementary
approaches. This in not an exhaustive list, but the opponents included 
amongst others,
Argentina, Brazil, Malaysia, Thailand, the Philippines, ASEAN (minus 
Singapore), a
group of Caribbean countries, the entire Africa Group and the LDCs.

In their interventions, most highlighted the flexible structure of the 
GATS (Article XIX:2)
which they wanted preserved in order to retain policy space for national 
policy
objectives and development.

***************************************

MEMBERS' OPPOSITION TO "COMPLEMENTARY APPROACHES" IN THE CTS

Antigua and Barbuda, Barbados, Jamaica, Dominica, Grenada, St Kitts and 
Nevis, and
St Vincent and the Grenadines:
"The proposed new approaches would make it impossible for our domestic 
service
suppliers to maintain their domestic markets. Such deep levels of 
liberalisation in more
sub-sectors than we would rationally commit to would undermine our own 
development
goals and objectives. As these proposals do not aim to facilitate the 
process of
development for small developing countries, the result would be the 
"crowding out" of
domestic suppliers. This issue is of significance to the countries 
particularly in light of
the fact that 50% of the service firms in the group of countries employ 
loess than five
persons...

"The proposals require that all Members adopt a similar approach. They 
do not take into
account the fact that small vulnerable countries such as those 
contributing to this
statement are unable to undertake the same pace of liberalisation as 
larger developing
countries....

"It is regrettable that in this development round, more attention is not 
being paid to
ensuring that developing countries are actually the primary 
beneficiaries of the
services negotiations, and not developed countries who already account 
for 80% of
global services exports". (9)

AFRICAN GROUP
The Group spelt out Article XIX.2 of the GATS on flexibilities for 
national policy
objectives.
"Therefore it is the group's view that pre-establishing anything 
quantitative and
qualitative would go beyond, and in fact reduce the flexibility already 
inherent in the
GATS provisions stipulated above. Such targets, by establishing a common 
benchmark
would tend to harmonize the "development situation" of individual developing
countries. This is an inaccurate measure as countries, even within a 
similar group have
their own development objectives which would determine individual decisions
regarding their GATS commitments.

"Furthermore, although the proposals claim to be complementary to the 
request-offer
approach, which is recognized in paragraph 11 of the Negotiating 
Guidelines as the
main method of negotiations, they in fact seek to replace the 
request-offer process and
leave the latter to play an insignificant role. This is clearly 
inconsistent with the
mandate in the negotiating guidelines.

"...they have also failed to show how they relate to achieving the main 
objectives of the
GATS preamble. The preamble aims at promoting economic growth and 
development of
developing countries. Moreover the proposals are contrary to the 
principles set out in
the Doha Development Agenda which places Development at their top.

"From the African Group's assessment, what is lacking in the GATS 
negotiations in not a
binding formula but the requisite political will to make commitments. 
This is most true in
the sectors and modes of interest to developing countries and Mode 4 in 
particular. In
fact we are of the view that the proposals divert attention from this 
important issue ..."

ASEAN MINUS SINGAPORE
"Each Member has scheduled its own limitations in one sector or 
subsector or another.
We are currently allowed by the Agreement and the Guidelines to 
gradually and at our
own pace liberalise our markets. And this opening up, usually takes 
place where and
when it corresponds to domestic priorities...

"We also underscore the belief that services liberalisation should be 
accompanied by
sound macro-economic management and appropriate regulation and 
supervision. While
we fully recognize the benefits of an open market, our authorities 
continue to carefully
consider the pace and sequencing of further liberalisation in sectors of 
mutual interest,
together with a comprehensive review of our existing regulatory regime 
in order to
ensure the sustained soundness of our services sectors, particularly 
those relating to
sensitive systems like financial services and telecoms, to name a few.

"We are concerned that these approaches may undermine such flexibility. 
A Member
may be caught in situations where it has no choice but to undertake 
commitments
prematurely to fulfill the targets. This may undermine the principle of 
progressive
liberalisation.

"It is dangerous to request for an outright agreement on the desirability of
complementary approaches before the design is fully fleshed out. It is 
comparable to
asking for a blank cheque, and is disconcerting if viewed in the context 
of its being
possibly extended to encompass future rounds of negotiations..." (10)

LEAST DEVELOPED COUNTRIES (LDCs)
Citing LDC modalities, Rwanda, speaking on behalf of LDCs said, "...LDCs 
are to
liberalise sectors in accordance with their development situation and 
needs. It is
therefore our view that requiring LDCs to meet certain quantitative and 
qualitative
targets is to ignore this flexibility...

"In addition, many LDCs have not or are in the process of carrying out 
assessments
and determining their services development plans which are key in 
determining the
nature and scope of commitments. How then are the LDCs expected to 
determine the
extent to which they can make commitments?

"The LDCs are therefore in favour of respecting and maintaining the 
request/offer
approach which allows Members to take into account the flexibilities 
granted to LDCs
and other developing countries in the services negotiations".

INDONESIA
..."I would like to reiterate that some of the substance of the proposed 
complimentary
approaches do not seem to take duly into account the urgent need to 
fully respect the
architecture of the GATS, especially the specific provisions that grant 
flexibilities to
developing countries like mine... It is difficult for my delegation, at 
this point, to
consider any other approach that we think it would erode the flexibility 
for developing
countries" (11)

*****************************

MANUFACTURING THE TEXT: ABUSE OF THE CHAIR
Despite very clear statements of opposition, the Chair of the Council 
for Trade in
Services (CTS), Mexican Ambassador Fernando de Mateo went ahead to present
"possible elements" of a draft Ministerial text for Hong Kong, listing 
those very
elements that had been opposed by the majority.

Under "Objectives", the 13 October (JOB(05)/234 -Annex 1 attached) text 
included the
following:

- Modal or other specific multilateral objectives
- Sectoral and modal objectives as individually expressed by Members 
(Annex to the
Chairman's Report to the TNC) (12)

And under "Approaches"
- Plurilateral approaches, sectoral - and/or mode-specific
- Multilateral approaches (e.g. measure specific)
- Numerical targets and indicators.

In the CTS meeting discussing these elements, delegations again objected to
complementary approaches and modal schedules. Many were angry that these 
items,
which clearly did not have the consensus of the Membership, had been 
included in the
text, and not even within brackets! They also pointed out the 
double-standard. The
section on "rules", referring to the emergency safeguard mechanism (ESM)
negotiations, where developed countries would like to avoid, had been 
placed within
brackets! (13) Many developing country members were further incensed by the
insistence of the Chair, that he would not remove items from the text 
unless there was
consensus!

Despite these objections, the new proposals regarding new approaches 
again appeared
  - unbracketed -  in Ambassador Mateo's second draft elements dated 20 
October (JOB
(05)/234/Rev.1 - Annex 2). In addition, these have been further 
elaborated upon in the
draft Ministerial Text on Services of 26 October (JOB(05)/262) (14). A 
second draft of the
text will be released by 3rd November - the text Mateo aims to bring to 
Hong Kong.

WHAT'S IN THE DRAFT HONG KONG TEXT (26 OCTOBER)
The text now captures a significant number of the elements the proponents of
benchmarking would like. It contains almost word for word, the proposals 
of the EC (13
September) and India (mid October proposal). Under "Objectives", the 
text highlights the
qualitative parameters described earlier:

1. Qualitative parameters: Whilst it is not mandatory, the language here 
is nevertheless
overly prescriptive. It calls for Members to ensure to the greatest 
extent possible,
improved commitments in Modes 1-4.

In Modes 1 and 2, it calls for binding at "existing level of openness... 
across all sectors
of interest to Members". In Mode 1, it also asks for removal of any existing
requirements of commercial presence. (This clause is spearheaded by 
India due to its
interest in outsourcing). Developing countries with good IT 
infrastructure may perceive
that they have a competitive edge. However, for many lower income 
countries, any
gains here could be elusive. It may even be dangerous as technology 
advances ever
further, allowing for more and more services to be provided without 
actual presence of
the service suppliers. Most developing countries would do well to be 
cautious and
retain their ability to regulate this mode of supply in order to ensure 
the future survival
of their local service suppliers. The language "across all sectors" is 
also unnecessarily
broad. Developing countries should also maintain their right to demand 
for commercial
presence if they so wish in the future. This is important for skills and 
technology
transfer. (15)

In Mode 3, the elements are much more ambitious than what the majority 
of developing
countries have expressed. The elements are: "commitments to enhanced 
levels of
foreign equity participation"; "substantial reduction of economics needs 
tests";
"Commitments allowing greater flexibility of types of legal entity 
allow". The EC would
have liked to have language on 51% foreign equity, but this is not in 
the text.
Nevertheless, what is asked is essentially an investment agreement 
through the GATS -
that regulation on foreign companies coming into a country be 
substantially removed
and made much more flexible.

In Mode 4, the text in comparison, is very limited and does not reflect 
what many
developing countries have requested in their proposals to the CTS, 
particularly the
inclusion of categories of less skilled workers. The text only addresses 
"new or
improved commitments" on the categories of Contractual Services 
Suppliers and
Independent Professionals, Intra-corporate Transferees and Business 
Visitors. (16) In
comparison, this is much less ambitious than what is being asked in the 
other Modes of
supply, such as in Mode 3.

Apart from India, which has set its sights on the movement of its 
information technology
professionals, and is thus happy simply with improved commitments for 
professionals,
the African and LDC countries have asked for Mode 4 coverage spanning 
low to high
skilled occupations, delinked from commercial presence, removal of 
barriers to
residency requirements (17) and much simpler and transparent visa 
requirements. In
fact, UNCTAD has suggested using the ILO's International Standard 
Classification of
Occupations (ISCO), which is an internationally adopted classification 
spanning all skill
levels. (18) This would bring more balance to the negotiations, and 
ensure that broader
commitments are undertaken especially by the developed countries. In 
addition,
Economic Needs Tests must be dealt with to ensure they do not in fact 
subvert market
openings Members have scheduled. And even after ENTs have been dealt 
with, the
other barrier to be tackled is visa requirements. UNCTAD, for example, 
has suggested
that natural persons and occupations that are included in Members 
schedules of
commitments should qualify to obtain entry visas, i.e. GATS visas, 
either automatically
or with ease, for multiple entries over an assured period of time.

Delegates involved in these negotiations, however, would do well to keep 
in mind that
no matter what promises are given, the US Congress has already made it 
categorically
clear that it will not provide any additional Mode 4 openings above the 
present highly
limited quotas.

2. Under "Objectives", the texts also calls for the disciplining of 
Economic Needs Tests
(ENTs). It asks for "elimination of existing, and refraining from 
inscribing new, economic
needs tests unless stipulated in existing legislation". This item caused 
quite an uproar
in the CTS of 28 October, with developing country Members arguing that 
it would take
away their right to legislate and to regulate! Even though the developed 
countries use
ENTs more than the developing countries (since their economies are much 
better
regulated), many developing countries are currently in the process of 
building up their
institutional capacity to have such legislation and accompanying ENTs. 
This is critical
for developing countries especially in regulating foreign investment 
(under Mode 3),
and this regulation should be encouraged, not prohibited.

3. The text (under 3f) also asks for "substantial reduction of MFN 
exemptions". There
are about 400 MFN exemptions in the GATS schedules of Members, although the
timeline for these - up to 2004 has expired. Again, the EC and other 
developed countries
have tabled more exemptions than the developing countries. Nevertheless, 
these
exemptions are useful for developing countries in allowing for a more 
limited
liberalisation in accordance with development objectives.

4. The text in para 4, as in the earlier drafts, refers to "Sectoral and 
modal objectives as
expressed by Members, in order to provide guidance for the request/offer 
negotiations",
and refers to the Chairman's Annex to his TNC report. This reference to 
the Chair's
Annex should be deleted. Such a reference would imply that the demands 
of those with
an export interest will be used as the measure to evaluate the offers 
(see footnote 12).
Currently, many developing countries can ignore these requests and 
pressures if they
choose to. To have the yardstick of the demandeurs legitimized in the 
Hong Kong text
would make it more difficult to brush the pressures aside.

5. Under "Approaches", the text details the plurilateral request-offer 
approach. A group
of countries can approach any one country for a request. It even goes on 
to make it
mandatory - that any Member receiving these requests "shall enter into 
plurilateral
negotiations on the basis of such requests"!

It is unlikely that the text as it currently stands making the 
plurilateral approach
mandatory would be agreed to by all members. There was strong opposition 
in the CTS
on Friday, 28th October. However, even if it were not made mandatory, 
but language
detailing the plurilateral approach is retained, the bilateral 
request-offer process as the
main mode of negotiations would be sidelined (contrary to what has been 
agreed to in
the Negotiating Guidelines). The pressure on developing countries to 
open their
markets would be greatly increased, and would be legitimized. In fact, 
what is agreed
as "acceptable" amongst the "critical mass" or the "friends groups" 
would then be used
as the "norm" to pressure others to open up their markets to the same 
degree.
According to Varma and Raj, "Developing countries would be in a position 
whereby they
would have to justify why they refuse to be party to the commitment 
rather than have
the commitment extracted through negotiations". (19)

Even if Members decided not to be part of this "critical mass", they 
would also find
themselves at a disadvantage later on, since issues such as 
classification and
regulation, would already have been decided by this "critical mass" in 
accordance with
certain corporate interests. This is already the case in the 
telecommunications area.
Due to earlier plurilateral negotiations in telecommunications, there is a
Telecommunications Reference paper, which is designed to protect the 
rights of foreign
service suppliers. It regulates on the side of market access to foreign 
companies, but
says nothing about anti-competitive practices of international cartels, 
and market
concentration. (20)  In the many requests that have been made in 
telecommunications,
the demandeurs have asked for countries to comply with the 
Telecommunications
Reference paper.

In trade terms, this plurilateral approach would speed up the 
consolidation of already
concentrated markets. The effect would be the crowding out of small and 
medium size
players now and in the future.

6. The text, under paragraph 9, calls for "numerical targets and 
indicators". This is an
EC pushed agenda and has not been fleshed out, due to the strong 
opposition amongst
the Membership. However, given that the Chair is doing the bidding of 
certain Members,
it is clearly useful for the EC to keep that agenda item there in order 
to gain negotiating
leverage and push for at least retaining what appears to be EC's bottom 
line - the
plurilateral approach.

7. Paragraph 12 gives timelines, calling for outstanding initial offers 
to be submitted;
plurilateral requests to be made, possibly by February 2006; Members 
notification to
the Council by a certain date regarding the sectors in which they intend 
to engage in
plurilateral negotiations; and a second round of revised offers to be 
submitted.

There is not even agreement amongst the Membership that there will be 
acceptance of
this plurilateral approach. It is therefore hugely irresponsible of the 
Chair to outline a
timeline - without brackets - that endorses this. Nor has there been 
agreement that there
should be a second round of revised offers.

8. There is no elaboration on "rule making" in the text - referring 
especially to the
creation of the emergency safeguard mechanism (ESM). This is very 
important for
developing countries, and the deadline for the conclusion of these 
negotiations
promised in the GATS was 1 January 1998. It is critical that these 
negotiations are
completed before market access negotiations move ahead.

9. The other issue that has been completely omitted is that of 
assessment. To date, no
comprehensive assessment of the GATS has taken place, even though it was 
promised
to Members (Article XIX.3) that an assessment would be carried out 
before each
negotiating round. Without clear data on services trade flows, or the 
impact of the last
round of services liberalisation, many developing countries are simply 
negotiating in
the dark.

SOME CONCLUSIONS
If these complementary approaches are brought into the negotiations, 
changing
completely the negotiating modality of the GATS, it would
1) Create unemployment and destroy many countries' fledgling services 
suppliers and
services industries as it would put immense pressure on these countries 
to open up
their markets.
2) Exacerbate the imbalance already present in world services trade, 
where the majority
of trade is monopolised by the biggest multilateral corporations. 
Markets will be even
more concentrated.
3) Accelerate the privitisation process in many developing countries, 
even with regards
to essential services, putting at risk the access of the poor to basic 
services.
4) Severely limit the ability of countries, which currently do not have 
adequate
regulation, to put these regulatory frameworks in place. Regulation is 
critical for
ensuring access to services by all sectors of the population, and also 
of paramount
importance for ensuring employment and the protection of local service 
suppliers.
5) The language crafted already shows no intention to open up in Mode 4 
since the text
largely limits negotiations to the same categories of high skilled 
professionals. This
will tilt the outcome of the negotiations completely in favour of the 
demandeurs of
benchmarking. It is difficult to envisage any benefits to the African 
Group or the ACP
(African, Caribbean and Pacific) countries. Although LDCs are exempted 
from taking
further commitments, they will be losers since the international markets 
will be highly
concentrated. This will make it difficult for LDC small suppliers to 
survive. Even if their
domestic markets were protected, it would be more difficult, if not 
impossible for them to
access even regional markets in the future.

The EC is clearly having difficulties in convincing the French to lower 
their tariffs in
agriculture (as demanded by US and Brazil). In exchange, it needs to pry 
open the
NAMA and GATS markets of the world, in order to bring France and other 
European
countries on board (eg the G10 countries). There are not many in the 
developing world
that will gain from this game - Brazil and Argentina stand to gain from 
market access
opening in agriculture, but the other developing countries will not be 
competitive
enough to do so. India is eyeing gains in Mode 1 (outsourcing) and Mode 
4. The
Africans, Caribbean and Pacific countries will loose out completely - 
both in agriculture,
by having to open their markets there, in NAMA (non-agricultural market 
access) and
now also in services, unless they use their combined strength to oppose 
these
maneuvers.

What is clear is that the WTO Secretariat, and the CTS Chair, Mexican 
Ambassador
Mateo, are in the pockets of the powerful - crafting language and 
charting daily, new
procedural irregularities to bypass the voices of the majority.

Mr Lamy has lamented upon the "medieval" character of the WTO. (21) 
Under his
charge, the organisation is surely slipping into pre-medieval times, 
giving new meaning
to "multilateralism" and the "development round".

* Aileen Kwa is a research associate with focus on the Global South 
based in Geneva.

** The Draft Ministerial Text on Services JOB(05)/262, 26 October 2005 
is available at
http://www.tradeobservatory.org/library.cfm?refid=77247

NOTES
1. UNCTAD 1999 "Assessment of services", 26 August.
2. Countries which have not submitted an initial offer have been 
ridiculed in the WTO.
For example, the South African delegate has been barred from 
participation in some
small group informals because the country had not submitted an offer. 
When she raised
complaints in the CTS, the Chair then told her that her concern was not 
on the agenda of
the meeting, and cut her off. Pressure therefore comes in the form of 
exclusion and
informally, a prominent developing country Member has described the 
situation as one
where within the WTO, "nobody takes them seriously". The Chilean Chair 
of the CTS,
Jara (in July 2005) even listed these 24 (non-LDC) countries in his 
report to the TNC.
They are Antigua & Barbuda, Armenia, Belize, Botswana, Cameroon, Congo, Cote
d'Ivoire, Ecuador, Former Yugoslav Republic of Macedonia, Georgia, 
Ghana, Kuwait,
Kyrgyz Republic, Moldova, Mongolia, Namibia, Nigeria, Oman, Papua New 
Guinea,
Romania, South Africa, Swaziland, Venezuela and Zimbabwe (TN/S/20, 11 
July 2005).
3. Some of the elements of the EC 27 October paper (TN/S/W/55) are not 
detailed in this
article. The author judges the EC paper, with elements such as "capping" 
and making
mandatory the acceptance of model parameters simply a negotiating ploy 
of the EC to
ensure that the plurilateral approach looks more acceptable. This EC 
paper was widely
ridiculed by a broad range of developing countries in the CTS meeting of 
28 July as
being "incompatible, imbalanced, inappropriate and incredibly unrealistic".
4. These numbers are not even being taken seriously by the EC itself. 
When questioned
on 28 October in the CTS by other Members, it emerges that whilst the EC 
wants others
to open up the stipulated number of sub-sectors, for itself, the 25 EC 
members would
jointly make up the 139 sub-sectors (as opposed to each country opening 
up 139 sub-
sectors!). As one delegate puts it, the EC will give itself special and 
differential
treatment!
5. Economics needs test are applied across all sectors in Members' GATS 
schedules
and serve the purpose of regulation. There is no definition within the 
GATS regarding
what these have to be, and currently, the ENTs applied depend on 
national legislation.
For example many Members have scheduled the need for "economics needs 
test" for
the establishment of departmental stores, or limitations on hotels, 
restaurants,
hospitals, tour operators, even transport operators. Some reasons cited 
include the
need to protect the investment of local operators (e.g. the Philippines 
with regards to
passenger and freight transport). ENTs are therefore important for 
protecting local
suppliers and ensuring that they have a sector of the domestic market. 
They are also
important for environmental or social /regulatory purposes, such as 
limiting the number
of tour operators and hotels for environmental reasons, or ensuring that 
in certain
professions, those practicing are familiar with the local regulation. 
The bulk of ENTs
however, are found in Mode 4 and have been a barrier for developing 
countries wanting
access to developed country markets. The EC for example, has ENTs right 
across the
board for all of Mode 4. What they have done is to schedule exceptions 
to ENTs for an
extremely limited category of persons - intracorporate transferees of senior
management position and who "possess uncommon knowledge essential to the
establishment's service".
6. What stands out is the lack of reference to a much broader category 
of "persons". In
particular, there is no specific reference to mid-level or low skilled 
workers - the
categories that African and LDC countries are most interested in. These 
can in theory
fall under "contractual service suppliers" (CSS), but currently, most 
countries' visa
requirements for CSS are based on educational and professional 
qualifications.
7. Council of the European Union, 1200/105, 7 September 2005 "Outcome of the
Proceedings of Ad Hoc Article 133 Committee (Services), 6 September 
2005", Brussels.
8. There are about 14-15 "Friends" groups which have been holding 
discussions and
negotiations in Geneva. They are mainly Members with an export interest 
in a sector,
and they also sometimes invite Members whose markets they are interested 
in. These
Friends groups include Friends of Financial Services; Telecoms; 
Audiovisuals;
Environmental Services; Distribution; Maritime; Mode 4; Postal services; 
Construction
Services; Tourism; Logistics; Energy and Legal Services.
9. "Statement on the Complementary Approach to GATS negotiations", 
Council for Trade
in Services Special Session - Informal Session, 22 September 2005, by 
Antigua and
Barbuda, Barbados, Jamaica, Dominica, Grenada, St. Kitts and Nevis, and 
St Vincent
and the Grenadines.
10. "Statement on Complementary Approaches and Intensification of the 
Request/Offer
Approach", Joint Statement of Brunei Darussalam, Indonesia, Malaysia, 
the Philippines
and Thailand, CTS-SS, September 20 2005, delivered by Mr Manuel 
A.J.Teehankee,
Ambassador and Permanent Representative of the Philippines to the WTO.
11. "Statement by the Delegation of Indonesia, SSCTS, 29 September 2005".
12. The Annex to the Chairman's Report to the July General Council 
meeting (11 July
2005 TN/S/20) was, in itself, a controversial document. The document had 
been
prepared by the Chair, Chilean Ambassador Jara, without the consent of 
the whole
Membership. Many developing countries questioned the Chair on why he had 
compiled
such a study, and published it as part of his report to the TNC without 
consultation with
the Membership. The Annex essentially provides the views of only the 
demandeurs in
the negotiations, and by so doing, does not provide a full and fair 
picture. It lists the
negotiating expectations of demandeurs in each of the main services 
sectors, and
provides the demandeurs' assessments of the state-of-play in the 
negotiations in those
areas. It even has the figures provided by some of the developed 
countries, such as
how many requests were made, the percentage of offers provided and the 
level of
restrictions maintained or removed in the offers. For example, on 
financial services,
one member's assessment was that "35 per cent of the Members to whom 
requests had
been addressed had kept restrictions on the form of establishment and/or 
restrictions
on new establishment or initial entry;...Another Member indicated 
continued severe
limitations on mode 3, including restrictions on legal form (e.g. direct 
banking),
limitations on foreign equity participation, and discriminatory 
licensing requirements".
This annex is being referred to in the Ministerial text, as if the 
ambitions of the
demandeurs are the standards by which the offers should be measured. 
This will place
unnecessary pressure on many countries.
13. Negotiations on the emergency safeguard mechanism had been promised to
developing countries since the Uruguay Round (as reflected in Article 
X.1 of the GATS).
They were supposed to have been concluded 3 years from the date of entry 
into force of
the GATS agreement, but deadlines have repeatedly been missed since 
there has not
been political will on the part of the developed countries in keeping 
their promise.
14. The draft Hong Kong Ministerial Text 26 October 2005, JOB(05)/262 is 
available at
http://www.tradeobservatory.org/library.cfm?refid=77247
15. South Centre "Comments on Chairman Draft Ministerial Text on Services",
forthcoming.
16. Arguably, low skilled workers can be included under Contractual 
Services Suppliers
(CSS). However, unless these other categories are spelt out more 
explicitly, the
language remains ambiguous. The categories referred to in the text - 
CSS, IP, ICT and
BV -  are the categories found in developed countries' immigration 
policy. These
countries define CSS in a much more narrow manner and visa requirements 
are based
on educational/professional qualifications.
17. South Centre October 2005 "Comments on Chairman Draft Ministerial 
Text on
Services JOB(05)/262", forthcoming.
18. UNCTAD/ITCD/TSB/8 1999 "Lists of Economic Needs Tests in the GATS 
Schedules
of Specific Commitments", 6 September. ILO's ISCO covers nine major 
occupation
groups 1) legislators, senior officials and managers 2) professionals 
3) technicians and
associate professionals 4) clerks 5) service workers and shop and market 
sales
workers 6) skilled agricultural and fishery workers 7) craft and related 
trade workers 8)
plant and machine operators and assemblers 9) elementary occupations. 
This list is
further sub-divided into sub-major, minor and unit group titles that 
have corresponding
detailed definitions. Whilst not all may be equally important in the 
movement of
persons under the GATS, it is a useful point of departure to explore in 
the negotiations,
and would ensure more balance.
19. South Centre, 2005, ibid.
20. South Centre, 2005, ibid.
21. Closing press conference of the WTO Fifth Ministerial Conference, 
Cancun,
September 2003.
22. Specific elements would be added at a later stage based on inputs 
from the
subsidiary bodies.

*************************************************
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