Services Negotiations in Doha Round: Concerns of South Asia

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Services Negotiations in Doha RoundConcerns of
South Asia

• WTO Doha Round and South Asia Linking Civil
  Society with Trade Negotiations
• 9-10th March 2005,
• Colombo, Sri Lanka
• By
• Pranav Kumar
• CUTS Centre for International Trade, Economics
  Environment, India
• Email citee_at_cuts-international.org

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Presentation Coverage

• Global trade in services
• Services sector in South Asia
• A recap of the services negotiation in WTO
• Current status of services negotiation in WTO
• South Asian strategy in the Doha round
• South Asias major interests

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Global Trade in Services (some features)

• Trade in services has grown faster than
  merchandise
• 60 of global output
• 30 of global employment
• 20 of global trade
• World services trade growth 155 between
  1990-2002 mfg. 97 and Ag. 40

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Global trade in services (contd.)

• The composition of FDI has shifted towards
  services
• Early 1970s one-quarter of the world FDI
• 1990 less than one-half
• 2002 two-third of total FDI
• The composition of services FDI is also changing

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Global Trade in Services (contd.)

• Developing countries share has increased
• In last 15 years - a four fold increase in
  services export from developing cts.
• Increase in share in global services exports
  14 in 1985-89 to 20 in 2000.
• Share in global outward FDI in services climbed
  from 1 in 1990 to 10 in 2002.

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Global Trade in Services

• Holds an immense potential in terms of further
  expansion of world trade
• By 2050 the world services exports would exceed
  merchandise
• In case of USA this situation would come much
  earlier by 2037

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Global Trade in Services

• Developing countries likely to benefit more
• Global gain of 260bn p.a. by eliminating all
  post UR barriers 1/2 of it from services (Dee
  et al 2000).
• Benefits vary from under 1 to over 50 of GDP
  (GEP 2002, WB)
• Significant gain for DCs 1.6 (India) to 4.2
  of GDP if tariff-equivalents of protection cut by
  1/3 in all countries (Chadha et al 2000)
• Increased developed countries quotas by 3 of
  their labour force generates gains of 150bn p.a.
  (Winters et al 2002)

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Services Sector in South Asia

• Commonalities
• Important sector in terms of its contribution to
  GDP ranging between 40-50 .
• Second most important sector after agriculture in
  providing employment
• Remittances South Asia is the second largest
  remittance recipient area (20)
• Greatly endowed in semi-skilled and unskilled
  labours

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Services Sector in South Asia (contd.)

• Differences
• Except India and Sri Lanka other three countries
  witnessed a decline in their services export in
  post WTO period.

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Services Sector in South Asia

• Differences
• Bdesh and Pak are net importers while India,
  S.Lanka, Nepal have trade surplus.
• Services Exports and Imports in mn, 2003

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Services Sector in South Asia

• Differences
• Except India, others have advantage only in mode
  4. Indias interest lies in mode 1 and 2 in
  addition to Mode 4.

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Services Negotiations in the WTO

• Initially many countries were skeptical and
  opposed
• High degree of flexibility in rules and market
  access
• UR only a beginning GATS required more
  negotiations
• Further negotiations started in 2000
• End of 1st Phase In March 2001 adoption of
  negotiating guidelines and procedures
• DDA and July Package

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March 2001 Negotiating Guidelines and
Procedures

• Adoption of request-offer approach for
  negotiating new specific commitments on
• National treatment
• Market access
• Additional commitments
• Mandate members to continue negotiations on
  outstanding issues
• Emergency Safeguard Mechanism (ESM)
• Disciplines on domestic regulation
• Disciplines on govt. procurement and subsidies

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Services in Doha Dev. Agenda

• March 2001 guidelines as the basis for continuing
  the negotiations
• To pursue Art. XIX objective of progressively
  higher levels of lib. of trade in services.
• Flexibility for DCs - freedom to open fewer
  sectors progressive ext. of market access
• The mandated neg. was supposed to conclude on 1
  January 2005.

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Services in July Package

• Fresh deadline for submission of revised offers
• Stress on high-quality offers, particularly in
  sectors and modes of export interest to DCs
• Special attention to be given to LDCs
• Emphasis on mode 4
• To intensify efforts on rule-making under GATS
• Targeted technical assistance to DCs

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Current Status of Negotiations

• The services negotiations are in a bad
  situation. If there isnt a decent services
  package at the end of the day, its very
  difficult to imagine any meaningful outcome on
  other items
• ---- Hamid Mamdouh, Director of
  
• WTO Trade in Services
  Division
• What we have on table is very poor. We have a
  daunting task over the next few months.
• ---- Alejandro Jara, Cman of
  CTSSS

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Current Status of Negotiations

• Nearly two years after the deadline for countries
  to make initial offers, only 47 have submitted
• Most of the offers put forward to date are
  horizontal in nature and lack sectoral
  commitments
• The three most popular service sectors in regards
  to improved offers are financial,
  telecommunication and business

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Current Status of Negotiations

• USA expressed its inability to table a better
  offer in Mode 4.
• Only in the area of domestic regulation some
  momentum has built up.
• Before the May 2005 deadline for first or revised
  offers and the next services cluster in June
  several informal meetings have been planned.
• A special session on LDCs shall be held in next
  services cluster.

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South Asias Strategy in Doha Round

• India has been very proactive. Made its initial
  conditional offer in January 2004
• Sri Lanka also made its initial offer in
  September 2003.
• Bangladesh and Nepal are exempt from making any
  offers.
• Pakistan is yet to make its initial offers.

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Indias Strategy in Services Negotiations

• Probably the first DCs to make a comprehensive
  submission on Mode 4 in Nov. 2000
• Offered to undertake extensive commitments under
  Mode 1 4
• substantially improved access to some critical
  service sectors.
• India signed a joint statement with 15 other
  countries urging CTSSS to accelerate services
  negotiations

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South Asias Major Interests

• India Mode 1, 2 4
• Sri Lanka and Nepal Mode 2 4
• Pakistan and Bangladesh Mode 4

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Major Hurdles Under Different Modes of Supply

• Mode 4
• Economic Needs Test
• Strict visa procedures
• Non-recognition of professional qualifications
• Imposition of discriminatory standards or
  burdensome licensing requirements
• Payment of social security without corresponding
  benefits
• Requirement of registration with or membership of
  professional organisation

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Major Hurdles Under Different Modes of Supply

• Mode 2
• US federal or state govt. reimbursement of
  medical expenses is limited to licensed,
  certified facilities in the US or in a specific
  state.
• Lack of long-term portability of health coverage
  for retirees from OECD countries.

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Major Hurdles under Different Modes of Supply

• Mode 1
• Legislation by many US states to ban outsourcing
  of government contracts
• Europe introduced a legal norms called Transfer
  of Undertakings and Protection of Employees to
  protect workers in outsourced deals.

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Systemic Problems in Services Negotiations

• Negotiations proceed through a laborious process
  of requests and offers.
• Definitional Issues in Mode 4 lack of uniform
  definition, statistics not compiled according to
  mode 4 criteria, time-period of temporary movement