Energy Services in International Trade: Development Implications

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Energy Services in International Trade
Development Implications

• Simonetta Zarrilli
• UNCTAD
• September 2002

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Energy
Access to energy 1 billion people in
industrialized countries consume 60 of total
energy supply 5 billion people in
developing countries consume 40
Energy business Turnover of about US 2.4
trillion in 2000
The productivity of 1/3 of worlds people is
compromised by lack of access to commercial
energy. Another third suffers economic hardship
due to unreliable energy supplies
Energy necessary to achieving
sustainable development
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Structural reform of the energy sector

• Privatization, increasing competition,
  unbundling of monopolies, deregulation

Developed countries poor performance of state
owned energy companies subsidy burdens over
investment
Developing countries debt crisis capital
shortages
Externalization of services new
services International Trade in Services
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What energy services are?

• They are required at each step of the energy
  process from the location of the potential energy
  source to its distribution to the final consumer

Value added in the energy chain
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Energy services in the market

• Traditional services
• exploration
• extraction
• drilling
• derrick building
• pipeline construction

• Emerging services
• gas electricity transmission and distribution
• operation of power pools
• energy trading/ brokering
• energy management

Increasingly technology-intensive
Emerging from structural reform
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Energy services in GATS
Energy services are not listed as a separate
category
3 specific entries transportation of fuel
services incidental to mining services
incidental to energy distribution
Energy services present in existing services
categories (e.g. engineering, construction,
transportation, financial services)
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Problems

• The energy sector is a chain of interrelated
  activities but the classification is fragmented
  and non-exhaustive

Market access conditions unclear/unpredictable
Commitments made in other sectors may have
implications for energy services
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The ongoing debate in the WTO

• Seven proposals on energy services
• United States
• Venezuela
• Canada
• Norway
• European Communities
• Chile
• Japan

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Common elements
Improved market access in the sector can be
beneficial for all countries
Ownership of natural resources excluded from
negotiations
The energy sector will continue to be regulated
for achieving public goals
Countries are in different phases of regulatory
development commitments will reflect the levels
of market reform
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Common elements
Norway Venezuela promote trade for all and
secure a share for developing countries
USA Norway reference paper
EC pro-competitive regulatory framework
EC, Japan USA neutrality of energy sources
Canada, Norway EC checklist
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Specific elements
Venezuela classification according to sources
of energy phases of energy process core and
non-core services
USA Index for classification of energy
services Technological neutrality
Chile comprehensive coverage subsidies
Canada oil gas services
Japan new classificationcomprehensive
coverage core and non-core services
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Present situation

• Initial requests by 30 June 2002
• Initial offers by 31 March 2003
• Conclusion not later than 1 January 2005
• Energy services included in the requests of
  several developed countries
• Developing countries are not front-runners

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Types of requests

• Seeking clarification and technical improvement
  of existing commitments
• Seeking binding of the existing regimes
• Seeking further liberalization commitments
• Seeking additional commitments under Article XVIII

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Developing country challenge
Achieving a broader, sustainable, and more
reliable and efficient access to energy
Obtaining a greater share of the energy
business
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Implications for developing countries

• Energy producers developing countries
• import traditional energy services
• few commitments in their GATS schedules
• flexibility to liberalize and seek reciprocal
  concessions

• Developing countries
• limited experience with reform in the energy
  sector
• effective domestic energy policies promoted by a
  better understanding of market reform

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Questions for developing countries

• Classification A
  sufficient degree of precision in the definition
  of energy services would facilitate specific
  commitments

• Additional provisions
• Commitments in the energy services sector result
  in effective access to market
• Art. IV GATS provisions
• Public services obligations

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Conclusions
Access to energy is crucial for development
Rapid developments in the sector need to
better understand the implications
GATS-consistent ways should be found to achieve
these goals
Freer trade in energy services may facilitate
access to energy
Energy services are the value added in the
energy chain developing countries wish to
increase their participation