The Multilateral Trading System Basic Elements

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MARITIME TRANSPORT SERVICES WITHIN THE WTO /
GATS FRAMEWORK
Dr. Benjamin Parameswaran International Max
Planck Research School for Maritime Affairs,
Hamburg, Germany Maritime Transportation
Services under the GATS Agreement, Challenges for
Viet Nam Hanoi, 24 October 2005 Hai Phong, 26-28
October 2005
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Contents of Speech

• The Economic Importance of Transportation
  Services in General and Maritime Transport in
  Particular
• Maritime Transport and GATS The Status Quo
• Reasons for the Failure of Maritime Negotiations
• Maritime Transport and GATS An Outlook

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Contents of Speech

• The Economic Importance of Transportation
  Services in General and Maritime Transport in
  Particular
• Maritime Transport and GATS The Status Quo
• Reasons for the Failure of Maritime Negotiations
• Maritime Transport and GATS An Outlook

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The economic importance of transport services in
general

• Transport...
• is the connecting link between supply and demand.
• accounts for major share in attaining level of
  development.
• is a major service industry in its own right.
• is an indispensable ancillary activity for trade
  in goods.
• accounts for 30 per cent of all trade in
  services.
• represents 4-8 per cent of GDP and accounts for
  2-4 per cent of total employment in developed
  countries.
• Of all modes of transport, maritime is most
  important.

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The economic importance of maritime transport
services (MTS)

• All trade is world trade, all world trade is
  maritime trade.
• 
  Sir Walter Raleigh
• Maritime transport
• 90-95 per cent of all trade in goods (by volume
  and weight) is carried by sea.
• Close relationship between efficient shipping
  services and prospects for economic development.
• Maritime transport services account for 10 per
  cent (!) of all trade in services.
• 3 per cent average annual growth rate over last
  decade.
• In short Maritime transport is of huge economic
  significance as a service sector in its own right
  but also as an indispensable ancillary activity
  for trade in goods.

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Barriers to Trade in Maritime Transport Services

• cargo sharing agreements
• restrictive access to government and strategic
  cargoes
• national preferences
• limitations on local presence and on investment
• restrictions on presence of natural persons
• mandated use of monopolized port services
• discriminatory taxes and charges
• unnecessary administrative requirements
• Effect increase in freight rates leading to
  negative effects on trade, employment, national
  income, balance of payments etc.

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Contents of Speech

• The Economic Importance of Transportation
  Services in General and Maritime Transport in
  Particular
• Maritime Transport and GATS The Status Quo
• Reasons for the Failure of Maritime Negotiations
• Maritime Transport and GATS An Outlook

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Liberalizing Maritime Transport Services

• Efforts have been undertaken on the bilateral,
  regional and international level (OECD, UNCTAD,
  WTO).
• However, there is until today no global regime
  governing shipping.

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Maritime Transport in WTO / GATSDevelopments in
Uruguay Round

• Negotiations began with start of Uruguay Round
  (1986).
• By end of Uruguay Round (1993), still no
  agreement on shipping
• Annex on Negotiations on MTS
• Ministerial Decision on Negotiations on MTS
• On the basis of these documents
• Extension of sectoral negotiations in NGMTS until
  1996
• Suspension of MFN obligation
• No meaningful market access and national
  treatment commitments in schedules.
• THEREFORE de facto exclusion of MTS from GATS

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Maritime Transport in WTO / GATSDevelopments in
NGMTS (94-96)

• NGMTS negotiations began in 1994 and lasted until
  1996.
• By end of talks, still no agreement on shipping
• Decision on Maritime Transport Services (28 June
  1996)
• On the basis of this document
• Resumption of negotiations with next trade round
  (2000)
• Further Suspension of MFN obligation
• No meaningful market access and national
  treatment commitments in schedules
• THEREFORE de facto exclusion of MTS from GATS

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Maritime Transport in WTO / GATSDevelopments
since 2000

• Negotiations were resumed in the context of
  general services talks in 2000.
• New trade round launched in 2001 (Doha Round),
  currently expected to finish by end of 2006.
• So far, no rules of substance have been agreed
  upon, i.e. the situation remains the same as it
  was before, i.e.
• MFN obligation does not apply
• No specific commitments on market access and
  national treatment
• THEREFORE UNTIL TODAY
• de facto exclusion of MTS from GATS

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Contents of Speech

• The Economic Importance of Transportation
  Services in General and Maritime Transport in
  Particular
• Maritime Transport and GATS The Status Quo
• Reasons for the Failure of Maritime Negotiations
• Maritime Transport and GATS An Outlook

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Reasons for Failure of Maritime Negotiations in
WTO / GATS

• No offer from the USA as the worlds leading
  trading nation.
• No substantial offers from many developing
  countries and newly industrialized economies of
  Asia, South America and Africa.
• Shipping industry resistance in the US and
  Europe.

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Contents of Speech

• The Economic Importance of Transportation
  Services in General and Maritime Transport in
  Particular
• Maritime Transport and GATS The Status Quo
• Reasons for the Failure of Maritime Negotiations
• Maritime Transport and GATS An Outlook

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Maritime Transport in WTO / GATSAn Outlook

• The three pillars of maritime transport
• Multimodal transport the fourth pillar?
• Benefits of potential MTS agreement under GATS
• Possible outcome scenarios at the end of the Doha
  Round

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The three pillars of maritime transport

• Pillar 1 International Maritime Transport
• Pillar 2 Maritime Auxiliary Services
• Pillar 3 Access to and Use of Port Services

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Pillar 1 International Maritime Transport

• This pillar covers the actual transportatiom
  service as such performed once the cargo is on
  board a vessel in country A until the port of
  destination in country B.
• Liberalization in this pillar is crucial in view
  of providing free access by foreign shipping
  companies to cargoes for international carriage,
  irrespective of whether or not a commercial
  presence has been set up in either country
  involved.
• Regulatory restrictions on all outbound and
  inbound cargoes must be progressively abolished.
• Problematic issues cabotage, shipping
  conferences

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Pillar 2 Maritime Auxiliary Services

• These include for instance
• cargo handling services
• storage and warehousing services
• customs clearance services
• container station and depot services
• maritime agency services
• freight forwarding services

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Pillar 2 Maritime Auxiliary Services

• In this pillar, many restrictions remain to be
  tackled.
• This pillar is characterized by monopolized
  ventures.
• A liberalization of Pillar 2 would bring
  considerable efficiency gains in the competitive
  supply of these services.
• These adjuncts to the primary sea leg have become
  increasingly important in the past years.
• They must be included in any comprehensive
  liberalization approach.

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Pillar 2 Maritime Auxiliary Services

• There are two aspects to the
• liberalization of these services
• One component is to allow foreign ships serving
  the domestic market non-discriminatory access to
  such services.
• The second component is to allow foreign
  participation and competition in the supply of
  the service itself.

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Pillar 3 Access to and Use of Port Services

• Port services include
• pilotage
• towing and tug assistance
• provisioning
• fuelling
• garbage collecting
• port captain services
• navigation aids
• emergency repairs
• anchorage
• berthing

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Pillar 3 Access to and Use of Port Services

• What is sought in this pillar, is not the ability
  for foreign service suppliers to provide these
  services, but the ability for foreign shipping
  companies to have access to and use these
  facilities on non-discriminatory terms.
• Access to Pillar 3 is crucial and many States
  tend to be too restrictive here.
• Pillar 3 must be an essential component of any
  liberalization undertaken.

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Multimodal Transport The Fourth Pillar of
Maritime Transport?

• Multimodal transport carriage of goods by at
  least two different modes of transport (e.g.
  water and road) by the multimodal transport
  operator on the basis of one single contract from
  point of loading to point of delivery.
• Today transport consumers demand one-stop
  freight shop because of efficiency gains
• Traditional MTS are increasingly replaced by
  integrated services where the blue water leg is
  one of many transport components.

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Mode of delivery 1) Cross-border supply (2) Consumption abroad (3) Commercial presence (4) Presence of natural person Mode of delivery 1) Cross-border supply (2) Consumption abroad (3) Commercial presence (4) Presence of natural person Mode of delivery 1) Cross-border supply (2) Consumption abroad (3) Commercial presence (4) Presence of natural person Mode of delivery 1) Cross-border supply (2) Consumption abroad (3) Commercial presence (4) Presence of natural person
Sectors and sub-sectors Limitations on Market Access Limitations on National Treatment Additional Commitments
XI. TRANSPORT SERVICES XI. TRANSPORT SERVICES XI. TRANSPORT SERVICES XI. TRANSPORT SERVICES
1. Maritime Transport Services
(a) Passenger transportation (less cabotage) (CPC 7211) (b) Freight transportation (less cabotage) (CPC 7212) (1) Unbound (2) None (3) Upon accession, foreign shipping enterprises may only establish representative offices in Vietnam. After 3 years from the date of accession, foreign service suppliers are permitted to establish joint-venture in which the capital contribution of foreign side shall not exceed 49 of total legal capital. Foreign seafarers may be permitted to work in ships under the national flag of Vietnam (or registered in Vietnam) owned by joint-ventures in Vietnam but not exceeding 1/3 of total employees of the ships. The Master or first chief executive must be Vietnamese citizen. (4) Unbound, except as indicated in the horizontal section. (1) Unbound (2) None (3) Unbound (4) Unbound, except as indicated in the horizontal section The following services at the port are made available to international maritime transport suppliers on reasonable and non-discriminatory terms and conditions 1. Pilotage 2. Towing and tug assistance 3. Provisioning, fuelling and watering 4. Garbage collecting and ballast waste disposal 5. Port Captain's services 6. Navigation aids 7. Shore-based operational services essential to ship operations, including communications, water and electrical supplies 8. Emergency repair facilities 9. Anchorage, berth and berthing services.
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Liberalization Offer for Pillar 2
Mode of delivery (1) Cross-border supply (2) Consumption abroad (3) Commercial presence (4) Presence of natural person Mode of delivery (1) Cross-border supply (2) Consumption abroad (3) Commercial presence (4) Presence of natural person Mode of delivery (1) Cross-border supply (2) Consumption abroad (3) Commercial presence (4) Presence of natural person Mode of delivery (1) Cross-border supply (2) Consumption abroad (3) Commercial presence (4) Presence of natural person
Sectors and sub-sectors Limitations on Market Access Limitations on National Treatment Additional Commitments
8. Services auxiliary to all modes of transport 8. Services auxiliary to all modes of transport 8. Services auxiliary to all modes of transport 8. Services auxiliary to all modes of transport
(b) Storage and warehouse services (CPC 742) (c) Freight transport agency services (CPC 748) (1) Unbound (2) None (3) Foreign service suppliers are permitted to provide services through the establishment of joint ventures with Vietnamese partners with the capital contribution of foreign side not exceeding 49. (4) Unbound, except as indicated in the horizontal section (1) Unbound (2) None (3) None (4) Unbound, except as indicated in the horizontal section
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Benefits of a Potential Maritime Agreement under
GATS

• WTO today is the forum for successful
  international trade liberalization.
• competences for both the goods and the service
  sector
• global coverage 148 Member States, 90 per cent
  of all trade in services covered
• membership structure all major developed
  countries AND most developing countries

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Benefits of a Potential Maritime Agreement under
GATS

• Liberalization of MTS leads to
• more foreign investment
• increase of trade volumes
• more employment
• economies of scale
• promotion of international division of labour
• state-of-the-art technology
• effective management of shipping services
• decrease in transport costs for the benefit of
  consumers

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Benefits of a Potential Maritime Agreement under
GATS

• A maritime transport agreement under GATS would
• create solid legal obligations for open shipping
  markets
• abolish the risk of backtracking to more
  restrictive maritime transport regimes
• bring legal certainty for international
  entrepreneurs and thus foster
• investment in infrastructure, especially in LDCs
• guarantee legal enforceability through the WTO
  dispute settlement mechanism

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Benefits of a Potential Maritime Agreement under
GATS

• If Doha Round negotiations on maritime transport
  failed again, there would be...
• a severe setback for the WTO (and for world
  trade).
• the realistic risk of reappearance of various
  forms of protectionism.
• a danger that developing countries with a
  negotiating disadvantage cannot benefit (via MFN)
  from the concessions negotiated between the big
  trading nations.

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The Doha Round Negotiations on MTS Possible
Outcome Scenarios

• Four scenarios seem possible
• Scenario 1
• Negotiators are unable to find any maritime
  agreement at all.
• MTS remain de facto excluded from the GATS
• Lack of legal certainty.
• Danger of backtracking to protectionism

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The Doha Round Negotiations on MTS Possible
Outcome Scenarios

• Scenario 2
• Negotiators are unable to find a consensus on a
  maritime agreement, but manage to agree on
  standstill binding for all WTO Members.
• MTS remain de facto excluded from the GATS
• Guarantee that current degree of market openness
  is maintained
• Establishment of a baseline for liberalization

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The Doha Round Negotiations on MTS Possible
Outcome Scenarios

• Scenario 3
• Maritime transport Code based on reciprocity only
  applying to some WTO Members that decide to adopt
  it.
• Maritime players willing to subscribe to full
  liberalization may do so and have all the rights
  vis-à-vis other Code Members while other
  countries are not bound and cannot benefit.
• Code could be first step on the way to a future
  multilateral instrument binding for all.
• However, reciprocity and Code conditionality are
  normally non-WTO instruments.

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The Doha Round Negotiations on MTS Possible
Outcome Scenarios

• Scenario 4
• A critical mass of developed and developing
  countries decide to make substantial commitments
  on market access and national treatment and MFN
  enters into force for MTS.
• Creation of the first global framework providing
  for progressive liberalization of MTS for the
  benefit of international maritime service
  suppliers, consumers and world trade in general.

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The Doha Round Negotiations on MTS Possible
Outcome Scenarios

• Taking a Guess...
• USA still not likely to make a substantive offer,
  but
• trading interests of many countries have shifted
  towards newly emerging, dynamic Asian markets,
  which might provide the necessary initiative for
  many countries to make an offer nonetheless.
• Meaningful participation of developing countries
  still uncertain, but
• there seems to be increasing acknowledgement in
  many LDCs that liberalizing MTS is one of the key
  factors to foster economic growth.
• Industry Lobby is now supporting inclusion of
  MTS.