Benchmarking will help if it delivers results in mode 4

Updated: Nov 16 2005, 05:30am hrs
The proposals on benchmarking or complementary approaches in services made mainly by developed countries (including the European Union, Japan, Australia and Canada), advocate a multilateral approach to complement the present bilateral request-offer negotiations. The advocates of benchmarking advocate a plurilateral approach where a critical mass of members would establish benchmarks to guide the level of commitments in sectors of interest to them. These benchmarks could take the form of model schedules.

Clear and firm dates should be fixed during the first four months of 2006 for the presentation of revised services offers, reflecting both multilateral targets set and, where relevant, the sectoral model schedules. And finally, a discussion to ascertain realistic targets for negotiations for rules in the agreement on services was advocated by proposals on complementary approaches.

A country will have the freedom to select the sub-sectors to conform to the minimum number. Out of these sub-sectors, certain percentages (again different for the developed and developing countries) will be covered by commitments on the four modes of supply. The nature of the commitment with respect to mode 3 ( through commercial presence) and mode 4 (through presence of persons) has been specified.

In the former case, at least 51% foreign equity will be allowed and in the latter case, the economic need test will be given up. Apart from this multilateral approach, there may be a plurilateral approach where some members may agree to negotiate among themselves higher degree of commitments applicable only to them. While the EU stipulates two-stage percentages, first in fixing the minimum number of sub-sectors and then selecting from them minimum numbers for different modes of supply, Japan specifies the percentages of sub-sectors in which commitment will be undertaken.

The proposals were opposed because several developing and some developed countries felt that they will be obliged to commit to liberalise in at least a specified number of sub-sectors, and with a certain depth. Pre-establishing targets would go beyond, and, in fact, reduce the flexibility inherent in the Gats provisions stipulated above.

What is lacking in the Gats negotiations is 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. How would benchmarking in mode 4 work out! Would this lead to an increase in quotas, easier conditions for mutual recognition of qualifications, removal of ENTs and if so how How would SDT be compatible with benchmarking and would this approach not lead to a deviation from the core concerns in mode 4. Such questions need to be answered.

In particular, it is claimed that benchmarking would also be counter to the modalities on the special treatment of LDCs adopted by the membership as mentioned in a recent paper by India.

Many proposals are in favour of a priority list of sectors which need preparedness in terms of regulatory, legal and institutional framework. Developing countries are deficient in these areas and thus, would be particularly disadvantaged.

However, there is a recognition that two rounds of offers have not delivered the desired results, and the need for clear objectives and complementary approaches to supplement the request-offer process, while maintaining the Gats architecture, is required.

Improvements in mode 4 in categories de-linked from commercial presence through enhanced coverage, removal of economic needs tests and prescribing length of stay need to be highlighted. The enhanced coverage can be met through inclusion in political objectives or numerical targets.

On modal parameters, all four modes will need specific indicators to provide the right balance of interests across all members while mindful of the importance of mode 4 to developing members. Thus, benchmarking or complementary approaches would only be useful if it could deliver benefits on mode 4 or in sectors of export interest to them. It is not clear from the current proposals whether it is possible.

The author is coordinator, India programme, Unctad. Views are personal