Negotiations should not be pushed off the track

Updated: Nov 16 2005, 05:30am hrs
EU Trade Commissioner Peter Mandelson, in his address to the Geneva-based negotiators in October 2005, said services cannot be Cinderella. Mr Mandelson is right, and I agree with him. Services certainly cannot be ignored. I, however, have different reasons for thinking that way. Ignoring the services negotiations is not in the interest of WTO members, especially developing countries. It is high time members start taking the services negotiations seriously.

Negotiations in services had begun much before the Doha Ministerial under the mandate of Article XIX of the General Agreement on Trade in Services (Gats). Before the Doha Ministerial, WTO members had already agreed on two things, namely (i) credit for autonomous liberalisation and (ii) guidelines for services negotiations.

In Doha, the ministers had mandated negotiations based on agreed guidelines. Further, members had also agreed on the deadlines for negotiations on the three unfinished agenda of Gatssafeguard measures, subsidy and government procurement.

One of the agreed guidelines was that services negotiations would take place on request-offer basis, as against a formula approach that was suggested by the EU at that time. The Doha mandate had also suggested request-offer basis for negotiations, and deadlines were put in place for submission of requests and offers. Nobody could imagine then that members would make a mockery of the request-offer approach.

After the launch of the Doha Round, members had not come up with requests and offers of any sort for a long time. Deadlines were allowed to lapse. The few who have come up with their lists of requests and offers, have been primarily demandeurs (making requests), and misers on offers. The miserly attitude on offers and the profoundity of requests are noticeable, particularly among the developed countries, especially the US, the EU and Japan, who together account for over 70% of global trade in services.

They are particularly silent on market access in areas such as movement of natural persons (mode 4), where developing members enjoy comparative advantage. The EU, in the meantime, has sought to dilute its Uruguay Round market access commitments in the wake of its expansion to a 25-member Union. The latest EU proposals, (October 10, 2004) are unacceptable to developing countries.

First, by suggesting use of a multilateral formula (one for developed countries and another for developing countries), it is seeking to nullify the request-offer process and is trying to establish its pre-Doha position. This is obviously not acceptable to rest of the WTO members. Shifting to the formula approach will not impart any dynamism in the lacklustre services negotiations.

Second, while the EU is talking about minimum levels of ambitions in certain number of sectors, it is doing so without any commitments on its part, and is aiming at larger access to developing country markets. This is obvious in view of its linking ambitions in services to ambitions in agriculture and Nama.

Finally, it has raised the issue of benchmarking, whereby members should establish minimum benchmark levels to open sectors to foreign competition. This has apparently some merits, since there would be minimum benchmarks of markets opening in all sectors across all the modes of supply. Going by this, even developing countries will get some benchmark opening of markets in mode 4. However, developing countries will have much more to lose than gain.

More importantly, the idea of benchmarking goes against the architecture of Gats, that is particularly designed to accommodate the interests of developing countries. The idea of benchmarking at this stage of Doha negotiations amounts to upsetting the apple cart at a time when it needs to stay on course.

Right now, it is advisable not to disturb the current negotiation and let it stay on course. When ministers assemble in Hong Kong, they should fix a final deadline for improved offers, or as EU would call it, ambitious offers but on less than full reciprocity basis so that we arrive at a win-win outcome.

The author is chairman WTO committee, Assocham