Talks are reduced to blame-game

Updated: Nov 16 2005, 05:30am hrs
There is much polarisation in the Gats debate with some seeing advantages in further services liberalisation, while others unequivocally demand prudence given the loss of domestic policy flexibility. Gats negotiations are mired in a complex web of interlocking demands, counter-demands and retractions. Lack of progress has degenerated into a childish blame game at the highest levels of diplomatic core. An agreement at the Hong Kong ministerial conference looks increasingly unlikely.

Developing countries have been blamed for failing to be constructive. A closer analysis reveals a different picture. The petulant rich countries have for the past ten years added more and more audacious issues to the agenda. The purpose of this was partly to detract attention from consistent and cogent demands from developing countries. It also increased the cost of any concession that developing countries received from the rich countries in exchange. In the context of this overloaded agenda, the rich are pushing for liberalisation to provide bigger markets for their firms.

In recent years, twelve developing countries provided for about 70% of developing countries services exports. So the scope for formenting divisions amongst them is indeed high. While the potential for exploiting these differences exist, there is a counter-demand from developing countries that any move requires adequate offers in agriculture negotiations from the rich. The intransigence by developing countries in the negotiations is fickle . The rich countries can bide their time to achieve their objectives. The draft agreement that was rejected in 2003 in Cancun was accepted almost verbatim in Geneva less than a year later.

Contrary to the spin provided by the rich countries, it is the developed countries that need access to developing countries services markets. Services has shown the highest growth, employs most of their workforce and is where they have surplus supply capacity.

Even the World Bank and IMF have been roped in to address their service sector expansion needs. Increasingly, privatisation and liberalisation are imposed as conditions for loans and aid. The coherence between these international institutions is far too coincidental to be improbable.

Developing members, like rabbits who have had a whiff of a juicy carrot, are drawn to mode 4 market access. While salivating at the prospect of being able to export professionals, albeit temporarily, earn remittances and relieve some unemployment, developing countries have inadequately understood the limits on mode 4.

Gats opens the door to the movement of persons. However, entering and passing the doorway is another matter, since the receiving country is not obliged to provide a visa nor change its immigration laws. Developing countries have surplus supply capacity of semi- and unskilled people, but this is not even on the agenda. Rather than an opportunity, mode 4 prospect is more like a carrot on stick leading a donkey continuously in the chase.

The developing and developed countries have complained that the offers in mode 4 for the former and in the areas of finance, telecommunications and environmental services for the latter have been poor. The EU has now made another audacious proposal which demands that each country make a certain number of liberalisation offers that can be benchmarked quantitatively and qualitatively.

With characteristic impudence the EU is demanding a change in the agreed negotiating method in Gats. Countries will only liberalise those service sectors that they choose. Developing countries are entitled to make less offers than the rich countries. What are the Europeans offering in exchange for this demand Nothing. Many civil society groups have added their voices to the opposition.

Within Gats there are outstanding issues still to be finalised. Without resolving these issues it is impossible for a country to put a value to their liberalisation. The rules on domestic regulation and the emergency safeguard measure (ESM) are yet to be completed. The rules refer to the right of the state to regulate the service sector. A narrow right to regulate would increase the relative value of the offer and conversely for a wide right.

Already the Mexico/US Gats case has shown that liberalisation is indeed very expensive and intrusive because it crowds out the ability of the state to promote its development objectives. The ESM is a defensive tool that countries can deploy to protect the local industry if there is a surge of imports. Without this in place, developing countries have very limited means of protecting local service suppliers. Consequently, the value of a concession under Gats without the ESM increases dramatically, especially if a country has had its local suppliers wiped out by an import surge and has to contend with erratic domestic supply.

Rich countries are demanding that developing countries put their services offers on the table without them having even a modicum of certainty about the value of the offer. The rich country offers are also of questionable value, doubly so because in mode 4; empty promises are a real risk. Second, few developing countries have export capacity. Countries do not have to liberalise services and it is better to err on the side of caution if there is so much uncertainty and unpredictability in Gats.

The author is a researcher with SEATINI (The Southern and East African Trade Institute)