Even as the World Trade Organization’s (WTO) member states have recently ratified the trade facilitation agreement (TFA) in goods and India is pitching for a similar pact on services, several industry executives and analysts believe that it would not be easy for New Delhi to muster the requisite support for a TFA in services. The challenges, they say, could be in the form of building a coalition of like-minded countries and reconciling the differing interpretations of “substantive issues.” Developing a domestic consensus on the need for relaxing service trade rules would also be a harder task than many would have thought.
While the TFA in goods ratified on Wednesday in Geneva aims to streamline, simplify and standardise customs procedures, potentially reducing trade costs globally by an average of 14.3%, an agreement on services is expected to give a big push to global services trade, benefitting countries like India with ease of rules (rather than enhanced market access negotiated earlier under the WTO’s Doha Round).
Pritam Banerjee, senior director, corporate public policy, South Asia, Deutsche Post DHL Group, a multinational logistics services provider, feels that India could have worked towards building an alliance of countries in the WTO with the common interest of having an agreement on TFS in services. Developed countries in the West did the same for the TFA on goods and used their joint capacity to prepare in-depth economic studies that helped push their objective. India, on its own, would find it hard to mobilise its domestic institutional capacity to undertake background research or conduct outreach programmes.
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For instance, understanding Mode III issues — pertaining to “commercial presence” in another country in terms investment committed — requires research and communication exercises carried out not only at the national level in the foreign country, but also calls for understanding their laws at the provincial and local level. This requires substantial funds and adequately equipped human resources, both India needs to harness.
Another important issue, Banerjee said, is regarding the interpretation and treatment of a particular issue as a “substantive measure” or a trade facilitation measure. For instance, for a logistics service provider, landing rights and airport charges in a foreign country are currently a pertinent issue. A particular country might treat landing rights as policy issue and not a facilitation measure, in accordance to their domestic laws. Generally speaking, both could be trade facilitation measures, but a country may object to this citing their national security interests.
Another example could be Japan giving licence to a qualified foreign trained chartered accountant to practise in there only after the candidate completes articleship in there for a stipulated period of time. Dropping the compulsory articleship criteria for CA professionals of foreign origin could be problematic for Japan, as it considers this a substantive issue which requires change in their policy. India has repeatedly stressed its TFS proposals seek improvement in trade facilitation and not increase in market access. Despite this assurance, differing interpretations by WTO member states may create obstacles in reaching a pact on TFS at the WTO.
The extent of India’s trade-restrictive policies in the service sector is revealed by the OECD’s Services Trade Restrictiveness Index (STRI) — measured across 22 sectors and 44 countries. India has an STRI score above average in all the 22 sectors, whereas the US scored above average in only six of the total 22 sectors.