GATS modalities for autonomous liberalization credits set
Source: Third World Network Features
Chakravarthi Raghavan

GENEVA: The Special Session of the WTO Council for Trade in Services (CTS), where the services negotiations are taking place, agreed on 6 March to modalities for the treatment of autonomous liberalization in services (in various sectors and modes of delivery), i.e., for those who have carried out such autonomous liberalization to negotiate with trading partners to seek credit, before binding it in their GATS schedules of commitments if they choose to.

For each round of negotiations for services liberalization, under Article XIX.3 of the WTO's General Agreement on Trade in Services (GATS), the CTS "shall establish" negotiating guidelines, and as part of the negotiating guidelines "shall establish" modalities for the treatment of liberalization undertaken autonomously by members since previous negotiations, as well as for special treatment of the least developed countries (LDCs).

Since the new round of services talks began technically in January 2000, and after it was rolled into and became part of the WTO's Doha work programme, the issue of modalities for treatment of autonomous liberalization has been raised by the developing countries (and some of the newly acceding countries).

Though developing countries had viewed this issue as part of Art. IV of GATS (for increasing participation of developing countries in services trade) and special and differential treatment for themselves, enabling them (if they so choose) to seek credits and set these off against offers of liberalization they might feel under pressure to make in the round, the modalities agreed to at the CTS Special Session apply to all members.

Technically, the UK or other EU members, which have 'liberalized' autonomously several of their service sub-sectors (water, sanitation, energy, education, health, etc.), could through the EC seek to get credit and bind their own liberalization measures in GATS (and thus make it irreversible, so to say).

This prospect has alarmed several of the public interest civil society groups which have mounted campaigns against GATS. EU Trade Commissioner Pascal Lamy has tried to quieten them and win them over with the assurance that some of these key sectors would not be included in the EC's own 'offers' of liberalization. However, the EC has made 'requests' to many developing countries to open up their markets in these very same sectors.

Technically, the EC or any of the industrialized countries which have taken some autonomous liberalization measures, for example in terms of Mode 4 (movement of natural persons, which is the fourth mode of service delivery covered by GATS), which have benefited some developing country or other, could use it to negotiate bilaterally on its own requests and ask the developing country to give something in return for binding its own measure under GATS. The developing country would then weigh the economic value it is deriving from the industrialized-country measure, and the benefits of certainty when it is bound, and then give.

However, the Mode 4 commitments or liberalization measures by countries contain so many fine-print conditions (e.g., economic and other needs tests of the importing member, the security and other tests used non-transparently for grant of visas, etc.) that any long-term economic benefits as a result of binding would be difficult to judge - more so when there are no reliable data and methods of measuring them in services trade.

In fact, some studies suggest that the arguments used by developing-country negotiators and governments in 'selling' the WTO (including GATS) to their parliaments, domestic enterprises and civil society - by claiming that the opportunities to their labour (mostly, and for the foreseeable long term, highly skilled labour and professional service providers drawn from the country's elite classes) as a result of the Mode 4 access would compensate for their opening up to the developed countries under the other three modes in GATS, particularly Mode 3 (commercial presence, an euphemism for investment) - are quite misplaced.

Developing countries which, under IMF and World Bank pressures and programmes, have undertaken some autonomous liberalization (in such service sectors as water supply and water treatment, sewerage and sanitation, energy services, etc.) and are now facing sharp domestic criticism and opposition, could try to get some 'benefits' in the form of concessions on Mode 4 or in goods trade, before binding the liberalization measures in GATS.

It is doubtful, however, whether the governments of major developing countries can get away with it. Even if they do, it may end up intensifying opposition to the trading system arising from the public perceptions in developing countries of inequities and lack of benefits from the WTO, a major dilemma facing the WTO and trade establishments of member governments.

Credit criteria

The newly approved modalities define autonomous liberalization measures for which credits could be sought as those measures which have been undertaken unilaterally since the previous negotiations (which would mean the Uruguay Round negotiations), which could be scheduled in GATS or result in the end of an MFN (most favoured nation) exemption (inscribed in a member's schedule), which are compatible with the MFN principle, and which are applicable to any or all service sectors.

According to the modalities, the criteria for assessing the value of autonomous liberalization measures include sectoral coverage, liberalizing nature of the measure concerned (elimination of market-access restrictions, measures inconsistent with national treatment and/or MFN), entry into force and duration of the measure, share of the sector in the total trade of the trading partner, share of the trading partner in the total trade in the sector that has been autonomously liberalized, importance of the measure to the liberalizing member's economy, market potential for trading partners, opportunities for expansion of foreign participation in the sector after introduction of the measure, and whether the measure has been scheduled or the member is willing to do so.

To facilitate the assessment, the member seeking credits and the trading partner could agree to use either a quantitative or qualitative approach or a combination.

It is not clear, however, how a quantitative approach may be feasible, even for Mode 3, when the data is either absent or so unreliable, as brought out by panellists and experts at a recent meeting of the UNCTAD Commission on Trade in Goods and Services and Commodities.

The members applying these approaches are asked to take account of the level of development and size of the economies of the individual members.

In terms of procedures for negotiating and getting credits, the CTS decision allows for bilateral, plurilateral or multilateral procedures, but the grant of credits "shall" be advanced through bilateral negotiations. It is thus a process where the major economies could use their 'economic power' to grant or deny credits to negotiate or get other benefits.

In seeking credit, the liberalizing member is to make known to its trading partner the autonomous measure for which credit is sought (and notify it if deemed appropriate to the CTS, but with no guarantee of right to credit nor an obligation to bind the measure). The criteria for assessing the value of the measure concerned are to be specified, and so is the specific credit sought.

This last could take the form of a liberalization measure to be undertaken by a trading partner in sectors of interest to the liberalizing member under GATS, refraining from pursuing a request addressed to the member or any other form which the two may agree upon.

In theory, it would help a developing country to ward off or resist requests from the major trading powers and/or get some benefits in the goods sectors. However, in practice it would mostly remain a theoretical proposition for the majority of the developing-country members.

The decision on modalities stipulates that these modalities are to be used inter alia as a means of promoting economic growth and developing countries' increasing participation in trade in services, and the flexibilities allowed in GATS for developing countries are to be fully taken into account.

In presenting the modalities text, the chair of the CTS Special Session, Ambassador Alejandro Jara of Chile, underscored the long and labourious negotiations to achieve a consensus text, and commended the text as one providing significant components and thus the necessary balance. All the principles and objectives set for the services talks by the Doha Ministerial Declaration were also applicable to the modalities, Jara said. In applying them, the Members had to be guided by paragraphs 49 and 50 of the Doha Declaration. (Paragraph 49 calls for transparency and effective participation of all members in the negotiations, while paragraph 50 provides for special and differentials treatment for developing and least developed countries to be take"fully into account" in the ngotiations.

These however would not mean much unless members applied them in the bilateral negotiations, Jara added.

The chair also made references to the concerns expressed by countries that recently acceded to the WTO, and the view of several that these concerns could not be addressed in the modalities paper on autonomous liberalization. He said that it was fair to acknowledge that in several cases liberalization measures bound by the newly acceded countries were more extensive than the commitments of the original WTO members.

Referring in this connection to paragraph 9 of the Doha Ministerial Declaration (which has made references to the extensive market-access concessions made by the recently acceded members as a contribution that would strengthen the multilateral system), he said: "The fact that these commitments are recent and extensive may imply, in some cases, significant effort and adjustment-related cost and, therefore, less room to undertake many more commitments at this stage."

Recognizing this, Jara added in the statement before the adoption, "it is understood that the provisions evoked earlier - paras 9 and 49 of the Doha Declaration - should be taken into account in the course of the ongoing negotiations, when requests are made to recently acceded members."

Whether the major demandeurs (the US, the EC, Japan, Canada, Switzerland) will heed this in the bilateral request-offer process of the talks now under way remains to be seen. As for the others, perhaps they would judge it in terms of what benefit, now or in the future, they might derive from these commitments made in the accession talks.

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