Report by Linda Schmid, USCSI

February 1st to 3rd, the services industry delegation met with the WTO Director General, Secretariat and WTO Member delegates to discuss the progress of the built in agenda. Essentially, the WTO is moving forward in the mandated negotiations in services and agriculture. Electronic commerce remains a delicate issue. Developing countries have raised concerns about implementation issues associating them with services and e-commerce. In the Council on Trade in Services, Members share a common purpose on services and work is proceeding with deliberation. The "Cairns Group," Australia, New Zealand, Brazil, Argentina and Canada have linked progress in services with agriculture, and expect symmetry of movement between agriculture and services in terms of rhythm, structure and scope. The following report highlights some of the issues discussed in meetings with WTO officials, WTO Member delegates, and the GSN meeting.

Electronic Commerce

Electronic commerce is a delicate issue in the WTO. The Seattle text on e-commerce has been superseded by new negotiating postures associating "implementation" issues with the WTO moratorium on customs duties on electronic transmissions. Last year, the General Council received reports on electronic commerce from the Council for Trade in Services, the Council for TRIPS, as well as WTO delegations. When the General Council decides to take a next step on the reports, perhaps in midsummer, an electronic commerce work program may move forward. Developing countries remain skeptical of the moratorium. They will consider electronic commerce among issues of competition, implementation, and agriculture.

Developing Country Issues

LDC's recognize that the Uruguay round favors mode 3 establishment, yet, LDC's do not have money to invest. They have emphasized that the Uruguay Round did not produce developed country commitments in mode 4, movement of natural persons, where LDC's have some capacity. LDC's expect better in the next round.

LDC’s are very interested in implementation issues. TRIMS and TRIPS transition periods for implementation will expire shortly. Some countries are floating the idea of considering a waiver across the board for implementation of TRIMS and TRIPS. Developed countries oppose such an across the board waiver due to its effect on the integrity of past and future commitments. Developed countries believe implementation problems should be dealt with on a case by case basis. Some countries are associating their concerns about implementation of TRIMS and TRIPS with their support of the moratorium on customs duties on electronic transmissions.

LDC's see the moratorium on customs duties on electronic transmissions as a concession, and view e-commerce as a US issue. LDC’s were essentially silent on the opportunities electronic commerce might offer their economies. Some were fearful of cross border competition their services sectors and adolescent industries might face from e-commerce.

LDC’s are focused on the development of safeguard measures within the GATS. In terms of negotiations, LDC's may consider "model" schedules as a friendly, effective approach. Expanding access into local regional markets through WTO negotiations is a priority for LDC’s. They will also seek credit for autonomous liberalization. LDC’s are assessing the state of their national trade to prepare for negotiations. There is much work to be done in raising awareness of the importance of services to LDC economies.

WTO Officials

Director General Michael Moore affirmed that the mandated negotiations on agriculture and services have begun. Work will need to be done to achieve acceptable agricultural text. The services text is not problematic. The Director General is examining WTO internal transparency, and moving toward realistic, steady, steps in building confidence among WTO members. The Director General plans to meet with national leaders in their capitals to build momentum and support for the WTO. In Davos, he received positive feedback from trade ministers and business people on negotiations in the WTO. He plans a trade and WTO administrative package for developing countries. The Director General is focussing on areas that have common ground while addressing issues such as agriculture, labor, and implementation where delegations have very rigid positions.

David Hartridge, Director, Trade in Services Division, WTO, noted that services work in the Council on Trade in Services is directed to the negotiating process. Negotiations will likely proceed in two phases: the all rulemaking phase and the request offer phase or negotiation of better commitments. Negotiations can take place in bilateral, plurilateral, or multilateral formats among members.

Stuart Harbinson, Chair of the GATS Council on Trade in Services (CTS), hopes to move forward with negotiating text on services using the Ministerial text as a basis. He sees CTS milestones as the establishment of negotiating structures, selection of working party and committee chairs, guidelines, and request offer discussions. There is a coordinated effort in the CTS of technical assistance to developing countries to prepare them for negotiations. The Council on Trade in Services (CTS) has four subsidiary bodies developing disciplines on domestic regulations, examining GATS rules (safeguards, subsidies, and government procurement), developing methodology for specific commitments, and focussing on financial services. The subsidiary bodies are driven by WTO Members.

Working Party on GATS Rules

The GATS Rules work includes an examination of safeguards, subsides, and government procurement. Safeguard discussions will take into account precepts of GATT safeguard measures. Note the GATT safeguard agreement waves rights to retaliation. The services safeguard discussions have looked at inclusion of a retaliation provision. The ASIAN countries have a paper on recommendations for safeguards that is being considered. The Working Party expects an agreement on safeguard text by the end of the year. Resolution of safeguard concerns would enable developing countries to be forthcoming in negotiations. In 2003, the peace clause on subsidies expires. Delegations are reluctant to take up this issue. The CTS does not want to replicate work on government procurement being done elsewhere. In a wider context there is discussion of a comprehensive agreement on government procurement that would be plurilateral only to those who sign up.

Working Party on Domestic Regulation

Transparency and necessity represent priority domestic regulation principles for Working Party delegates. The necessity principle will take into account "legitimate objectives" for example consumer or environmental protection. Equivalence on recognition of professional degrees, as well as international standards are being considered. The Working Party is looking at the extension of principles established in accountancy to professional services. The accountancy principles have been distributed to capitals for feedback. The end product of the Working Party may be a proposal for an Annex to the GATS or establishment of core principles applicable across sectors, with adjoining sector specific principles. Domestic regulations will be considered as part of a wider agenda.

Committee on Specific Commitments

The Committee is revising the scheduling guidelines. They are addressing classification issues, advising how to record commitments in a coherent way, and considering a cluster approach to scheduling commitments. The cluster approach was described as an indicative list of services that are substantially related. For example, "environmentally" related services. Model schedules are also being considered for mode 4 commitments. Mr Dos Santos of Brazil chairs the Committee on Specific Commitments until a new chair is selected. The Committee is seeking "sequencing" to provide juridical certainty in implementing commitments.

Committee on Trade in Financial Services

The Financial Services Committee will focus on market access commitments. They will begin moving when other negotiations get going. Agreement on safeguards and implementation are expected at the end of negotiations.

Australia

Andrea Spear, Counselor for Services Issues for Australia, is working closely with Australian agriculture representatives. Australia is seeking a comprehensive round, recognizing an immediate need to get things going and have decisions made. Australia has allies with the same objectives, who are also working on investment and competition policy. Ongoing work on agriculture is starting to move forward, and delegates are thinking about the structure of negotiations. Australia is seeking symmetry between agriculture and service negotiations. Australia recognizes that the WTO needs to demonstrate that it can work in a transparent and effective manner to assure its credibility and strengthen its image.

Movement in the WTO will require the identification of obstacles and benefits. Some countries want to move slowly. Hard negotiations will start when offers are on the table. Developing countries will seek credit for autonomous liberalization under GATS Article XIX, and emphasize mode 4 and tourism. In the next year, we have a heavy work program that includes the development of scheduling guidelines and horizontal model approaches as well as consideration of: necessity tests, MFN exemptions, emergency safeguards, which are almost a precondition to negotiate other issues. The Australian Department of Trade has examined and posted reports on the benefits of trade and foreign investment on its website.

Brazil

Sergio Dos Santos, Secretary, Brazil, affirmed that the mandated negotiations have started. Brazil will seek symmetry in negotiations of services and agriculture in terms of rhythm, structure, and results. They will seek a parallel approach in how discussions will be organized, guidelines developed, and scope determined. At the end of negotiations, Brazil expects a whole package under a single undertaking with complete rules and new commitments. If no progress in agriculture, there is no progress in services, however, rules work can continue without short-term advancement in agriculture. Negotiation of commitments on services would have to wait for agriculture. Negotiating guidelines will flow from Article XIX. On electronic commerce, Brazil expects the electronic commerce program to go forward in the General Council. E-commerce will be considered among issues of competition, implementation, and agriculture.

Egypt

Egypt's First Secretary Tarek Adel, asserted that mandated negotiations have started; delegations will discuss modalities, frameworks, and procedures. Some delegations will link services with agriculture. Egypt supports immediate negotiations and has a national policy geared toward liberalization.

Egypt is interested in seeing its trading partners make offers in tourism, audiovisual, and construction. Egypt will seek market access commitments from neighboring countries. They would also like to see implementation of mode 4 commitments due to Egypt's competence in engineering design. Egypt is interested in putting together position papers on its priority services sectors. On electronic commerce, Egypt believes the an e-commerce work program should be completed before commitments are sought on the moratorium.

Malaysia

Malaysian industries have moved "upmarket." Malaysia has increased its pace of liberalization as the 19th largest exporter and 18th largest importer. They intend to move into the "multimedia corridor" and to become more services oriented. Malaysia believes infant and adolescent industries need to mature before its market is opened wide. They are interested in exporting services to regional markets. The country is concerned about cross border provisions of services into its home market particularly through the use of electronic commerce.

Thailand

Ms. Pimchanok Vonkhorporn, First Secretary, Thailand, emphasized that Thailand is a leader in the region in terms of liberalization. Thailand is seeking parody between agriculture and services. Emergency safeguard measures are a priority for Thailand in light of the Asian financial crisis. They are concerned with the general safeguard rules and definitions. They are looking at the GATT safeguard agreement and seek to be able to take provisional safeguard measures without demonstrating injury, with compensation possible, and with appropriate dispute settlement and review mechanisms. They would also like to be able to temporarily suspend specific commitments and retain flexibility on modes.

Pakistan

Mr Syed Habib Ahmed, Counsellor, Pakistan highlighted the importance of safeguard measures to Pakistan. Pakistan is contending with structural and adjustment problems. They are interested in technical assistance and capacity building. Mr Ahmed believes GATS Article 4 Increasing Participation of Developing Countries should be made more firm. Pakistan is interested in expanding its market access in education, health, tourism, and engineering services. They are interested in a formula approach on mode 4 commitments, but believe the traditional request offer will be the primary negotiating method.

GSN Meeting

Rachel Thompson chaired the GSN Meeting for the Australian Services Network. We reviewed briefly our discussions with delegations and heard suggestions for activities this year. GSN participants thought that the Network should try to raise the awareness of the importance of services in developed and developing economies. Participants agreed that the Network should try to more thoroughly engage GSN participants in the exchange of information about regional services activities and information. Participants agreed that the Network should reach out to services associations in countries that are critical to WTO negotiations such as Egypt, India, Malaysia, and Thailand. Participants discussed the possibility of a gathering of the Network in Geneva in conjunction with Council on Trade in Services activities, perhaps in the third week of July or in the Fall.