China Programme • Volume 12 • Number 27 • 7th August 2008

Strong Signals Sent on Services

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Surprising, encouraging, positive and constructive were among the terms used by participants after the half-day ‘signalling conference’ on services held during the Geneva mini-ministerial in July.

The event marked the first time that services liberalisation had been discussed at the ministerial level since the launch of the Doha Round in 2001. Together with agriculture and industrial goods, services form the ‘holy trinity’ of the round’s market access negotiations, but many WTO Members had repeatedly complained that most offers tabled so far did not even reflect current levels of openness, not to speak of creating new export opportunities.

The purpose of the signalling conference was to give countries keen on expanding their access to foreign services markets a sense of what the 30 or so trading partners actively involved in the negotiations could potentially offer. Although the outcome of the meeting is in no way binding, the indications put forward at the meeting seem to have held at least some promise to WTO Members such as Australia, the EU, India and the US that more robust market access commitments could be secured in services if an acceptable deal were struck in agriculture and non-agricultural market access.

Most of the participants were developing countries, in whose markets the demandeurs of the high-level services meeting are seeking deeper and broader concessions in a large number of sectors. In contrast, the main developing country demands centred on more access for their temporary service providers (movement of natural persons or mode 4 of services supply) and cross-border services, such as business outsourcing (mode 1).

WTO Director-General Pascal Lamy, who chaired the meeting, summed up the outcome in a report, which did not attribute the potential commitments to individual countries (JOB(08)/93).

New Commitments Outlined on Market Access

According to the report, Members signalled potential new market opening concessions across a wide range of sectors, including business and financial services, telecommunications, tourism, distribution and postal services, health, education, transport and construction, as well as energy, environmental and audiovisual services.

Many participants indicated willingness to remove, or improve, limitations with regard to foreign ownership of enterprises involved in areas such as telecommunications, banking, insurance and postal and courier services.

Although Mr Lamy’s report did not mention individual countries or the exact content of their signals, several press sources reported that India was willing to increase its foreign equity cap in the telecommunications sector from 50 to 74 percent, and to allow 51 percent foreign ownership in its hitherto closed asset management sector. Brazil’s chief negotiator Celso Amorim said his country could consider improvements in telecommunications and reinsurance, while China indicated potential new commitments in financial and infrastructure-related services.

These moves were welcomed by the EU and the US, although both said they would like to have seen more on the part of the major emerging economies. Australia’s Trade Minister Simon Crean also expressed positive surprise at some of the conditional offers made at the meeting.

Some Flexibility Signalled in Mode 4

The EU and the US were reportedly willing to improve existing offers in cross-border supply of services in a range of sectors; they also signalled more flexibility in granting access to foreign service providers. However, such access is likely to concern skilled professionals rather than the non- or semi-skilled labour that is in most abundant supply in developing countries. The EU said it could eliminate the cumbersome economic needs tests for foreign workers when issuing temporary visas, but limit the number of such service providers through a numeric quota. US Trade Representative Susan Schwab said she was prepared to work with Congress to increase the number of temporary H-1B visas for foreign professionals. Although this does not seem a major concession, the US had previously been reluctant to broach the subject at all, arguing that under US law only immigration services are authorised to deal with visa issues.

India’s Commerce Minister Kamal Nath called Schwab’s announcement a ‘good move’ that signalled new willingness to engage on the issue. His colleague Gopal Pillai was more sceptical, saying that, for the moment, the US statement was nothing more than a ‘vague promise’ and that much would depend on the specific details that the US includes in its revised services offer. Obtaining better mode 4 access is one of India’s key priorities in the Doha Round negotiations.

Waiver to Cover Special Treatment for LDCs
WTO Members agreed in 2003 to give ‘special priority’ to providing market access in sectors and modes of supply of export interest to least-developed countries (LDCs). First and foremost, these countries seek better access for their temporary service providers, particularly in the semi- and non-skilled categories.

Although this topic was not addressed at the signalling conference, chair Fernando de Mateo’s latest draft ‘elements required for concluding the services negotiations’ (TN/S/33) is more precise than its predecessor with regard to implementing the LDC mandate.

Since fulfilling the ‘special priority’ commitment would entail discrimination in favour of LDCs, Members have agreed that the most satisfactory outcome would be a ‘waiver’ that could be invoked by any country giving greater concessions to LDCs than to other WTO Members. Members ‘shall strive’, the chair’s report said, to conclude negotiations on the ‘specific principles and characteristics’ of the waiver before the deadline for the submission of revised offers. This was initially set for 15 October 2008, but the date is now “subject to further confirmation in the light of the overall calendar” of the Doha Round.

It has also been agreed that the waiver negotiations will take into account the mechanism’s impacts on other developing countries, many of which have export ambitions very similar to those of LDCs. In addition, Members will give ‘due consideration’ to the trade-related concerns of small economies, as well as ‘take into account’ the extensive market access commitments that recently acceded Members agreed to in their accession negotiations.

Next Steps Uncertain

At the time of writing, it was not entirely clear how the services talks will proceed. The ‘elements’ paper had originally set a 15 October 2008 deadline for revised offers, and a 1 December target date for submitting final schedules of market opening commitments. However, following the collapse of the mini-ministerial those dates will certainly be postponed, and the signals exchanged in July remain “subject to a satisfactory conclusion of the Doha Development Agenda.”