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Services Negotiations in Doha Round: Concerns of South Asia

Services Negotiations in Doha Round: Concerns of South Asia. WTO Doha Round and South Asia: Linking Civil Society with Trade Negotiations 9-10 th March 2005, Colombo, Sri Lanka By Pranav Kumar CUTS Centre for International Trade, Economics & Environment, India

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Services Negotiations in Doha Round: Concerns of South Asia

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  1. Services Negotiations in Doha Round:Concerns of South Asia WTO Doha Round and South Asia: Linking Civil Society with Trade Negotiations 9-10th March 2005, Colombo, Sri Lanka By Pranav Kumar CUTS Centre for International Trade, Economics & Environment, India Email: citee@cuts-international.org

  2. Presentation Coverage • Global trade in services • Services sector in South Asia • A recap of the services negotiation in WTO • Current status of services negotiation in WTO • South Asian strategy in the Doha round • South Asia’s major interests

  3. Global Trade in Services (some features) Trade in services has grown faster than merchandise • 60% of global output • 30% of global employment • 20% of global trade • World services trade growth – 155% between 1990-2002; mfg. – 97% and Ag. – 40%

  4. Global trade in services (contd.) The composition of FDI has shifted towards services: • Early 1970s – one-quarter of the world FDI • 1990 – less than one-half • 2002 – two-third of total FDI The composition of services FDI is also changing

  5. Global Trade in Services (contd.) Developing countries’ share has increased: • In last 15 years - a four fold increase in services export from developing cts. • Increase in share in global services exports – 14% in 1985-89 to 20% in 2000. • Share in global outward FDI in services climbed from 1% in 1990 to 10% in 2002.

  6. Global Trade in Services Holds an immense potential in terms of further expansion of world trade: • By 2050 the world services exports would exceed merchandise • In case of USA this situation would come much earlier – by 2037

  7. Global Trade in Services Developing countries likely to benefit more: • Global gain of $260bn p.a. by eliminating all post UR barriers – 1/2 of it from services (Dee et al 2000). • Benefits vary from under 1% to over 50% of GDP (GEP 2002, WB) • Significant gain for DCs – 1.6% (India) to 4.2% of GDP if tariff-equivalents of protection cut by 1/3 in all countries (Chadha et al 2000) • Increased developed countries’ quotas by 3% of their labour force generates gains of $150bn p.a. (Winters et al 2002)

  8. Services Sector in South Asia Commonalities: • Important sector in terms of its contribution to GDP – ranging between 40-50 %. • Second most important sector after agriculture in providing employment • Remittances – South Asia is the second largest remittance recipient area (20%) • Greatly endowed in semi-skilled and unskilled labours

  9. Services Sector in South Asia (contd.) Differences: • Except India and Sri Lanka other three countries witnessed a decline in their services export in post WTO period.

  10. Services Sector in South Asia Differences: • B’desh and Pak are net importers while India, S.Lanka, Nepal have trade surplus. Services Exports and Imports in $mn, 2003

  11. Services Sector in South Asia Differences: • Except India, others have advantage only in mode 4. India’s interest lies in mode 1 and 2 in addition to Mode 4.

  12. Services Negotiations in the WTO • Initially many countries were skeptical and opposed • High degree of flexibility – in rules and market access • UR only a beginning; GATS required more negotiations • Further negotiations started in 2000 • End of 1st Phase In March 2001 – adoption of “negotiating guidelines and procedures” • DDA and July Package

  13. March 2001 “Negotiating Guidelines and Procedures” Adoption of “request-offer” approach for negotiating new specific commitments on: • National treatment • Market access • Additional commitments Mandate members to continue negotiations on “outstanding issues”: • Emergency Safeguard Mechanism (ESM) • Disciplines on domestic regulation • Disciplines on govt. procurement and subsidies

  14. Services in Doha Dev. Agenda • March 2001 guidelines as the basis for continuing the negotiations • To pursue Art. XIX objective of “progressively higher levels of lib. of trade in services”. • Flexibility for DCs - freedom to open fewer sectors; progressive ext. of market access • The mandated neg. was supposed to conclude on 1 January 2005.

  15. Services in “July Package” • Fresh deadline for submission of revised offers • Stress on high-quality offers, particularly in sectors and modes of export interest to DCs • Special attention to be given to LDCs • Emphasis on mode 4 • To intensify efforts on rule-making under GATS • Targeted technical assistance to DCs

  16. Current Status of Negotiations “The services negotiations are in a bad situation. If there isn’t a decent services package at the end of the day, it’s very difficult to imagine any meaningful outcome on other items” ---- Hamid Mamdouh, Director of WTO Trade in Services Division “What we have on table is very poor. We have a daunting task over the next few months.” ---- Alejandro Jara, C’man of CTSSS

  17. Current Status of Negotiations • Nearly two years after the deadline for countries to make initial offers, only 47 have submitted • Most of the offers put forward to date are horizontal in nature and lack sectoral commitments • The three most popular service sectors in regards to improved offers are – financial, telecommunication and business

  18. Current Status of Negotiations • USA expressed its inability to table a better offer in Mode 4. • Only in the area of domestic regulation some momentum has built up. • Before the May 2005 deadline for first or revised offers and the next services cluster in June several informal meetings have been planned. • A special session on LDCs shall be held in next services cluster.

  19. South Asia’s Strategy in Doha Round • India has been very proactive. Made its initial conditional offer in January 2004 • Sri Lanka also made its initial offer in September 2003. • Bangladesh and Nepal are exempt from making any offers. • Pakistan is yet to make its initial offers.

  20. India’s Strategy in Services Negotiations • Probably the first DCs to make a comprehensive submission on Mode 4 in Nov. 2000 • Offered to undertake extensive commitments under Mode 1 & 4 • substantially improved access to some critical service sectors. • India signed a joint statement with 15 other countries urging CTSSS to accelerate services negotiations

  21. South Asia’s Major Interests • India – Mode 1, 2 & 4 • Sri Lanka and Nepal – Mode 2 & 4 • Pakistan and Bangladesh – Mode 4

  22. Major Hurdles Under Different Modes of Supply Mode 4: • Economic Needs Test • Strict visa procedures • Non-recognition of professional qualifications • Imposition of discriminatory standards or burdensome licensing requirements • Payment of social security without corresponding benefits • Requirement of registration with or membership of professional organisation

  23. Major Hurdles Under Different Modes of Supply Mode 2: • US federal or state govt. reimbursement of medical expenses is limited to licensed, certified facilities in the US or in a specific state. • Lack of long-term portability of health coverage for retirees from OECD countries.

  24. Major Hurdles under Different Modes of Supply Mode 1: • Legislation by many US states to ban outsourcing of government contracts • Europe introduced a legal norms called “Transfer of Undertakings and Protection of Employees” to protect workers in outsourced deals.

  25. Systemic Problems in Services Negotiations • Negotiations proceed through a laborious process of requests and offers. • Definitional Issues in Mode 4 – lack of uniform definition, statistics not compiled according to mode 4 criteria, time-period of temporary movement

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