Aaditya Mattoo (World Bank) Sacha Wunsch-Vincent (OECD)*

1. WTO Symposium on Cross-Border Supply of ServicesConstraints with the existing GATS framework and Schedules of Specific CommitmentsGeneva: 29 April 2005 Aaditya Mattoo (World Bank) Sacha Wunsch-Vincent (OECD)* *the views expressed do not necessarily represent the views of the OECD

2. Outline of Presentation • Virtues of the GATS • Market Reality: Globalised service production • The inadequacies of the scheduling framework and commitments • Other issues

3. 1) Virtues of the GATS

4. Virtues of the GATS • Includes cross-border trade as mode of supply. • Provides a framework to make specific commitments granting open trading conditions -market access -national treatment -underpinned by technological neutrality • Other GATS obligations apply to committed services • And some concerns -The ‘likeness’ of electronic and non-electronic services - Are digitally-traded services covered by GATS Mode 1 or 2 commitments? - GATS obligations: too much or too little?

5. Globalised service production- Trade in intermediate services- Trade in new services

6. Example of Information Technology and Business Process Outsourcing Services • 1. Information Technology Services Software Development Services, Data processing and Database Services, IT Support Services, Web-hosting and Application Service Providers (ASPs) • 2. Business Process OutsourcingCustomer Interaction Services, Reservations for Airlines, Subscription services, Payroll Services, Insurance Claims Adjudication • 3. More Independent Professional or Business ServicesHuman Resource Services, Finance & Accounting Services, Marketing Services, Product Design and Development

7. Insurance Insurance service fragments • Customer Services Helpline. • Insurance claims processing • Payroll management • Business Intelligence & Data Warehousing

8. 3) The inadequacies of scheduling framework and commitments • Inadequacy of the existing classification scheme • Inadequacies of Existing GATS Commitments and Offers on Mode 1

9. a) Inadequacy of the classification scheme Implications of Positive list approach • WTO Members are free to include only certain (sub)-sectors of the GATS Services Sectoral Classification List (W120) in their schedules. • Services are only covered unambiguously when they can be clearly identified under an existing sectoral classification for which commitments have been entered.

10. Fragmentation of goods

11. Fragmentation of Services Hospital service fragments • Call Centre for customer service, etc. • Medical transcription services • Payroll management • Web hosting services / application service providers (ASPs)

12. Route 1: Services Directly Specified in the W/120 Hospital services Health services Other Health or Auxiliary Services Hospital call centre services Supply of office personnel Other business services Other “Other business services”

13. Route 1: Services Directly Specified in the W/120 Example: hospital call centre or medical transcription Step one: Are these serviced explicitly listed under health services?

14. Route 1: Services Directly Specified in the W/120 Example: hospital call centre or medical transcription Step two: Are these services explicitly listed under business services?

15. Some new services are specified in the revised CPC Version 1.1 New category: Business and production services • Division: 85 - Support services 8512 - Supply of personnel services 859 - Other support services 8593 - Telephone based support services 85931 - Telephone call center services 8596 - Data processing services 8599 - Other support services n.e.c.

16. But some new services are not even captured in the latest CPC 1.1 Example: Web hosting services / application service providers (ASPs) OECD proposal to the revision of the CPC 2007 • 8316 Hosting and IT infrastructure provisioning services Source: OECD (2004): Classifying ICT Services, DSTI/ICCP/IIS(2004)2 (7 April)

17. Services Sectoral Classification list: A continual catching up? • Classification systems become obsolete fast. • The CPC was updated twice to cover the evolution of services since the end of the Uruguay 1989: Provisional CPC 1991: GATT secretariat produces the W120 1997: CPC 1.0 2002: Manual on trade in services 2002: CPC 1.1 2007: CPC 2.0

18. Route 2: Indirect Coverage as “Inputs to Services Specified in W/120” • Argument for The "supply of a service" Art. XXVIII(b) includes production, distribution, marketing, sale and delivery. • Argument against But: Fn 9 states that GATS Art. XVI (2) does not cover measures which limit inputs for the supply of services” Guidelines for the Negotiations on Services: “[...] market access and national treatment commitments [...] do not imply a right for the supplier of a committed service to supply uncommitted services which are inputs to the committed service.”

19. b) Inadequacies of Existing GATS Commitments / Offers on Mode 1 • Existing commitments on GATS Mode 1 are limited and diverge widely for the different service sectors. • Even most liberal GATS schedules offer surprisingly little in categories important for intermediate services

20. Example from Initial GATS Offers (2005 ) Supply services of office support personnel Unbound: Australia, Brazil, China, India, EC (majority of MS), Japan Other business services n.e.c. Unbound: Australia, Brazil, China, India, EC (all MS), Japan, USA, etc. • Only few sectors where some Members made commitments • on other categories or • at the higher two-digit level • Few updates to incorporate elements of CPC 1.1 classification updates or deliberations in the Committee on Specific Commitments

21. 4) Other issues • Transparency • Domestic regulation -applicable jurisdiction, -data privacy issues • Mutual recognition • Government procurement • Taxation.

22. Bibliography • Mattoo, A and Wunsch-Vincent, S (2004) ‘Pre-Empting Protectionism in Services: The WTO and Outsourcing’, Journal of International Economic Law, vol 7, no 4, Dec 2004, pp 765-801 • OECD (2005), Growth in Services: Fostering Employment, Productivity and Innovation, OECD Services Economy Project, Directorate for Science, Technology and Industry • Wunsch-Vincent, Sacha (2005): The WTO, the Internet and Digital Products, Oxford: Hart Publishing (www.hart.oxi.net/bookdetails.asp?id=810&bnd=0)