THE CURRENT SERVICES ROUND

1. THE CURRENT SERVICES ROUND

2. Services: General perception • NOT TRADABLE AND NOT STORABLE • Simultaneity of production and consumption • Role of local establishment • STRONG GOVERNMENT INVOLVEMENT • Existence of natural monopolies, public service obligations, etc. • Infrastructural importance of services (transport, telecom, etc.) • Role of non-economic objectives (social, cultural, safety) • INTANGIBLE • Quality criteria for services providers rather than for products • NO TARIFFS • Access conditions determined by regulation, quotas etc.

3. But... • Certain services - international transport and communication - have been traded for centuries • Services are supplied in conjunction with goods (finance, insurance, marketing, etc.) • Services have become tradable as a result of: • technical progress (e-banking, tele-medicine, distance learning) • government retrenchment • market liberalization and regulatory reform

4. Structure of GDP

5. Importance of Services Trade Limited role of services in total world trade (~ 20 % on BOP basis) but ... • more rapid growth than goods trade • GATS broader in coverage than BOP • role of services in trade facilitation

6. Services trade has grown faster in developing than in high-income countries Source: World Bank

7. Services trade is becoming more important for upper middle income countries Source: World Bank

8. Increasing importance of CBT, including for developing countries

9. GATS: Scope, coverage, definition • MEASURES AFFECTING TRADE IN SERVICES AT ALL GOVERNMENT LEVELS • ALL SERVICES(except governmental services and measures affecting air traffic rights) • FOUR MODES OF SUPPLY • Cross-border supply • Consumption abroad • Commercial presence • Presence of natural persons

10. Modes of supply EXAMPLE (Health) Tele-diagnosis from Country B into A A’s resident obtains hospital treatment in B Hospital operator from B has subsidiary in A Physician from B practices in A MODE 1. Cross-border Trade 2. Consumption Abroad 3. Commercial Presence 4. Movement of Natural Persons

11. Purpose of the GATS • Assists governments that want to reduce their trade barriers and/or consolidate reforms • Contributes to coordination of economic policy-making • Better access to foreign markets • Transparency and predictability of trading conditions • Efficient and impartial settlement of disputes

12. GATS: Key Obligations • Most-Favoured Nation (Article II) • Applies to all sectors • Obligations implying openness to international competition (Market Access and National Treatment) only apply in accordance with each Member’s schedule of commitments • Only in selected sectors • Subject to conditions and limitations inscribed

13. Starting point of the negotiations (‘progressive liberalization’ pursuant to Article XIX)

14. Pattern of Commitments: sectoral distribution

15. Pattern of commitments: sector coverage

16. Level of Treatment for Committed Sectors

17. Starting point: Applied Regimes • Actual regimes tend to be far more liberal in many countries than commitments suggest. • Widening gap between UR schedules and • schedules of recently acceded countries • access conditions negotiated under FTAs

18. Services Negotiations: Process and State of Play (Specific Commitments)

19. How Services Negotiations Work From the outset: • Essentially a bilateral process • Some key principles: • No sector or mode excluded a priori • Flexibility for developing countries • Starting point: existing commitments • No change in basic structure of the GATS

20. STATE OF PLAY (July 2006) INITIAL OFFERS: 71 Schedules (covering 95 Members*) REVISED OFFERS: 31 Schedules (covering 55 Members*) *Counting EC Members (EC 25) individually

21. Offers: Main features (I)

22. Offers: Main features (II)

23. Sub-Sectors Committed: Before and After Offers (all Members)

24. Offers: Main features (III) “Few, if any, new commercial opportunities would ensue for service suppliers. Most Members feel that the negotiations are not progressing as they should."[1] Chair of CTSS, July 2005 (TN/S/20)

25. Sobering Assessment: • Long delays • (initial target date: March 2003) • Modest achievements • (number of sectors and substance) • Uneven participation of developing • countries • Little change in MFN Exemptions • _____________________________________________________________________________ • Little progress in rules negotiations

26. How Negotiations Work • Since Hong Kong Ministerial: • Plurilateral request/offer process • LDCs not expected to undertake new commitments • No formula, but set of multilateral objectives per mode

27. Negotiating Objectives (I) Modes 1 to 3 (examples) • No requirement of commercial presence (mode 1) • Commitments at existing levels of access (modes 1 & 2) • Removal or substantial reduction of ENTs (modes 2 & 3) • Enhanced levels of foreign equity, more types of legal entity (mode 3)

28. Remaining Risks... • Contamination from AG & NAMA • Lack of political resolve • Exaggerated expectations(access abroad as a substitute for own reform) • Impact of regionalism in services

29. Reason for Hope, Nevertheless • Experience with previous trade rounds • Too much at stake • No credible alternative to WTO • Domestic liberalization pressure in (infrastructure-related) services (> competiveness of user industries, threat of industrial relocation)

30. WHAT NOW?