Role of Developing Countries in Services Negotiations: Offensive or Defensive The Case of India by Arpita Mukherjee Developing Countries & Services Negotiations 6-7 June, 2006

25 years of ICRIER - Linking India to the World Economy Services sector & India Dominant sector – contributes significantly to GDP (over 50 %) and employment Services exports account for around 40% of total exports World trade in commercial services increased by 11 % to 2.4 trillion in 2005 India’s share in world trade of commercial services is increasing at a fast pace Relative ranking of India as exporter of commercial services improved significantly from 34 in 1995 to 15 in 2004 and 10 in 2005 Share of India’s export in total exports of commercial services was 2.8% in 2005

25 years of ICRIER - Linking India to the World Economy Services sector & India Shift from traditional exports such as transport and travel to newer areas such as software, health Increase in cross-border trade via new technologies- telemedicine, call centres, medical and legal transcriptions, outsourcing services, on-line services, etc. Exporter of knowledge based services and importer of infrastructure services Significant development in sectors such as telecommunication

25 years of ICRIER - Linking India to the World Economy India’s Negotiating Position Performance and global competitiveness of the sector determines government’s negotiating position Negotiating position changed since the Uruguay Round India now has an offensive interest in services negotiations Different from India’s position in agriculture and NAMA Why offensive? India has autonomously liberalised most of the service sectors Need for infrastructure investment Exports increased - Indian service providers are facing several barriers in markets of export interest Limited gains in areas of export interest in Uruguay Round – Mode 4 Focused on liberalisation of trade through Mode 4 and Mode 1

25 years of ICRIER - Linking India to the World Economy What India wants in Mode 4? Commitments in categories of CSS/IP delinked from commercial presence Uniformity in Mode 4 categorization Removal/reduction in ENT/labour market test Exemption of social security Increased duration of stay and possibility of renewal Abolition of quota Not using absolute wage parity as a precondition Allow intra firm labour mobility Separate temporary from permanent movement Improve transparency in immigration and labour market regulations and in applications of limitations Disciplining Domestic Regulation

25 years of ICRIER - Linking India to the World Economy What India wants in Mode 1? Commitments in Mode 1 across a wide range of commercially meaningful sector/sub-sectors for professionals services, computer related services, health services, education, etc. Similar commitments wherever possible for Modes 1 and 2 Ensure that commitments address the inadequacy of GATS classification to cover all Mode 1/2 services and takes into account technological developments in future

25 years of ICRIER - Linking India to the World Economy Pushing Ahead Offensive Interest India is a major player in the services negotiations India’s revised offer in August 2005 shows significant improvements over initial offer – one of the best revised offers India supported complementary approach to negotiations India is in favour of a prescribed and qualitative approach and not a quantitative one India supported plurilateral negotiations Address Domestic Regulation related barriers

25 years of ICRIER - Linking India to the World Economy Achievements So Far…. Some improvement in horizontal offers in Mode 4 Expanded to include contractual service suppliers, independent professionals, graduate trainees (EU offer) Requirement of economic needs and labour market tests removed/relaxed for intra-corporate transferees, professionals, business visitors (Canada, EU) Period of stay extended for business visitors, executives, senior managers, specialists (Canada, New Zealand) Clarified definitions of service provider categories and associated qualification and training requirements Some expansions in Mode 1 commitments Annex C of Hong Kong Ministerial Text addresses our some of our concerns in Modes 1 and 4

25 years of ICRIER - Linking India to the World Economy Annex C : Hong Kong Ministerial Text In Modes 1 and 2, members should undertake commitments at existing levels of market access on a non-discriminatory basis Remove the requirement of commercial presence in Mode 1 In Mode 4, new or improved commitments on the categories CSS (Contractual Services Suppliers), IP (Independent Professionals) delinked from commercial presence and new improved commitments in ICT (Intra-Corporate Transferees) & BVs (Business Visitors). In Mode 4, removal/substantial reduction of ENT and indication of the duration of stay and possibility of renewal Develop disciplines on Domestic Regulation

25 years of ICRIER - Linking India to the World Economy Plurilateral Negotiations Complimentary approach to enhance market access commitments Brings together a critical mass of developed and developing countries – around 35 countries are involved in discussions Plurilateral requests have been made in 16 sectors Requests have been made in all four modes and MFN exemptions Requests are mostly made by developed economies - US and EU made requests in 12 sectors each, Japan in 13 sectors Target groups are developing countries – Philippines, India, Malaysia, South Africa, Brazil India received requests in 14 sectors, MFN exemptions for audio-visual services

25 years of ICRIER - Linking India to the World Economy Plurilateral Requests made by India India is the coordinator of Mode 1/2 and Mode 4 and cosponsor of requests in computer and related services and architecture, engineering and integrated engineering Modes1/2 Made jointly with Chile, Mexico, New Zealand, Pakistan, Singapore, etc. to both developed and developing countries - US, EC, Canada, Australia, Brazil, Argentina, China, Philippines, Malaysia, etc. Full commitments in wide range of sectors/sub-sectors Commitments are sought at two digit level for certain sectors such as computer related services to take into account technological developments Commitments to reflect commercially meaningful opportunities

25 years of ICRIER - Linking India to the World Economy Plurilateral Requests made by India Cont……. Mode 4 Made jointly with developing countries ( Argentina, Brazil, Chile, China, Mexico, Pakistan, etc.) to developed countries (US, EC, Australia, Canada, Japan, etc.) Sought new/improved commitments in - CSS and IP delinked from commercial presence Clarifies definitions and categories for CSS/IP Wage parity should not be precondition for entry ENT should be removed/substantially reduced Duration of stay for one year or for duration of contract (if longer) with provision for renewal Transparency in Mode 4 commitments

25 years of ICRIER - Linking India to the World Economy Plurilateral Requests made by India Cont……. Computer and Related Services Made jointly with developed and developing countries - Australia, Canada, US, EC, Chile, Mexico, Pakistan, etc. Made to Argentina, Brazil, China, Indonesia, Thailand, Egypt, Philippines, South Africa, etc. Full MA and NT commitments in Modes 1,2 & 3 and commitments in Mode 4 in accordance with Annex C

25 years of ICRIER - Linking India to the World Economy Response to Requests Received India is a serious player in plurilateral negotiations Indicated that it can meet requests Substantially in certain sectors such as construction and related engineering services, and maritime transport services Partially in sectors such as energy, telecommunication Difficult to meet requests in sectors such as Distribution (retail), legal services, audio-visual services India has already made an ambitious revised offer - whether India would improve it or not would depend upon what it get in return in areas of export interest

25 years of ICRIER - Linking India to the World Economy Issues and Concerns How to balance offensive and defensive interests? Domestic reforms requirements - in certain areas the regulatory regime is still evolving Agriculture vis-à-vis services India’s major trading partner, the US, have not shown much interest in liberalizing Mode 4 The US has indicated that India, Brazil and ASEAN countries are target countries. Target sectors are telecommunication, computers, express delivery, energy, audio-visual and distribution services – these are sensitive sectors for India

25 years of ICRIER - Linking India to the World Economy Issues and Concerns Cont……. Will there be meaningful liberalisation? It is likely that developed countries may meet Mode 1 request Some developed countries would partially meet Mode 4 request How to address Domestic Regulation related barriers? Working together with other developing countries to push ahead the negotiations

25 years of ICRIER - Linking India to the World Economy Thank You!