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

Outline of Presentation 1.Virtues of the GATS 2.Market Reality: Globalised service production 3.The inadequacies of the scheduling framework and commitments 4.Other issues

1) Virtues of the GATS

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?

1)Globalised service production - Trade in intermediate services - Trade in new services

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 Outsourcing Customer Interaction Services, Reservations for Airlines, Subscription services, Payroll Services, Insurance Claims Adjudication 3. More Independent Professional or Business Services Human Resource Services, Finance & Accounting Services, Marketing Services, Product Design and Development

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

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

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.

Fragmentation of goods

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

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

8. A. Hospital services9311 Services delivered under the direction of medical doctors chiefly to in patients, aimed at health status of a patient. Services delivered under the direction of medical doctors chiefly to in patients, aimed at health status of a patient. 8. D. Other (not defined further) Example: hospital call centre or medical transcription Step one: Are these serviced explicitly listed under health services?

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? 1.F.Other Business Services F.k.87203Supply services of office support personnel Services consisting in supplying on a fee or contract basis to the clients, whether on a temporary or long term basis, office support personnel hired by the supplier, who pays their emoluments. Included are the provision of personnel such as secretaries, clerks, etc. F.t. Other Other business services Telephone answering services Services consisting in the provision of telephone answering services (eg, wake up services) Other business services n.e.c.

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

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 Hosting and IT infrastructure provisioning services Source: OECD (2004): Classifying ICT Services, DSTI/ICCP/IIS(2004)2 (7 April)

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 W : CPC : Manual on trade in services 2002: CPC : CPC 2.0

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. 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 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: 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.

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

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 on other categories or at the higher two-digit level 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 Few updates to incorporate elements of CPC 1.1 classification updates or deliberations in the Committee on Specific Commitments

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

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 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 (