The Draft SADC Annex on Trade in Services UNCTAD Secretariat Sub-regional Conference on Improving Industrial Performance and Promoting Employment in SADC Gallagher Estate 6-8 December 2006

The Growing Importance of Services Services are becoming the largest sector in most economies They are important contributors to GDP In 2002 services contributed on average: - 72% of GDP in industrialized economies - 49% of GDP in developing countries (DCs) They also contribute largely to employment (including of women)

The Growing Importance of Services (2) Services play a key role in infrastructure building, competitiveness and trade facilitation They are also vital inputs into other goods and services The potential gains from more open services trade are greater than those from liberalizing goods

Infrastructure Services Transport, logistics and distribution services are crucial for moving goods and services from one country to another Business, telecom and financial services reduce transaction costs and support trade The challenge is to determine how best to ensure the provision of these services to the economy (options range from subsidizing these sectors to opening them to participation by domestic and foreign firms) Situation is similar in the case of public interest/essential services (ensuring access to such services is a means for achieving the MDGs)

Services Trade in Africa DCs, including Africa, remain net importers of commercial services Africa’s share of world trade in services dropped from more than 5 % in 1980 to around 2% in 2003

Potential Benefits from Services Trade Liberalization in SADC Region Trade in services can contribute to: enhancing economic growth and increasing living standards in the SADC region, the development of domestic services capacities, achieving the MDGs by contributing contribute to social development (education and health) and poverty reduction, making merchandise exports more competitive, and promoting structural change of regional economies

The Mandate for Services Liberalization in the SADC Region The mandate for negotiating trade in services in SADC stems from Article 23 of the SADC Trade Protocol: 1.Member States recognise the importance of trade in services for the development of the economies of SADC Countries. 2. Member States shall adopt policies and implement measures in accordance with their obligations in terms of the GATS, with a view to liberalising their services sector within the Community.

The Mandate for Services Liberalization (2) Main GATS obligations include: Most-favoured nation treatment (Article II GATS) - Article V (Economic Integration) allows countries to derogate from the MFN principle under certain conditions Countries’ specific commitments for liberalization in different services sectors and modes of supply

The SADC Approach for Services Liberalization The 1st SADC TNF meeting on Trade in Services was held in Lesotho, in June 2000, the 7th TNF was held in Mauritius in July 2006 A Draft Annex (to the Trade Protocol) on Trade in Services was prepared in 2002 Once the Draft Annex is adopted negotiations on progressive liberalization should be conducted in the Trade Negotiating Forum (TNF)

The SADC Approach for Services Liberalization (2) Three track implementation plan: GATS Plus approach (commitments in the six priority areas should be the starting point) SADC Plus approach (building on work already undertaken by the relevant sector coordinating units dealing with services sectors) Consolidation of the two approaches to develop a regional negotiating strategy

The Draft SADC Annex on Trade in Services The Draft Annex largely uses the GATS as a model It defines trade in services according to the 4 modes of supply as defined by the GATS The issue of coverage (whether the annex applies to all sectors) is still not final It refers to measures taken by central, regional or local governments and authorities

The Draft SADC Annex (2) The provision on market access is drafted on the GATS model (positive list approach and no ‘reservations’ allowed unless clearly indicated in Members’ lists of commitments) Services liberalization is to be progressive (according to a liberalization calendar) No limitations are envisaged for national treatment The negotiations will take into account the special needs and circumstances of least developed countries

The Draft SADC Annex (3) In principle 3 years following the adoption of the Annex the TNF shall establish the necessary steps for the negotiation of mutual recognition agreements relating to requirements, qualifications, licences, and other regulations The draft Annex seeks to promote investments in services (by providing for the development of a legal framework/model laws, regulation for investments as well as mechanisms for joint investments (in particular with SMEs))

The Draft SADC Annex (4) The SADC Draft Annex is now being reviewed by Member States for formal adoption The question was raised whether an Annex to the Trade Protocol is the adequate legal form The impact of other SADC protocols affecting trade in services should be kept in mind

Other Relevant Work on Trade in Services in the SADC Region National workshops to raise awareness on services trade and services negotiations Assessment of Trade in Services (in 6 sectors) - SADC-wide exercise - SADC Members States that are also members of COMESA will also benefit from assessment work undertaken in COMESA Review of the implementation of the protocols affecting trade in services

Other Relevant Work on Trade in Services (2) Assessment undertaken will consist of: Collection of law and regulations affecting trade in services Questionnaires covering policy issues, market structure and market performance in the different services sectors National studies Regional study

Conclusions Ensuring the positive impact of liberalization at regional and multilateral levels will require a clear understanding of the specificities of the services sectors and of the relationship between sectors The importance of services is double: economic activities in their own right but also inputs to other sectors The private sector has a key role to play in the elaboration of policies for the sector (including in the assessment exercise)

Thank you for your attention