General Agreement on Trade in Services by Arpita Mukherjee Workshop on WTO-related issues May 1-3, 2006

25 years of ICRIER - Linking India to the World Economy An Overview of GATS The Uruguay Round introduced services into the multilateral trading system GATS : progressive liberalisation of services trade through successive Rounds of negotiations (every five year Article XIX (I)) Four modes of supply of services Second Round of negotiations began in January 2000 Became a part of the Doha Round - Development Round Negotiating Agenda in services covers Market Access Concessions Rule Making

25 years of ICRIER - Linking India to the World Economy Services Negotiations in the Doha Round Slow progress of the negotiations – expectations were high but the response is lukewarm Request-Offer Approach - Poor Quality of offers Some developing countries (India, Brazil, China) have emerged as important players in services negotiations Others are defensive about opening up the service sectors India is demanding greater market access in Modes 1 & 4 Complementary approach to negotiations – numerical targets and benchmarking, plurilateral negotiations Friends Group

25 years of ICRIER - Linking India to the World Economy Hong Kong Ministerial Declaration The Final Text received mixed reactions Developed countries felt that ambition levels have been diluted Some developing countries felt that they have been dragged into plurilateral negotiations Hong Kong Declaration outlined the need to intensify negotiations towards achieving meaningful liberalisation, with appropriate flexibility to individual developing countries Annex C laid down objectives which members should follow in making new and improved commitments

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 3, remove/reduce restrictions such as foreign equity participation and ENT (Economic Needs Test) and allow greater flexibility on the type of legal entity 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

25 years of ICRIER - Linking India to the World Economy Annex C : Hong Kong Ministerial Text Cont……. Removal/reduction of MFN exemptions Clarification of remaining MFN exemptions Intensify negotiations on rule making and develop disciplines on domestic regulation Plurilateral negotiations in addition to bilateral negotiations Time lines Plurilateral requests - February 28, 2006 Second round of revised offers - July 31, 2006 Final draft schedules of commitments - 31 st October 2006 LDCs are not expected to undertake new commitments

25 years of ICRIER - Linking India to the World Economy Plurilateral Negotiations Brings together a critical mass of developed and developing countries Around 35 countries are participating in the negotiations 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 Negotiations Cont……. Pakistan received requests in sectors such as energy, environment, construction, telecommunication and financial services Sri Lanka received requests in sectors such as architectural and engineering services, education services and logistic services Some developing countries also made requests India and Pakistan in computer related services and Modes1/2, Mode 4 Pakistan has also requested for removal of MFN exemptions Sri Lanka did not make any requests India, Pakistan received requests in Mode 3

25 years of ICRIER - Linking India to the World Economy Requests of major players, such as US and EU, show that there are no major changes in the negotiating strategy EU expressed reservation in participating in any request addressing audiovisual and cultural services, education, etc., while US is not keen to open up transport sectors All requesting members were also deemed recipients, except in Mode 4 Sectors and sub-sectors are clearly defined in the plurilateral requests Sensitivities of making commitments in social sectors have been highlighted (private education services) The Friends Group are not necessarily the group making the plurilateral requests in the concerned sectors Plurilateral Negotiations Cont…….

25 years of ICRIER - Linking India to the World Economy Plurilateral Requests in Different Sectors In Modes 1 and 2, countries have asked for removal of all market access barriers, removal of citizenship and residency requirements and removal of requirements of commercial presence In Mode 3, requests focused on removal/reduction of foreign equity restrictions, ENT, removal of restrictions on the type of legal entity, removal of residency conditions, etc. In Mode 4, sectoral requests focused on removal of ENT, removal of wage parity requirements, etc. In sectors (air transport, environmental services) requiring specialised skills, countries have asked for sector-specific Mode 4 commitments

25 years of ICRIER - Linking India to the World Economy Plurilateral Requests in Mode 4 Mode 4 requests are made by developing countries such as Argentina, Brazil, Chile, China, Mexico, Pakistan, etc. Target group is developed countries (US, EC, Australia, Canada, Japan, etc.) Sought new/improved commitments in - CSS and IP delinked from commercial presence The request lists out common categories of interest to members of the group along with certain common parameters and market access (MA) and national treatment (NT) conditions that are needed to be attached to each of them for effective MA in Mode 4 Transparency in Mode 4 commitments

25 years of ICRIER - Linking India to the World Economy Plurilateral Requests in Mode 1/2 Cont……. Made jointly with Chile, Mexico, New Zealand, Pakistan, Singapore, etc. Made to both developed and developing countries - US, EC, Canada, Australia, Brazil, Argentina, China, Philippines, Malaysia, etc. A list of sectors/sub-sectors have been provided in which trading partners are requested to consider taking full MA and NT commitments

25 years of ICRIER - Linking India to the World Economy Plurilateral Requests in some sectors 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 Telecommunication Services Requesting members are largely developed countries Call for commercially meaningful coverage of sub-sectors (esp. voice and data transmission services and leased circuit services) Removal of substantial MA restriction in Mode 1, no NT restrictions

25 years of ICRIER - Linking India to the World Economy Services Negotiations Services Cluster March 27-April 7 Discussions centered around Exchange of information about domestic policy regime Seeking clarifications Explaining the extent to which countries could meet the requests Likely to be a mini-Ministerial in mid-May

25 years of ICRIER - Linking India to the World Economy Issues and Concerns for SAARC Countries How to respond to plurilateral requests in sensitive sectors? Even large developing countries such as India are not in a position to make offers in certain sectors as the regulatory regime is evolving – India may not be able to meet the requests in certain sectors such as legal and education Many developing countries pointed out that participation in plurilateral negotiations should be voluntary How to enhance market access in developed countries? US has already indicated that there will not be much expansion on the initial offer in Mode 4 How significant is the Mode 4 liberalisation? Plurilateral negotiations are tilted in favour of developed countries

25 years of ICRIER - Linking India to the World Economy Issues and Concerns for SAARC Countries cont…… If a country makes plurilateral request in a particular sector, is it required to undertake commitments in that sector? If negotiations in other areas such as agriculture does not progress, can there be meaningful liberalisation in services? Concerns of LDCs As majority of the LDCs are not participating in the plurilateral negotiations, will their interest be addresses – case of Mode 4 Implementation of LDC Modalities Limited financial and technical capacity There is wide diversity among SAARC nations – how to derive a common developing strategy?

25 years of ICRIER - Linking India to the World Economy What should SAARC Countries do? Intensify domestic consultation with stakeholders Identify sectors in which they can undertake commitments Identify regulatory deficiencies and initiate reforms Link commitments to regulatory reforms Push for disciplining domestic regulations – MRA within SAARC? Enhance cooperation and collaboration among SAARC members Technical Assistance within SAARC countries

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