Controversial 'benchmarking' idea to dominate GATS talks?

By Martin Khor (TWN), 24 June 2005

The concept of 'benchmarking' is expected to be a major issue in the week of services negotiations starting on 27 June, as some developed countries put on the pressure on developing countries to make more commitments to liberalise their services sectors.

It is still not clear what exactly the proponents of 'benchmarking' are proposing. However, many developing countries have been sceptical about the concept, believingthat it is being used as an instrument to oblige them to open up more of their servicessectors and in more ways than they would otherwise like.

'Although we are still to get a concrete proposal on what the major countries exactlymean by benchmarking, we believe they want us to bind our present level ofliberalization through commitments in GATS (the General Agreement on Trade inServices),' said one developing country diplomat.

'This will take away the flexibility that we now have, of making bindingcommitments only when we are ready to do so. It will erode the concept ofprogressive liberalization, and the special treatment for developing countries, that wecan choose which sector and when and how much to commit to liberalise, withoutpressures.'

The diplomat also said that 'benchmarking' had never been agreed to as part of theDoha work programme mandate, nor had it been included in or even been part ofdiscussions on modalities.

He added that there is no need for new 'benchmarking' because the benchmarks forservices negotiations already exists, in the Guidelines and Procedures for theNegotiations on Trade in Services (which had been adopted by the GATS Council on28 March 2001).

The European Union is expected to be the major proponent advancing the'benchmarking' concept in the forthcoming week's negotiations.

It would appear that 'benchmarking'would be the equivalent in services to theadoption of a 'formula' approach applied in market access negotiations in agricultureand NAMA, in aiming to bind members to certain minimum commitments.

According to European NGO sources in Brussels, the European Commission hasindicated to EU member states that in its concept, benchmarking would be anegotiating tool that is 'complementary' to the main request/offer method.

Benchmarks as envisaged by the EC would have quantitative and qualitativeelements. It would also have a cross-sectoral approach and would differentiatebetween developed countries, developing countries and LDCs.

In the cross-sectoral approach, a certain number of key sectors would be selected forpriority targeting. WTO members would agree to make commitments in a numberof key sectors with major economic interest.

For example, if ten key sectors are agreed on, then developed countries would makecommitments in 8 or 10 sectors, developing countries in 5 or 6, and LDCs would beexempted but do whatever they can.

There would also be a 'qualitative' element in the EC approach. This would includean obligation to bind at least the status quo in the selected sectors and go beyond itin some of them. The flexibility for developing countries is that they will be requiredto 'go further' in fewer sectors than the developed countries.

According to the sources, the EC idea of benchmarking will also include specificmeasures to reduce horizontal limitations in members' existing GATS schedules.There would also be an obligation to reduce the current requirements related to eachmode of supply in a certain percentage of sectors.

The benchmarking exercise will be aided by the use of model schedules and sectoralunderstandings. It will also involve binding commitments.

The EC is expected to float its benchmarking concept at the services special session,and may try to get a reference or agreement to have 'benchmarking' as a modalityaccepted as part of the July General Council's text on 'first approximations'.

When benchmarking was brought up in previous services discussions as a possiblenegotiating method, it was received with some hostility by developing countrydelegations.

The benchmarking approach would, they believe, significantly alter the architectureof the GATS framework and remove a large part of the flexibility. At present,countries are able to choose whether they would like to make commitments inwhichever sectors, in which mode, and to what degree.

The 28 March 2001 Guidelines and Procedures, which are taken as the mainframework for the services negotiations, states (in the section on Objectives andPrinciples) that 'the negotiations shall take place within and shall respect the existingstructure and principles of the GATS, including the right to specify sectors in whichcommitments will be undertaken and the four modes of supply.'

In the section on modalities and procedures, paragraph 12 states that 'there shall beappropriate flexibility for individual developing country members for opening fewersectors, liberalizing fewer types of transactions, progressively extending marketaccess in line with their development situation, and when making access to theirmarkets available to foreign service suppliers, attaching to such access conditionsaimed at achieving the objectives referred to in Article IV.'

The benchmarking approach which is expected to be floated by the EC contradictsthe principle of respecting the existing GATS structure and principles. It would alsonot be in line with the modality of allowing 'appropriate flexibility' for developingcountries for making market access commitments in line with their developmentsituation.

Up to now, the GATS architecture, including its positive-list approach, has been seento have a positive aspect, in that members (especially developing countries) are givensome flexibility to choose whether to make commitments and if so, the timing, typeand level of commitment in each sector.

The benchmarking approach (involving the selection of 'key sectors', the proposedrequirement to bind in GATS existing liberalization (and then go further) and theproposed obligation to reduce horizontal limitations and current requirements inmodes of supply) would change the architecture and largely erode the existingflexibilities, especially for developing countries.