South continues objection to services 'targets' in Ministerial text

Many developing countries continued to raise objections to the inclusion of "numerical targets and indicators" as a negotiating approach in a revised text on services for the Ministerial Declaration for the WTO's Hong Kong conference.

The objections were raised by many developing countries at an informal meeting of the WTO's Council for Trade in Services held on 24 October.

A new draft of a Ministerial text (not only a list of elements) will be presented by the Chair of the services negotiations, Ambassador Fernando de Mateo of Mexico, at a services meeting on 27 October, while the EU will also present a major proposal.

"Numerical targets and indicators" is the latest term being used by advocates of a new negotiating approach in services, in which WTO members will be required to make liberalisation commitments under the GATS (General Agreement on Trade in Services) in at least a specified minimum number of sectors.

The proposal (initially termed "benchmarking" and "common baseline" as well as "complementary multilateral approach") is being advocated mainly by developed countries, with the aim of requiring developing countries to commit to open up their services markets to their transnational services firms.

At present, developing countries have the flexibility under the GATS and the services negotiating guidelines and procedures (of 2001) to choose their own rate and extent of liberalisation, and in sectors of their choice.

At Monday's meeting, the Chair presented a revised version of his "Possible elements for a draft Ministerial text on services."

Despite criticisms made by a wide range and number of developing countries when he presented his first draft at the informal services meeting on 17 October, the Chair continued to include "numerical targets and indicators" as well as "multilateral approaches (e. g. qualitative parameters relating to specific measures and/or modes of supply") in the section on "Approaches" in the revised text.

Several countries and groupings, including Brazil, the Philippines (speaking for many ASEAN countries), Rwanda (speaking for the LDC Group) and Barbados (speaking for many Caribbean countries), Egypt, Indonesia, Malaysia, Bolivia and the Dominican Republic, reiterated their position that it was inappropriate to include "numerical targets and indicators" in the list of elements for the text.

The Chairman, however, continued with his position that proposals that had been made by some members, and which he included in the list, could not be deleted.

Many developing country delegates, speaking privately outside the meeting, disagreed with this approach. With such a large number of developing countries opposed to the item, the Chairman should not have included it in a revised draft, as there was clearly no consensus and indeed strong opposition from many members, in their view.

Speaking on the "numerical targets and indicators" item, Brazil said it did not see the basis for continuing to have this on the list or to have further discussion on it, as so many members had spoken against its inclusion.

The Philippines, speaking for many ASEAN countries, reiterated their position that the "complementary" approaches were not compatible with the flexibilities and principles in GATS and the services guidelines. They requested the Chair to consider the objections raised by members to the complementary approaches as the proposals are unfair. The issues related to them should be given separate treatment.

Barbados (speaking on behalf of several Caribbean members) supported other members such as Brazil, the Philippines and Rwanda, in stating that the complementary approaches are problematic, and did not see any basis to carrying on the discussion on these items in the context of the Ministerial text.

Developed countries - including the EU, Japan, Australia and the US - continued to insist that the issues of "numerical targets" and "multilateral approach" be on the list.

At the end of the meeting, the Chair announced that he would produce a draft of a text (i. e. not merely a list of elements) at the services meeting on 27 October.

It is also understood that the EU will present a major paper, with suggestions for a text, by Thursday.

In the Chairman's revised list of elements, the main difference with the original list is the addition of a new section "Overall principles." The inclusion of this section had been advocated by Brazil at the previous meeting.

The principles include progressive liberalisation; respect for national policy objectives and level of development of individual Members; appropriate flexibility for individual developing countries; right of Members to regulate; facilitating the increasing participation of developing countries in services trade; recognition of LDCs' special needs, and that they are not expected to take on further commitments; recognition of the special situation of newly acceded Members; and preservation of the basic architecture of GATS.

Papers were also presented by India on multilateral qualitative parameters for the services negotiations (a revised version of its earlier paper first presented on 17 October), Pakistan et al (on systemic elements on quality of offers) and Mexico et al (on basic parameters for plurilateral request/offer negotiations).

The India and Pakistan (and others) papers were introduced during discussion on Objectives (item on modal or other specific multilateral objectives) in the Chair's list of elements.

The India paper said an important objective relates to qualitative improvements that members need to make in their offers to fulfill the collective ambition of high quality of offers.

It suggested a Chapeau to such qualitative parameters, that would mention that Members shall strive to ensure that new and/or improved commitments are meaningful by adhering to the following qualitative parameters to the greatest extent possible.

The extent of prescription and level of specificity for each of the qualitative parameters would be similar so as to maintain the right balance of interests across the membership. For each qualitative parameter, there should be appropriate flexibility for individual developing country members.

On Qualitative Parameters, India proposed that they be divided into two

categories: ( a) Modal parameters relating to each of the four modes of supply, and ( b) Cross cutting/horizontal issues relating to scheduling clarity, MFN exemptions and Economic Needs Tests.

On Modal parameters, the following were suggested: Mode 1 - recognizing the existing openness and absence of specific barriers across many sectors, commitments in such sectors to reflect such openness and non-discrimination.

Removal of existing requirements of commercial presence for such sectors.

Mode 2 - similar approach as in Mode 1. Further, similar commitments in Modes 1 and 2 except when there is specific need for differential commitments.

Mode 3 - enhancement [substantial] in the levels of foreign equity permitted; removal [substantial reduction] of economic needs tests; allow greater flexibility in the types of legal entity permitted.

Mode 4 - new/improved commitments particularly in categories de-linked from commercial presence like CSS and IP [with adequate sectoral coverage]; removal [substantial reduction] of ENT's for such categories; indication of the prescribed duration of stay along with possibility of renewal etc.

Improved commitments in already existing categories including ICT, BV and others based on similar parameters.

On Cross-cutting parameters, the following were suggested: ( a) [Substantial] reduction of existing MFN exemptions across all the modes of supply; ( b) Scheduling clarity in schedules of commitments particularly if specifically requested by other trading partners; and ( c) Economic needs tests in schedules of commitments to follow the guidelines relevant to ENT's contained in the scheduling guidelines.

In the paper on Systemic Elements on Quality of Offers (by Pakistan, China, Hong Kong, Customs Territory of Taiwan et al) the co-sponsors provided language on the element on multilateral objectives, as follows:

• Scheduling and classification: "With a view to ensuring the quality of specific commitments, Members shall ensure clarity, certainty, comparability and coherence in the scheduling and classification of specific commitments and shall adhere to the Guidelines for the Scheduling of Specific Commitments under the GATS (S/L/92) in doing so."
• Economic needs tests: "With a view to ensuring the legal certainty of market access - ( i) Members shall eliminate substantially all the economic needs tests across all modes of supply; ( ii) Members shall refrain from inscribing economic needs tests when making new commitments; and ( iii) Members shall specify any remaining economic needs tests clearly and sufficiently in accordance with the Guidelines for the Scheduling of Specific Commitments under the GATS (S/L/92)."
• MFN exemptions: "In recognition of the MFN principle as a cornerstone of the multilateral trading system and the GATS framework - ( I) Members shall substantially reduce their MFN exemptions; and ( ii) Members shall specify any remaining MFN exemptions clearly and sufficiently in respect of their scope and time-limit for expiry with a view to their complete elimination."

The paper by Mexico, Chile and others on Basic Parameters for Plurilateral Request/Offer Negotiations said it was not meant to be a position paper or legal text but a "work in progress." There were four parameters mentioned.

• Intensification of Request/Offer: The paper said negotiations for specific commitments using the request/offer approach on a plurilateral basis is consistent with GATS and the negotiating guidelines. Plurilateral negotiations can intensify the request and offer approach and supplement negotiations hitherto undertaken mainly on a bilateral basis.

They shall be based on specific interests and requests identified by Members in specific markets and such interests and requests shall be considered in the negotiations; and any specific commitments from such plurilateral negotiations are to apply on an MFN basis.

Bilateral request/offer will continue to be pursued in parallel. Nothing in plurilateral negotiations prevents any Member from making requests bilaterally or absolves any Member from addressing such bilateral requests.

• Collective Requests: Any groups of Members (with no minimum threshold on

number) may present collective requests in any specific sector/mode, identifying their objectives for negotiations and the Members to whom the requests are made, as the basis for plurilateral negotiations.

For each sector/mode, there can be different collective requests from different groups of Members. Collective requests should not be addressed to LDCs. Such requests could follow a various formats, e. g. model schedules, checklists, scheduling guides, etc. They shall be submitted by an agreed date, with appropriate flexibility for developing countries. They should be notified to the CTS SS.

• Plurilateral Negotiations: Members who have made collective requests in a specific sector/mode, together with Members to whom such requests have been made, shall meet to consider such requests. Members to whom such requests have been made shall respond on an individual basis. Participation shall also be open to any other interested Members.
• Process/Organization: Meetings could be organized with a view to facilitating participation by all, particularly experts, e. g. by clustering bilateral, plurilateral and any other open-ended meetings for the specific sector/mode at around the same time. In organizing such negotiations, the special situation of developing countries should be taken into account. The schedule of meetings should be notified to all Members and progress of such plurilateral negotiations shall be taken stock of in the Services Council Special Session.