GATS Update: Differences emerge over draft services text

published 13 February 2008 updated 13 February 2008

Talks aimed at liberalizing the international trade in services under the WTO’s GATS agreement are moving at a slow but steady pace even as deep divisions remain on key issues, according to officials in Geneva.

The chair of the services negotiations, Fernando de Mateo of Mexico, admitted in early February that his attempt to find common ground amongst members in a draft GATS text has fallen short.

The development of a draft services text has been controversial from the start. Most Members agreed to participate in the process, although many – including Brazil, India, the African Group, the Association of Southeast Asian Nations (ASEAN), and the Small and Vulnerable Economies (SVE) group – expressed concern about the objectives of the draft. Cuba, Bolivia and Venezuela issued a joint statement opposing a text for services negotiations.

Many countries were unsure what the scope or purpose of the draft services text would be. Unlike the negotiations in agriculture and industrial goods where mathematical formulae in draft deals determine the degree of trade liberalization and tariff reduction, in services talks Members negotiate with one another over openings in specific sectors. Because no formulae for liberalization need to be developed, a draft services text would likely set out only general guidelines and schedules.

In January, a group of countries led by the EC, the United States, Japan, and Canada presented an outline of what they would like to see in the draft text. The group claims that talks to date have been disappointing and slow, and recommends that services be given the same priority as other areas of the Doha Round. They also recommend the draft services text urge Members to offer more market access commitments across more sectors with limited reservations.

On the other hand, the SVE group, in a separate note submitted to Ambassador de Mateo, argues that there should not be comparability among the services, agriculture and non-agricultural market access negotiations, and that negotiations must proceed cautiously. The SVE group also opposes “any attempts that propose to bind current levels” of trade liberalization in services.

Unable to bridge these differences, De Mateo is now indicating that he will issue a “report” that will outline points of agreement as well as areas of disagreement on a possible text. Members appear to agree on the need for a new date for the submission of revised GATS offers and, but are far apart on the level of ambition. The United States and the European Union, for instance, want Members to make services commitments based on the level of market opening. This idea is strongly opposed by by Brazil, China and India.

The latter issue will likely to come to a head as developed countries are also urging Members to hold a so-called “pledging” conference in which the key GATS players would indicate what specific commitments they are willing to make. Many developing countries are concerned industrialized nations will use the occasion to press them to lock-in their existing levels of services trade liberalization. This could, they say, limit their flexibility in setting GATS commitments.

Meanwhile, a revised text on GATS restrictions on domestic regulation was circulated to Members January 23. The text closely follows http://www.tradeobservatory.org/library.cfm?refID=98264" target="_blank">the last set of proposals from the chair of the working party on domestic regulation issued April 18, 2007. In particular, the latest draft retains the controversial requirement that Members ensure that certain regulations they adopt are objective and do not constitute “disguised barriers” to trade. If adopted, this would apply new restrictions on regulations governing qualification requirements and procedures, licensing requirements and procedures, and technical standards. EI has warned that the proposals are so broad sweeping that they could jeopardize a host of legitimate education regulations governing things such as the qualification requirements of teachers, and quality assurance and school accreditation procedures.

Meanwhile, plans are now being developed for a WTO ministerial meeting soon after the Easter Break to help achieve a breakthrough in the stalled Doha talks. At the end of January, WTO Director-General Pascal Lamy told heads of delegations that the ministerial should focus on reaching a deal on agriculture and NAMA only. However, the EC and U.S. are pressing for services to be included as well and other Members are pressing for additional issues to be added, indicating that Lamy will have difficulty in trying to focus the ministerial.

At the same time, political developments are dampening prospects for the conclusion of the Doha Round this year. While Lamy has outlined a schedule for the completion of talks by the end of 2008, many trade officials are now saying the timeline is far too optimistic. In the U.S., the lame-duck Bush administration has lost its trade promotion authority (TPA) and is unlikely to see it renewed by a Democratic-controlled Congress. TPA, or fast-track authority, prevents the U.S. Congress from amending legislation implementing trade agreements signed by the President, leaving many analysts to think no real breakthrough in the talks is possible until after the U.S. Presidential election and a new administration takes office.