role of developing countries in services negotiations: offensive or defensive the case of india by...

Role of Developing Countries in Services Negotiations: Offensive or Defensive

The Case of India by

Arpita Mukherjee

Developing Countries & Services Negotiations

6-7 June, 2006

25 years of ICRIER - Linking India to the World Economy

Services sector & India • Dominant sector – contributes significantly to GDP

(over 50 %) and employment

• Services exports account for around 40% of total exports

• World trade in commercial services increased by 11 % to 2.4 trillion in 2005

• India’s share in world trade of commercial services is increasing at a fast pace

• Relative ranking of India as exporter of commercial services improved significantly from 34 in 1995 to 15 in 2004 and 10 in 2005

• Share of India’s export in total exports of commercial services was 2.8% in 2005


Services sector & India• Shift from traditional exports such as transport and

travel to newer areas such as software, health

• Increase in cross-border trade via new technologies- telemedicine, call centres, medical and legal transcriptions, outsourcing services, on-line services, etc.

• Exporter of knowledge based services and importer of infrastructure services

• Significant development in sectors such as telecommunication


India’s Negotiating Position • Performance and global competitiveness of the sector

determines government’s negotiating position • Negotiating position changed since the Uruguay Round • India now has an offensive interest in services

negotiations • Different from India’s position in agriculture and NAMA• Why offensive?

• India has autonomously liberalised most of the service sectors

• Need for infrastructure investment• Exports increased - Indian service providers are facing

several barriers in markets of export interest • Limited gains in areas of export interest in Uruguay

Round – Mode 4• Focused on liberalisation of trade through Mode 4 and

Mode 1


What India wants in Mode 4? • Commitments in categories of CSS/IP delinked from

commercial presence

• Uniformity in Mode 4 categorization

• Removal/reduction in ENT/labour market test

• Exemption of social security

• Increased duration of stay and possibility of renewal

• Abolition of quota

• Not using absolute wage parity as a precondition

• Allow intra firm labour mobility

• Separate temporary from permanent movement

• Improve transparency in immigration and labour market regulations and in applications of limitations

• Disciplining Domestic Regulation


What India wants in Mode 1? • Commitments in Mode 1 across a wide range of

commercially meaningful sector/sub-sectors for professionals services, computer related services, health services, education, etc.

• Similar commitments wherever possible for Modes 1 and 2

• Ensure that commitments address the inadequacy of GATS classification to cover all Mode 1/2 services and takes into account technological developments in future


Pushing Ahead Offensive Interest• India is a major player in the services negotiations

• India’s revised offer in August 2005 shows significant improvements over initial offer – one of the best revised offers

• India supported complementary approach to negotiations

• India is in favour of a prescribed and qualitative approach and not a quantitative one

• India supported plurilateral negotiations

• Address Domestic Regulation related barriers


Achievements So Far….• Some improvement in horizontal offers in Mode 4

• Expanded to include contractual service suppliers, independent professionals, graduate trainees (EU offer)

• Requirement of economic needs and labour market tests removed/relaxed for intra-corporate transferees, professionals, business visitors (Canada, EU)

• Period of stay extended for business visitors, executives, senior managers, specialists (Canada, New Zealand)

• Clarified definitions of service provider categories and associated qualification and training requirements

• Some expansions in Mode 1 commitments

• Annex C of Hong Kong Ministerial Text addresses our some of our concerns in Modes 1 and 4


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 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

• Develop disciplines on Domestic Regulation


Plurilateral Negotiations • Complimentary approach to enhance market access

commitments

• Brings together a critical mass of developed and developing countries – around 35 countries are involved in discussions

• 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


Plurilateral Requests made by India

India is the coordinator of Mode 1/2 and Mode 4 and cosponsor of requests in computer and related services and

architecture, engineering and integrated engineering

• Modes1/2

• Made jointly with Chile, Mexico, New Zealand, Pakistan, Singapore, etc. to both developed and developing countries - US, EC, Canada, Australia, Brazil, Argentina, China, Philippines, Malaysia, etc.

• Full commitments in wide range of sectors/sub-sectors

• Commitments are sought at two digit level for certain sectors such as computer related services to take into account technological developments

• Commitments to reflect commercially meaningful opportunities


Plurilateral Requests made by India Cont…….

• Mode 4

• Made jointly with developing countries ( Argentina, Brazil, Chile, China, Mexico, Pakistan, etc.) to developed countries (US, EC, Australia, Canada, Japan, etc.)

• Sought new/improved commitments in - CSS and IP delinked from commercial presence

• Clarifies definitions and categories for CSS/IP

• Wage parity should not be precondition for entry

• ENT should be removed/substantially reduced

• Duration of stay for one year or for duration of contract (if longer) with provision for renewal

• Transparency in Mode 4 commitments


Plurilateral Requests made by India Cont…….• 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


Response to Requests Received• India is a serious player in plurilateral negotiations

• Indicated that it can meet requests

• Substantially in certain sectors such as construction and related engineering services, and maritime transport services

• Partially in sectors such as energy, telecommunication

• Difficult to meet requests in sectors such as Distribution (retail), legal services, audio-visual services

• India has already made an ambitious revised offer - whether India would improve it or not would depend upon what it get in return in areas of export interest


Issues and Concerns• How to balance offensive and defensive interests?

• Domestic reforms requirements - in certain areas the regulatory regime is still evolving

• Agriculture vis-à-vis services

• India’s major trading partner, the US, have not shown much interest in liberalizing Mode 4

• The US has indicated that India, Brazil and ASEAN countries are target countries. Target sectors are telecommunication, computers, express delivery, energy, audio-visual and distribution services – these are sensitive sectors for India


Issues and Concerns Cont…….

• Will there be meaningful liberalisation?

• It is likely that developed countries may meet Mode 1 request

• Some developed countries would partially meet Mode 4 request

• How to address Domestic Regulation related barriers?

• Working together with other developing countries to push ahead the negotiations


Thank You!

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