Services Negotiations in Doha Round:

Concerns of South Asia

WTO Doha Round and South Asia: Linking Civil Society with Trade Negotiations

9-10th March 2005, Colombo, Sri Lanka

ByPranav Kumar

CUTS Centre for International Trade, Economics & Environment, India

Email: citee@cuts-international.org

Presentation Coverage

Global trade in services Services sector in South Asia A recap of the services negotiation in WTO Current status of services negotiation in WTO South Asian strategy in the Doha round South Asia’s major interests

Global Trade in Services (some features)

Trade in services has grown faster than merchandise

60% of global output30% of global employment20% of global tradeWorld services trade growth – 155%

between 1990-2002; mfg. – 97% and Ag. – 40%

Global trade in services (contd.) The composition of FDI has shifted

towards services:Early 1970s – one-quarter of the world

FDI1990 – less than one-half2002 – two-third of total FDIThe composition of services FDI is

also changing

Global Trade in Services (contd.)Developing countries’ share has increased: In last 15 years - a four fold increase in

services export from developing cts. Increase in share in global services exports –

14% in 1985-89 to 20% in 2000. Share in global outward FDI in services

climbed from 1% in 1990 to 10% in 2002.

Global Trade in Services

Holds an immense potential in terms of further expansion of world trade:

By 2050 the world services exports would exceed merchandise

In case of USA this situation would come much earlier – by 2037

Global Trade in Services

Developing countries likely to benefit more: Global gain of $260bn p.a. by eliminating all post UR

barriers – 1/2 of it from services (Dee et al 2000). Benefits vary from under 1% to over 50% of GDP (GEP

2002, WB) Significant gain for DCs – 1.6% (India) to 4.2% of GDP

if tariff-equivalents of protection cut by 1/3 in all countries (Chadha et al 2000)

Increased developed countries’ quotas by 3% of their labour force generates gains of $150bn p.a. (Winters et al 2002)

Services Sector in South Asia

Commonalities: Important sector in terms of its contribution

to GDP – ranging between 40-50 %. Second most important sector after

agriculture in providing employment Remittances – South Asia is the second

largest remittance recipient area (20%) Greatly endowed in semi-skilled and

unskilled labours

Services Sector in South Asia (contd.)

Differences: Except India and Sri Lanka other three countries

witnessed a decline in their services export in post WTO period.

Exports of commercial services from South Asia, 1993-03

0

5000

10000

15000

20000

25000

30000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Years

Mil

lio

n d

oll

ars

Bangladesh

India

Nepal

Pakistan

Sri Lanka

Services Sector in South AsiaDifferences: B’desh and Pak are net importers while India,

S.Lanka, Nepal have trade surplus.

Services Exports and Imports in $mn, 2003

Countries Exports Imports Net trade

India 25043 21593 3450

Nepal 267 197 70

Sri Lanka 1385 1003 382

Pakistan 1485 3095 (-)1610

Bangladesh 404 1676 (-)1272

Services Sector in South AsiaDifferences:Except India, others have advantage

only in mode 4. India’s interest lies in mode 1 and 2 in addition to Mode 4.

Services Negotiations in the WTO

Initially many countries were skeptical and opposed

High degree of flexibility – in rules and market access

UR only a beginning; GATS required more negotiations

Further negotiations started in 2000 End of 1st Phase In March 2001 – adoption of

“negotiating guidelines and procedures” DDA and July Package

March 2001 “Negotiating Guidelines

and Procedures” Adoption of “request-offer” approach for negotiating new

specific commitments on: National treatment Market access Additional commitmentsMandate members to continue negotiations on

“outstanding issues”: Emergency Safeguard Mechanism (ESM) Disciplines on domestic regulation Disciplines on govt. procurement and subsidies

Services in Doha Dev. Agenda

March 2001 guidelines as the basis for continuing the negotiations

To pursue Art. XIX objective of “progressively higher levels of lib. of trade in services”.

Flexibility for DCs - freedom to open fewer sectors; progressive ext. of market access

The mandated neg. was supposed to conclude on 1 January 2005.

Services in “July Package”

Fresh deadline for submission of revised offers

Stress on high-quality offers, particularly in sectors and modes of export interest to DCs

Special attention to be given to LDCs Emphasis on mode 4 To intensify efforts on rule-making under

GATS Targeted technical assistance to DCs

Current Status of Negotiations

“The services negotiations are in a bad situation. If there isn’t a decent services package at the end of the day, it’s very difficult to imagine any meaningful outcome on other items”

---- Hamid Mamdouh, Director of WTO Trade in Services Division“What we have on table is very poor. We have a daunting

task over the next few months.” ---- Alejandro Jara, C’man of CTSSS

Current Status of Negotiations

Nearly two years after the deadline for countries to make initial offers, only 47 have submitted

Most of the offers put forward to date are horizontal in nature and lack sectoral commitments

The three most popular service sectors in regards to improved offers are – financial, telecommunication and business

Current Status of Negotiations

USA expressed its inability to table a better offer in Mode 4.

Only in the area of domestic regulation some momentum has built up.

Before the May 2005 deadline for first or revised offers and the next services cluster in June several informal meetings have been planned.

A special session on LDCs shall be held in next services cluster.

South Asia’s Strategy in Doha Round

India has been very proactive. Made its initial conditional offer in January 2004

Sri Lanka also made its initial offer in September 2003.

Bangladesh and Nepal are exempt from making any offers.

Pakistan is yet to make its initial offers.

India’s Strategy in Services Negotiations

Probably the first DCs to make a comprehensive submission on Mode 4 in Nov. 2000

Offered to undertake extensive commitments under Mode 1 & 4

substantially improved access to some critical service sectors.

India signed a joint statement with 15 other countries urging CTSSS to accelerate services negotiations

South Asia’s Major Interests

India – Mode 1, 2 & 4Sri Lanka and Nepal – Mode 2 & 4Pakistan and Bangladesh – Mode 4

Major Hurdles Under Different Modes

of Supply Mode 4: Economic Needs Test Strict visa procedures Non-recognition of professional qualifications Imposition of discriminatory standards or

burdensome licensing requirements Payment of social security without corresponding

benefits Requirement of registration with or membership

of professional organisation

Major Hurdles Under Different Modes

of Supply Mode 2:US federal or state govt. reimbursement

of medical expenses is limited to licensed, certified facilities in the US or in a specific state.

Lack of long-term portability of health coverage for retirees from OECD countries.

Major Hurdles under Different Modes of Supply

Mode 1:Legislation by many US states to ban

outsourcing of government contractsEurope introduced a legal norms called

“Transfer of Undertakings and Protection of Employees” to protect workers in outsourced deals.

Systemic Problems in Services Negotiations

Negotiations proceed through a laborious process of requests and offers.

Definitional Issues in Mode 4 – lack of uniform definition, statistics not compiled according to mode 4 criteria, time-period of temporary movement