The General Agreement on Trade in Services (GATS) negotiations:

Author: Scott Sinclair (ccpa@policyalternatives.ca)

First paragraph (Teaser):

The WTO's built-in services negotiations are proceeding expeditiously, although not as quickly as their strongest supporters such as the United States had hoped. Preparatory work on critical "technical" issues such as classification and revised scheduling guidelines is continuing. The General Agreement on Trade in Services (GATS) Secretariat has drafted a composite text of formal negotiating guidelines, which is currently circulating. The guidelines are to be finalized and adopted at the special session of the Council for Trade in Services from March 26-28, 2001. This key March "stock-taking" session is widely expected to launch the full market access phase of negotiations. Already, both the US and the EU have tabled initial, market access negotiating proposals at the talks in Geneva.

Rest of the text:

The WTO's built-in services negotiations are proceeding expeditiously,
although not as quickly as their strongest supporters such as the United
States had hoped. Preparatory work on critical "technical" issues such as
classification and revised scheduling guidelines is continuing. The General Agreement on Trade in Services (GATS) Secretariat has drafted a composite text of formal negotiating guidelines, which is currently circulating. The guidelines are to be finalized and
adopted at the special session of the Council for Trade in Services from
March 26-28, 2001. This key March "stock-taking" session is widely
expected to launch the full market access phase of negotiations. Already,
both the US and the EU have tabled initial, market access negotiating
proposals at the talks in Geneva.

While GATS negotiations are poised to shift into higher gear, their
outcome is closely, perhaps inextricably, linked to the fate of discussions
on the overall negotiating agenda of the WTO. Despite support from the
US corporate services lobby for pushing ahead independently, there are
significant differences among governments about whether the services
negotiations can be concluded ahead of, or in isolation from, a broader
round. There are also signs that WTO officials, corporate lobby groups
and some governments are becoming deeply concerned about growing
NGO and public scrutiny of the GATS. They have begun to vigorously
attack NGO critics of the GATS to thwart their campaign momentum.

DISCUSSION:

Although WTO work of high priority to developing countries, the so-
called "implementation agenda," is grinding, the "built-in" services
negotiations are proceeding expeditiously. The Quad, particularly the
European Commission and the US, are very active in the so-called
technical work on classification, scheduling guidelines and a range of
critical "rule-making" issues. Moreover, the two major trading powers
have already submitted initial negotiating proposals defining sectoral
market access objectives. (The US and EC proposals are posted on the
WTO web site; the URLS are appended to this note.)

There still remains a greater degree of intergovernmental consensus on the
GATS agenda than on virtually any other major WTO negotiating agenda
item. To the extent that there are fault lines on the substantive issues,
these are, as with so many other WTO issues, north-south.

Developing countries. The large majority of developing country
governments appear sceptical towards an agenda driven by northern
governments and corporations. Yet there are diverse views among
southern governments. A handful of southern governments participate in
the Friends of the GATS, an informal grouping of the GATS strongest
supporters. Some, such as Hong Kong, have decided they have an
intrinsic interest in liberalizing services, others such as Argentina
probably attach greater importance to the potential linkages in the GATS talks to
their own primary objectives in agriculture. A group of south Asian
countries, most notably India, have been defensive on most GATS issues,
but put a high offensive priority on labour mobility objectives under
GATS mode 4. Certain other developing countries, such as South Africa,
that view themselves as targets for inward migration, are wary of
initiatives to expand mode 4 commitments.

Overall, while the views of southern governments are far from monolithic,
the great majority are cautious regarding the north's ambitious GATS
agenda. But even those governments that have expressed concerns about
GATS expansion, are far less passionate than with regard to other divisive
north-south issues such as intellectual property rights or implementation
issues. Among southern governments, as one well-placed Geneva
observer put it, "there is neither passionate opposition, nor enthusiastic
support" for the GATS.

The major trading powers. Substantively, the EC, Japan and the US are
all strongly committed to broadening and deepening the GATS. The EC
and the US, in particular, have been cooperating closely to ensure that the
negotiations advance as quickly as possible. As noted, both have tabled
initial market access proposals and are pressing other delegations to follow
suit. There are, however, differences between the EU and the US
concerning the relationship of services negotiations to a broader round. So
far, these manifest themselves mainly as disagreement on time-frames to
conclude the negotiations.

The EC has explicitly linked the conclusion of the GATS to its ambitions
for a broader round. European Commissioner Pascal Lamy stated in
Brussels at the European Services Forum conference (see www.esf.be) on
the GATS that "(w)ithout a Round there is no calendar, and the pressure to
keep up the pace of work is missing. I am indeed clear in my own mind
that it will be virtually impossible to conclude the services negotiations in
isolation, and [they] will need to be integrated within a broader
negotiation." Japan also appears to be resisting a formal deadline to
conclude GATS negotiations until questions regarding a broader round are
resolved. The chairman of Mitsubishi, who also chairs the private-sector
Japan Services Network, expressed the official Japanese view that "it is
premature to refer to a final deadline for Services Negotiations at this
stage."

The US maintains that the next round should be primarily a "market
access" round, achieved by adding industrial goods access, procurement
and a few other issues to the built-in agenda items of agriculture and
services. Lamy disparagingly referred to this as a "fast-food round." The
EU and Japan continue to press for broader negotiations that explicitly
include new rule-making in areas such as investment, competition policy
and trade remedy laws. These east-west differences and the continuing
north-south divisions over implementation issues must be narrowed before
a new round can get off the ground.

GATS timelines. The next major milestone in the GATS negotiations is
the March stock-taking session. The GATS secretariat circulated draft
negotiating guidelines in January; these guidelines will likely be finalized
and agreed at the March meeting. There are relatively few divisive issues
among governments. One exception is the US proposal that the starting
point of negotiations should be the current, de facto, sector-by-sector
market openness in each country, not existing GATS schedules. This
proposal is being strongly resisted by developing countries, led by India.
The draft guidelines state that the "starting point for the negotiation of
specific commitments shall be the current schedules of specific
commitments."

Developing countries are also anxious to preserve the existing architecture
of the GATS and are resisting some of the innovative horizontal
approaches promoted by the EC and the US (e.g. clusters). The Indian
ambassador devoted much of his speech in Brussels to articulating
"developing country concerns about the US proposal for negotiating
guidelines and procedures," stating that "we cannot accept any
comprehensive approach." He singled out the cluster approach for
criticism, arguing that it "has the implication of changing the architecture
of the Services Agreement."

The existing architecture of the GATS, however, already includes a mix of
top-down and bottom-up approaches. The draft negotiating guidelines
affirm that the request-offer approach will be "supplemented as necessary
by other appropriate negotiating modalities, applied on a horizontal or
sectoral basis." The draft guidelines also state that "there shall be no a
priori exclusion of any service sector or mode of supply" from the talks.

While the US proposal called for GATS talks to conclude by the end of
2002, the draft guidelines do not include a specific end date, deferring this
matter to the Council for Trade in Services who are "to develop a time
schedule for the conduct of the negotiations."

In a vaguely worded, but ominous provision, the draft guidelines state that
"it is understood that, for the duration of the negotiations members will
not take action affecting access to their markets with the intention of
improving their negotiating position." Given the extraordinarily broad
scope of the GATS negotiations, this "standstill clause" could cast a long
shadow, deterring domestic regulatory initiatives undertaken during the
course of the negotiations. New regulatory initiatives could become
negotiating matters at the WTO, even if they deal with matters not yet
covered by the GATS.

There are some key external events this year that will critically influence
the GATS negotiations. In what will be a major test of Congressional
support for the new US administration's trade policy, President Bush has
indicated that he will seek early authorization of fast-track negotiating
authority. In another important development, the European
Intergovernmental Conference in Nice recently gave the European
Commission a form of "fast-track" negotiating authority for services. The
EC now has exclusive competence to negotiate internationally in most
service sectors -- with the significant exceptions of audiovisual, health,
educational and social services. The results of any negotiation are now to
be approved through qualified majority voting of ministers. Formerly,
competence over international services negotiations was shared between
the European Commission and the member states, with the results
requiring unanimous approval of the member states. Shared competence
and unanimous approval will continue to apply to the audiovisual, health,
educational and social service sectors.

The critical decision point for the WTO agenda as a whole will be the
fourth WTO ministerial conference which is scheduled for November 9-
13, 2001 in Qatar. As this date approaches, more negotiating effort will
necessarily be focused on the overall agenda, temporarily putting the built-
in negotiations in a holding pattern. If agreement is reached on an overall
agenda, however, the built-in services and agriculture negotiations will be
the centrepiece. Services negotiations, in particular, could forge ahead
rapidly.

While WTO Director-General Moore continues to publicly advocate the
launch of a broader round at the next ministerial, key member
governments are, publicly at least, lowering exceptions. Top Canadian
trade officials, for example, are stating that they do not see any prospects
for a new WTO round to be launched this year. If agreement on a broader
round cannot be reached by the Qatar meeting, a likely fall-back scenario
is that negotiators will work toward a launch at a special Ministerial
meeting to be held before Moore's term ends at the end of 2002.
(Ministerial meetings must be held at least every two years, but may be
held more often.)

If agreement on a global WTO agenda is not reached soon, then pressure
to conclude the built-in negotiations independently will intensify. The EC
and Japan may then be forced to reconsider their current position linking
conclusion of the GATS to a broader round.

Corporate lobby groups. North American, European and Japanese service
corporations continue to pressure governments to accelerate the GATS
negotiations and many corporate lobby groups have developed
sophisticated sector-specific market access and policy reform objectives
that they want to achieve through an expanded GATS (see the ESF web
site www.esf.be for presentations from sectoral workshops on financial, e-
commerce, professional mobility, distribution sector, postal and express,
and energy services.)

Significant themes emerging from the corporate views expressed at
the ESF conference included: 1) concern that developing country
dissatisfaction could frustrate progress in the GATS negotiations, 2)
complaints that services negotiations are being held back by linkage
to less important and less commercially significant sectors and issues
such as agriculture or implementation and 3) concern that the GATS
may become the target of a critical, MAI-style campaign.

Several business speakers signalled flexibility toward developing
countries, admitting (whatever this means) that "social and cultural
sensitivities" must be taken into account. Some also implied that
commercial opportunities in developed country services sectors are the
main prize. ESF chair Andrew Buxton, for example, stressed that the
Quad countries "have a duty to lead the way in liberalizing their own
service sectors."

Corporate leaders from both sides of the Atlantic grumbled about
"bureaucratic linkage" of the services agenda to the agriculture
negotiations. Dean O'Hare of the US Coalition of Services Industries
complained that "governments persist in subordinating services
liberalization to the interests of sectors that often represent very small
shares of their current economies." Both European and Japanese
corporate leaders expressed support for their governments' view that the
services negotiations can best succeed in the context of a broader round.
By contrast, Dean O'Hare stated that "We believe that the services
negotiations can succeed in and of themselves, without being wrapped into
a broad new round."

The counterattack against GATS critics. Corporate leaders and WTO
officials are clearly concerned about the capability of NGO
campaigning to disrupt the GATS negotiations. Dean O'Hare, argued
that "We have to do more to counter those who have distorted the
issues and threaten to roll back the benefits of freer trade." Without
any trace of irony, O'Hare declared that "we can't any longer expect
to be able to win our case in private closed meetings with
governments. We have to convince wider publics of the benefits of
trade."

David Hartridge, the director of the WTO Trade in Services Division,
devoted his entire keynote address to the ESF conference to highlighting
the threat posed by NGO critics and to appealing to the corporate
community to counter them. Answering the call, David Woods, a former
Director of Communications for the WTO, now in the private sector,
subsequently launched a furious attack on GATS critics ("Lies, damn lies
and what the GATS really says" at http://www.tradeagenda.com).

There is little pretense of dialogue with civil society. GATS' critics'
concerns are emphatically dismissed as "simply false," "scare stories" or
"lies." This harsh and overpowering rhetoric is apparently intended to
intimidate, not merely the critics, but decision-makers or segments of
public opinion that might sympathize with their concerns. Woods
specifically denounced "the limp-wristed acquiescence of ministers who
cannot risk being seen publicly to challenge the demagogues of `civil
society'." This early and vigorous counterattack indicates that the
character of the public and media debate on the GATS is going to be quite
different than on the MAI, where civil society concerns were largely
ignored and unchallenged until very late in the day.

US negotiating proposals:

EC negotiating proposals

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