Global Trade in Services: Some Features

1. Balancing the Objectives of Different Developing CountriesAgriculture Vs. Services, Safeguard Vs. Services International Seminar on Developing Countries and Services Negotiations, June 6-7, 2006 ICRIER, New Delhi, By Pradeep S Mehta, Secretary General CUTS-International psm@cuts.org

2. Global Trade in Services: Some Features Trade in services has grown faster than merchandise • 60% of global output • 30% of global employment • 20% of global trade • World services trade growth – 155% between 1990-2002; mfg. – 97% and Ag. – 40%

3. Global Trade in Services: Some Features The composition of FDI has shifted towards services: • Early 1970s – one-quarter of the world FDI • 1990 – less than one-half • 2002 – two-third of total FDI The composition of services FDI is also changing

4. Developing Countries’ Share in Global Services Trade Developing countries’ share has increased: • In last 15 years - a four fold increase in services export from developing countries. • 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.

5. Developing Countries’ Export of Services (Share in World Trade) OffensiveNot offensive Source: International Trade Statistics 2005, WTO

6. LDCs Export of Services • Third category of countries in the WTO • Mainly defensive interest as they are not in a position to participate in current services negotiations • Their combined share in world commercial services trade is only 0.41% • Major LDC Exporters – Tanzania, Ethiopia, Cambodia, Maldives, Bangladesh, Nepal and Uganda • Most of the LDCs are net importer of services and agriculture

7. Agriculture Vs. Services: How to Balance? Source: Compiled from International Trade Statistics 2005, WTO

8. Agriculture Vs. Services: How to Balance? • Fundamental Problem – Services trade liberalisation is an agenda of business while agr. is that of poor countries • China would not have problems – likely to gain by trade liberalisation of both the sectors • Brazil, Arg. may not open up services sector unless there is a satisfactory progress on agr. • India has made it clear – no trade off between agr. and services

9. Agriculture Vs. Services: How to Balance? • The other major service exporters Singapore and HK China hardly have anything to offer on agriculture • Thailand and Malaysia (Cairns Group), also have reasonable share in services trade may like to see progress on both fronts • Some of the LDCs have agressive interest in agriculture but most of them have defensive position on services

10. Emergency Safeguard Measures (ESM) The mandate for the negotiations on ESM emanates from Article X(1) of GATS: “There shall be multilateral negotiations on the question of ESM based on the principle of non-discrimination. The results of such negotiations shall enter into effect on a date not later than three years from the date of entry into force of the WTO Agreement.”

11. Emergency Safeguard Measures (ESM) • A number of DCs led by ASEAN supports the need for an ESM for services trade • Provides symmetry with goods trade, which contains a safeguard clause • Confers required safety when undertaking new liberalisation commitments • May work as an incentive to undertake new market access commitments • However, negotiations so far have revealed sharp differences between Members

12. ESM: Why It is Important? • Low level of development in many DCs and LDCs • These countries have not carried out an impact assessment of services liberalisation • Assist in meeting national economic and social policy objectives • Neutralises the risk of liberalisation commitments by poor countries • No alternative mechanism to address import surges

13. ESM: Feasibility and Desirability • Those against, argue that it is neither feasible nor desirable – EU’s argument • Not an unique demand. Provisions of ESM are there in many RTAs – NAFTA (in financial services), EEA, CARICOM, ASEAN framework agreement on services • Therefore, counters the argument of infeasible and not desirable • How can ESM be incorporated into the agreement? • Available to all WTO countries but with S&DT provisions for DCs and LDCs.