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THE CURRENT SERVICES ROUND. Services: General perception. NOT TRADABLE AND NOT STORABLE Simultaneity of production and consumption Role of local establishment STRONG GOVERNMENT INVOLVEMENT Existence of natural monopolies, public service obligations, etc.

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services general perception
Services: General perception
  • NOT TRADABLE AND NOT STORABLE
    • Simultaneity of production and consumption
    • Role of local establishment
  • STRONG GOVERNMENT INVOLVEMENT
    • Existence of natural monopolies, public service obligations, etc.
    • Infrastructural importance of services (transport, telecom, etc.)
    • Role of non-economic objectives (social, cultural, safety)
  • INTANGIBLE
    • Quality criteria for services providers rather than for products
  • NO TARIFFS
    • Access conditions determined by regulation, quotas etc.
slide3
But...
  • Certain services - international transport and communication - have been traded for centuries
  • Services are supplied in conjunction with goods (finance, insurance, marketing, etc.)
  • Services have become tradable as a result of:
    • technical progress (e-banking, tele-medicine, distance learning)
    • government retrenchment
    • market liberalization and regulatory reform
slide5
Importance of Services Trade

Limited role of services in total world

trade (~ 20 % on BOP basis) but ...

  • more rapid growth than goods trade
  • GATS broader in coverage than BOP
  • role of services in trade facilitation
services trade has grown faster in developing than in high income countries
Services trade has grown faster in developing than in high-income countries

Source: World Bank

slide9

GATS: Scope, coverage, definition

  • MEASURES AFFECTING TRADE IN

SERVICES AT ALL GOVERNMENT LEVELS

  • ALL SERVICES(except governmental services

and measures affecting air traffic rights)

  • FOUR MODES OF SUPPLY
      • Cross-border supply
      • Consumption abroad
      • Commercial presence
      • Presence of natural persons
modes of supply
Modes of supply

EXAMPLE (Health)

Tele-diagnosis from Country B into A

A’s resident obtains hospital treatment in B

Hospital operator from B has subsidiary in A

Physician from B practices in A

MODE

1. Cross-border Trade

2. Consumption Abroad

3. Commercial Presence

4. Movement of Natural

Persons

purpose of the gats
Purpose of the GATS
  • Assists governments that want to reduce their trade barriers and/or consolidate reforms
  • Contributes to coordination of economic policy-making
  • Better access to foreign markets
  • Transparency and predictability of trading conditions
  • Efficient and impartial settlement of disputes
gats key obligations
GATS: Key Obligations
  • Most-Favoured Nation (Article II)
    • Applies to all sectors
  • Obligations implying openness to international competition (Market Access and National Treatment) only apply in accordance with each Member’s schedule of commitments
    • Only in selected sectors
    • Subject to conditions and limitations inscribed
slide13
Starting point of the negotiations

(‘progressive liberalization’

pursuant to Article XIX)

slide17

Starting point: Applied Regimes

  • Actual regimes tend to be far more liberal in many countries than commitments suggest.
  • Widening gap between UR schedules and
    • schedules of recently acceded countries
    • access conditions negotiated under FTAs
slide18
Services

Negotiations:

Process and

State of Play

(Specific Commitments)

how services negotiations work
How Services Negotiations Work

From the outset:

  • Essentially a bilateral process
  • Some key principles:
    • No sector or mode excluded a priori
    • Flexibility for developing countries
    • Starting point: existing commitments
    • No change in basic structure of the GATS
slide20
STATE OF PLAY (July 2006)

INITIAL OFFERS:

71 Schedules (covering 95 Members*)

REVISED OFFERS:

31 Schedules (covering 55 Members*)

*Counting EC Members (EC 25) individually

offers main features iii
Offers: Main features (III)

“Few, if any, new commercial opportunities would ensue for service suppliers. Most Members feel that the negotiations are not progressing as they should."[1]

Chair of CTSS, July 2005 (TN/S/20)

slide25

Sobering Assessment:

  • Long delays
  • (initial target date: March 2003)
  • Modest achievements
  • (number of sectors and substance)
  • Uneven participation of developing
  • countries
  • Little change in MFN Exemptions
  • _____________________________________________________________________________
  • Little progress in rules negotiations
how negotiations work
How Negotiations Work
  • Since Hong Kong Ministerial:
    • Plurilateral request/offer process
    • LDCs not expected to undertake new commitments
    • No formula, but set of multilateral objectives per mode
slide27

Negotiating Objectives (I)

Modes 1 to 3 (examples)

  • No requirement of commercial presence (mode 1)
  • Commitments at existing levels of access (modes 1 & 2)
  • Removal or substantial reduction of ENTs

(modes 2 & 3)

  • Enhanced levels of foreign equity, more types of legal entity (mode 3)
slide28

Remaining Risks...

  • Contamination from AG & NAMA
  • Lack of political resolve
  • Exaggerated expectations(access abroad as a substitute for own reform)
  • Impact of regionalism in services
reason for hope nevertheless
Reason for Hope, Nevertheless
  • Experience with previous trade rounds
  • Too much at stake
  • No credible alternative to WTO
  • Domestic liberalization pressure in (infrastructure-related) services

(> competiveness of user industries,

threat of industrial relocation)

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