““Pro- Development Agenda Pro- Development Agenda for for
Services Negotiations Services Negotiations International International Civil Society Civil Society
Concerns”Concerns”
Economic Justice Network (EJN)Economic Justice Network (EJN)
Kempton Park Conference CentreKempton Park Conference Centre
2929ththNovember 2005 November 2005
StructureStructure
ContextContext– ApproachApproach– GloballyGlobally– International Trade TerrainsInternational Trade Terrains
GATSGATS– IntroductionIntroduction– IssuesIssues
CommentsComments Theoretical underpinningsTheoretical underpinnings
– Free TradeFree Trade– Broader PerspectiveBroader Perspective
ApproachApproach
What is needed to make discerning judgement?What is needed to make discerning judgement? ChoiceChoice
– EngageEngage AggressivelyAggressively ReluctantlyReluctantly
– Not engageNot engage ReluctantlyReluctantly DefensivelyDefensively
– Affirmative Defensive Agenda: middle roadAffirmative Defensive Agenda: middle road Strategic valueStrategic value Tactical valueTactical value
Context Context
Services TradeServices Trade– Services as % of GDP (2000)Services as % of GDP (2000)
Global 2.9%Global 2.9% Low income countries – 3.2 % (faster rate of growth)Low income countries – 3.2 % (faster rate of growth) Middle income countries – 3.6 %Middle income countries – 3.6 %
– Developing countries Developing countries 40 – 70% of GDP40 – 70% of GDP 30 – 50% of employment30 – 50% of employment 60% of FDI in services60% of FDI in services 12 developing countries lead service exports in 1998 – 66%, 12 developing countries lead service exports in 1998 – 66%,
2004 – 71% (potentially divisive)2004 – 71% (potentially divisive)
Context EU and USContext EU and US
– EU doubled services surplus 2000 to 2003EU doubled services surplus 2000 to 2003– US in 1990’s tripled, since 1995 increased 69%US in 1990’s tripled, since 1995 increased 69%
US Export $340 billion 2004 (30% of US Exports)US Export $340 billion 2004 (30% of US Exports) US firms established abroad earn $400 billionUS firms established abroad earn $400 billion 30% of exports bought by US firms30% of exports bought by US firms US 75% GDP and 80% of jobsUS 75% GDP and 80% of jobs
– AggressiveAggressive Demandeurs at WTODemandeurs at WTO
– Finance, Telecoms, Environment, DistributionFinance, Telecoms, Environment, Distribution Free Trade Areas alternatives to multilateralismFree Trade Areas alternatives to multilateralism
GATS & Health PolicyGATS & Health Policy
• ““The main policy advice from a health policy The main policy advice from a health policy perspective is for countries to keep their health perspective is for countries to keep their health and social services out of deeper and broader and social services out of deeper and broader commitments in GATS … In terms of trade in commitments in GATS … In terms of trade in services and options for developing countries, services and options for developing countries, caution is the operative word. This cautiousness caution is the operative word. This cautiousness should be extended to services that are should be extended to services that are important to the determinants of health, such as important to the determinants of health, such as water and sewage treatment.”water and sewage treatment.”
Koivusalo, M. “The Impact of WTO Agreements on Health and Development Policy” Koivusalo, M. “The Impact of WTO Agreements on Health and Development Policy” Globalism and Social Policy Programme (GASPP) STAKES No 3 Jan 2003Globalism and Social Policy Programme (GASPP) STAKES No 3 Jan 2003
GATSGATS from a Northern from a Northern PerspectivePerspective
• State plays a stewardship functionState plays a stewardship function
• GATS potential to limit policy flexibility of statesGATS potential to limit policy flexibility of states• On the United Kingdom the Pollock et al state:On the United Kingdom the Pollock et al state:
– ““Income and health inequalities continue to widen in Income and health inequalities continue to widen in the U K . The restrictions on national sovereignty the U K . The restrictions on national sovereignty imposed by the WTO through GATS will make it imposed by the WTO through GATS will make it increasingly difficult to reverse these trends.” increasingly difficult to reverse these trends.”
David Price, Allyson M Pollock, Jean Shaoul “How the World Trade Organisation is shaping David Price, Allyson M Pollock, Jean Shaoul “How the World Trade Organisation is shaping domestic policies in health care” THE LANCET • Vol 354 • November 27, 1999 domestic policies in health care” THE LANCET • Vol 354 • November 27, 1999
Goods vs. Services TradeGoods vs. Services Trade
Services are not like goods when tradedServices are not like goods when traded
Country X
Goods Border measures as main obstacles
Regulation
Services Regulation as main obstacles – beyond border
Key ElementsKey Elements GATS applies to many different types of actions (known GATS applies to many different types of actions (known
as measures) that a state governments may take. The as measures) that a state governments may take. The GATS applies to all levels of government, national, state, GATS applies to all levels of government, national, state, and local.and local.
Market access limits a government’s ability to regulate Market access limits a government’s ability to regulate services and service providers.services and service providers.
National treatment requires governments to treat foreign National treatment requires governments to treat foreign services and suppliers no less favourably than domestic services and suppliers no less favourably than domestic ones. ones.
A GATS general exception allows governments to A GATS general exception allows governments to maintain a challenged measure if they can demonstrate maintain a challenged measure if they can demonstrate that it is “necessary” to protect human health. that it is “necessary” to protect human health.
GATS limitations on Domestic Regulation require that all GATS limitations on Domestic Regulation require that all regulations be necessary and “least trade restrictive” to regulations be necessary and “least trade restrictive” to be validbe valid
How GATS structuredHow GATS structured
ModesModes
Top Down ElementsTop Down Elements– Domestic RegulationDomestic Regulation– Most Favoured Nation TreatmentMost Favoured Nation Treatment
Bottom Up ElementsBottom Up Elements– National Treatment National Treatment
Formally equal or formally unequalFormally equal or formally unequal
– Market AccessMarket Access Equivalent of “quantitative restrictions”Equivalent of “quantitative restrictions”
Trade in ServicesTrade in Services
Trade inservices
Cross-bordersupply of services
(Mode 1): telemedicine
Consumption of services abroad
(Mode 2): hospital
treatment overseas
Presence of natural
persons (Mode 4):nurses working inother countries
Commercialpresence (Mode
3):establishment
ofhealth facilities
abroad
WHO, Drager
How negotiateHow negotiate
GATS processGATS process– Request – offerRequest – offer– BilateralBilateral– Special and Differential Treatment for developing Special and Differential Treatment for developing
countries countries
Proposed ChangesProposed Changes– BenchmarkingBenchmarking
Qualitative and quantitativeQualitative and quantitative
– PlurilateralPlurilateral Negotiating processNegotiating process
Market Access & National Market Access & National TreatmentTreatment
National TreatmentNational Treatment
– Formally EqualFormally Equal– Formally UnequalFormally Unequal– Level Terrain of CompetitionLevel Terrain of Competition
Market AccessMarket Access– Equivalent to goods “quantitative restrictions”Equivalent to goods “quantitative restrictions”– Regulations need not be discriminatoryRegulations need not be discriminatory
Domestic RegulationDomestic Regulation
Domestic regulation Domestic regulation refers to the power of refers to the power of a country to make non-discriminatory laws, a country to make non-discriminatory laws, regulations or policies to address its needs regulations or policies to address its needs or objectives or objectives
Covers licensing, standards and Covers licensing, standards and qualificationsqualifications
Must be no “more burdensome than Must be no “more burdensome than necessary to ensure the quality of the necessary to ensure the quality of the service.” service.”
Right to RegulateRight to Regulate
The specific right to regulate dependsThe specific right to regulate depends– unscheduledunscheduled– ScheduledScheduled
changes to regulations must be anticipatedchanges to regulations must be anticipated
DSU makes decisions where limited DSU makes decisions where limited guidance from texts and contextguidance from texts and context
Mode 4Mode 4
Temporary movement of natural personsTemporary movement of natural persons Right in GATSRight in GATS
– ““by a service supplier of one Member, through presence of natural persons by a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member” Art. I.2.dof a Member in the territory of any other Member” Art. I.2.d
ParametersParameters– ““not apply to measures affecting not apply to measures affecting natural personsnatural persons seeking access to the seeking access to the
employment marketemployment market of a Member, nor shall it apply to measures regarding of a Member, nor shall it apply to measures regarding citizenship, residence or employment on a permanentcitizenship, residence or employment on a permanent basis.” basis.”
– ““not prevent a Member from applying measures to not prevent a Member from applying measures to regulate the entry of natural regulate the entry of natural personspersons into, or their temporary stay in, its territory, including those measures into, or their temporary stay in, its territory, including those measures necessary to protect the integrity of, and to ensure the orderly movement of natural necessary to protect the integrity of, and to ensure the orderly movement of natural persons across, its borders, provided that such measures are not applied in such a persons across, its borders, provided that such measures are not applied in such a manner as to nullify or impair the benefits … Annex on Movement of Natural manner as to nullify or impair the benefits … Annex on Movement of Natural PersonsPersons
– ““The sole fact of requiring a visa for natural persons of certain Members and The sole fact of requiring a visa for natural persons of certain Members and not for those of others shall not be regarded as nullifying or impairing benefits not for those of others shall not be regarded as nullifying or impairing benefits under a specific commitment.under a specific commitment. “ Footnote to Annex “ Footnote to Annex
ESMESM
There shall be multilateral negotiations on the question of There shall be multilateral negotiations on the question of emergency safeguard measures based on the principle of emergency safeguard measures based on the principle of non-discrimination. The results of such negotiations shall non-discrimination. The results of such negotiations shall enter into effect on a date not later than three years from enter into effect on a date not later than three years from the date of entry into force of the WTO Agreementthe date of entry into force of the WTO Agreement. .
Sub-Paragraph 1 Article X Sub-Paragraph 1 Article X
ESM suspend liberalisation commitments if:ESM suspend liberalisation commitments if: Import surgeImport surge ResultResult Serious threat/injury to domestic industrySerious threat/injury to domestic industry
Developing country interestsDeveloping country interests
Mode 4Mode 4 ESMESM OthersOthers
– Outcomes of Domestic Regulation rulesOutcomes of Domestic Regulation rules– Emergency Safeguard MeasureEmergency Safeguard Measure– Assessment and ReviewAssessment and Review
DevelopmentDevelopment– Special & Differential TreatmentSpecial & Differential Treatment– DevelopmentDevelopment– Less commitments than Developed countriesLess commitments than Developed countries
CommentaryCommentary
Value of ConcessionsValue of Concessions
GATS that liberalisation commitments may not be GATS that liberalisation commitments may not be meaningful:meaningful:– export supply capacityexport supply capacity– high barriers to market entry in highly competitive high barriers to market entry in highly competitive
foreign marketsforeign markets– offers made by foreign federal governments may not be offers made by foreign federal governments may not be
binding on provinces or states under their jurisdictionbinding on provinces or states under their jurisdiction
Link to development of other sectorsLink to development of other sectors Demand for reciprocityDemand for reciprocity
Assessments– Evidence required to make informed decisions
Lack of Data– UN acknowledged that there is a lack of data
in terms of the GATS modes– Caution: as not evidence based and
evidence led
Classification Issues– clarity should be provided for the nature and
scope of the service liberalization as classification issues are important
Mode 4Mode 4
Access but no entryAccess but no entry Growth strategy based on export of people?Growth strategy based on export of people? Surplus capacity in unskilled and semi-Surplus capacity in unskilled and semi-
skilledskilled Increasing Returns and allocation of surplus Increasing Returns and allocation of surplus
valuevalue Extension to challenges on labour Extension to challenges on labour
movementmovement
Domestic Regulation CommentDomestic Regulation Comment
The Concession may be quite narrow if outcome grants The Concession may be quite narrow if outcome grants governments wide governments wide authority to regulate authority to regulate
Conversely, the Concession may be wide if the Conversely, the Concession may be wide if the Rules Committee removes a great deal of Rules Committee removes a great deal of government’s rights to regulate. government’s rights to regulate.
The GATS formulation is imprecise and undermines The GATS formulation is imprecise and undermines legal precisionlegal precision
Art. VI.5.a – requires crystal ballArt. VI.5.a – requires crystal ball– lock in of current regulations lock in of current regulations – Realm of possibility definedRealm of possibility defined– Periodic review built into schedulePeriodic review built into schedule
All offers that are made should be made conditional All offers that are made should be made conditional upon a satisfactory outcome of the Rules upon a satisfactory outcome of the Rules negotiations.negotiations.
Update on Domestic RegulationUpdate on Domestic Regulation
DOMESTIC REGULATION: PREPARATION FOR THE DOMESTIC REGULATION: PREPARATION FOR THE SIXTH MINISTERIAL CONFERENCETECHNICAL SIXTH MINISTERIAL CONFERENCETECHNICAL STANDARDS” Working Party On Domestic Regulation 25 STANDARDS” Working Party On Domestic Regulation 25 October 2005October 2005
Transparency requirements Transparency requirements – ““opportunity for comments opportunity for comments and taking the results into account”and taking the results into account” – Plus “review of necessity” a legally binding obligation. Plus “review of necessity” a legally binding obligation. – Requires proactive government reviewRequires proactive government review
Technical StandardsTechnical Standards– imposition of imposition of international norms as the ceiling for services international norms as the ceiling for services
standardsstandards because there would be a “ because there would be a “presumption of presumption of consistency”consistency” with disciplines if in compliance with relevant with disciplines if in compliance with relevant international standards.” international standards.”
Update on Domestic RegulationUpdate on Domestic Regulation
LICENSING REQUIREMENTS AND LICENSING REQUIREMENTS AND PROCEDURES:PROCEDURES:– Setting as a requirement “the Setting as a requirement “the relevancerelevance of of
licensing requirements to the activities for which licensing requirements to the activities for which authorization is sought” authorization is sought”
– ““Imposition of a relevance test would be as Imposition of a relevance test would be as problematic as imposition of a necessity test, problematic as imposition of a necessity test, potentially restricting requirements to very potentially restricting requirements to very narrowly defined criteria. ” Gould 2005narrowly defined criteria. ” Gould 2005
ESM CommentESM Comment
ContextContext– Developing countries chronic forex problemsDeveloping countries chronic forex problems– Casino currency price effectsCasino currency price effects– Limited competitive domestic industry & domestic Limited competitive domestic industry & domestic
market to withstand surgesmarket to withstand surges
Foreign competition may displace local suppliers Foreign competition may displace local suppliers and lead to erratic service supply and lead to erratic service supply
Value of GATS concessions without increase it Value of GATS concessions without increase it dramaticallydramatically
Mandated but no conclusionMandated but no conclusion
Market Access CommentMarket Access Comment
Measures to protect local investments and Measures to protect local investments and to prevent destructive competition should be to prevent destructive competition should be included in the schedule. included in the schedule.
Economics Needs Tests must be protectedEconomics Needs Tests must be protected
National Treatment CommentNational Treatment Comment
Lack of precision in languageLack of precision in language Not define what level terrain of Not define what level terrain of
competition iscompetition is
Slippery SlopesSlippery Slopes
Issues in negotiationsIssues in negotiations– Investment Clause:Investment Clause:
Crystal Ball provision – domestic regulationCrystal Ball provision – domestic regulation– CompetitionCompetition
What terrain of competition is – national treatmentWhat terrain of competition is – national treatment– Subsidies:Subsidies:
problem of content of boxes – risk current flexibilitiesproblem of content of boxes – risk current flexibilities box shiftingbox shifting
– Transparency in Government ProcurementTransparency in Government Procurement Application of GATSApplication of GATS Bilateral clarificationsBilateral clarifications Bilateral definitional issues (should be multilateral)Bilateral definitional issues (should be multilateral)
– Trade FacilitationTrade Facilitation Sectors: transport, distributional services, logistics, insuranceSectors: transport, distributional services, logistics, insurance
Change of negotiating processChange of negotiating process– Within GATSWithin GATS– New Director GeneralNew Director General
Negotiation IssuesNegotiation Issues Understand trade offs – need more certaintyUnderstand trade offs – need more certainty No additional offers till more clarity and No additional offers till more clarity and
quality concessionsquality concessions Protect current negotiation flexibilitiesProtect current negotiation flexibilities Any agreement conditional upon satisfactory Any agreement conditional upon satisfactory
outcomes in:outcomes in:1.1. Domestic regulationDomestic regulation2.2. Emergency SafeguardEmergency Safeguard3.3. SubsidiesSubsidies4.4. Mode 4 Mode 4 5.5. Evidence based assessmentsEvidence based assessments6.6. Establishment of information pointsEstablishment of information points
TheoreticalTheoretical
Classical economicsClassical economics– Utopian free trade: factor price equalisationUtopian free trade: factor price equalisation
Impediments to labour and capitalImpediments to labour and capital Other experiencesOther experiences
– Bolkerstein directive - rejectedBolkerstein directive - rejected– EU insulate services integrationEU insulate services integration– US Federal and State jurisdictionsUS Federal and State jurisdictions
Classical Economics and Role of Classical Economics and Role of StateState
– Market best allocation of resourcesMarket best allocation of resources– Need to remove obstacles to market mechanismsNeed to remove obstacles to market mechanisms
– LiberalisationLiberalisation– the practice of reducing impediments or obstacles to the practice of reducing impediments or obstacles to
trade. For goods trade … reducing tariffs, for services … trade. For goods trade … reducing tariffs, for services … reducing regulations or generally … a reduction in the reducing regulations or generally … a reduction in the role of the state role of the state Specialisation Specialisation
– activities a country will focus on developing because it activities a country will focus on developing because it has a particular advantage in its productionhas a particular advantage in its production
PrivatisationPrivatisation– The sale of state owned assets to private sectorThe sale of state owned assets to private sector
Applying the Classical TheoryApplying the Classical Theory
World Bank and International Monetary FundWorld Bank and International Monetary Fund– Structural Adjustment ProgrammesStructural Adjustment Programmes
market rulesmarket rules privatisation privatisation deregulation deregulation liberalisation and specialisationliberalisation and specialisation competition and competition and cuts in government spending cuts in government spending
AhistoricalAhistorical– Rich countries did NOT use these policies to developRich countries did NOT use these policies to develop
Alternative viewsAlternative views
Lack of virtuous cycle link between Manufacturing and Lack of virtuous cycle link between Manufacturing and ServicesServicesNational Services StrategyNational Services Strategy
Increasing and Decreasing Returns of economic activities Increasing and Decreasing Returns of economic activities (vs. constant returns to scale)(vs. constant returns to scale)
Division of labour Services - the village blacksmithDivision of labour Services - the village blacksmith Under employmentUnder employment Services effectiveness requisite for competitivenessServices effectiveness requisite for competitiveness
Services cluster around manufacturingServices cluster around manufacturing
Broader View – Service ProvisionBroader View – Service Provision
Subsidy to wagesSubsidy to wages Preventative measures rather than curativePreventative measures rather than curative Social InvestmentsSocial Investments Increase aggregate demandIncrease aggregate demand Efficient use from effective regulation?Efficient use from effective regulation?
– Regulatory rents as distributionRegulatory rents as distribution
Theoretical GapsTheoretical Gaps
Factor price equalisation impeded because:Factor price equalisation impeded because:– different economic activities have different effects. different economic activities have different effects.
There are increasing, decreasing and return neutral There are increasing, decreasing and return neutral activitiesactivities
– Are no constant returns to scale in the real world, nor is Are no constant returns to scale in the real world, nor is there perfect competition and informationthere perfect competition and information
– Liberalisation between countries that have similar levels Liberalisation between countries that have similar levels AND quality of development may be beneficial, whereas AND quality of development may be beneficial, whereas liberalisation between countries of different levels and liberalisation between countries of different levels and quality of development is positively harmful. This is quality of development is positively harmful. This is especially the case where exchange for increasing especially the case where exchange for increasing return goods is made for decreasing return goods.return goods is made for decreasing return goods.
Reinert – The Other CanonReinert – The Other Canon
Approach RevisitApproach Revisit
Middle groundMiddle ground Affirmative agendaAffirmative agenda
– Strategically - sound because safeguard Strategically - sound because safeguard interests on broad basisinterests on broad basis
– Tactically – many issues to trade off on to reach Tactically – many issues to trade off on to reach “improved” arrangements and engaged“improved” arrangements and engaged
Not detract that GATS unsuited instrument Not detract that GATS unsuited instrument for Services Development Planfor Services Development Plan– Abrogation of State Responsibility – tail wagging Abrogation of State Responsibility – tail wagging
the dogthe dog