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GATS NEGOTIATIONS; WHY SERVICE INDUSTRY ASSOCIATIONS SHOULD GET INVOLVED

 

           The second, ongoing round of negotiations for the General Agreement on Trade in Services (GATS) puts exporters around the world in a position to help shape the future of this important sector. However, many service exporters and industry associations do not know where to begin. This article draws on ITC’s GATS Consultation Kit to explain why and how service industry associations should communicate with their policy-makers.

 

           Trade negotiators may not always be familiar with the capabilities and competitiveness of their service exporters and so they are not yet in a good position to develop appropriate negotiating strategies.

 

           Most service exporters and associations are also unfamiliar with the GATS and its schedules — or lists of liberalization commitments — and are therefore not necessarily able to provide useful input for trade negotiators. ITC has developed tools to help both sides to talk productively to each other.

 

 

Industry Spokespersons

           Given that individual service firms do not usually belong to the same business associations, and in the absence of an “umbrella” services organization, it is very difficult to reach potential and existing exporters in order to give them the opportunity to provide input to these important trade negotiations. This is why trade support institutions (TSIs) — such as service industry associations and chambers of commerce — are key interlocutors in reaching enterprises in the services sector, advocating for trade in services issues and advising governments on appropriate negotiating objectives for trade in services.

 

 

Why Get Involved

           For years, service firms in developing countries have exported their services despite non-tariff barriers to trade. In some instances, working with a local partner has made this possible. They will in all probability continue to export, but the participation of TSIs in the services trade liberalization process can help firms to be more profitable and successful in their export initiatives. Experience has shown that a supportive, rather than protectionist, policy environment is of greater benefit to service exporters.

 

The following points underline the importance of services trade liberalization to service exporters:

·         Access to world-class services will help exporters in developing countries to capitalize on their competitive advantage.

·         Liberalization can lead to lower prices, better quality and a broader choice for consumers. Such benefits impact the economic system and help to improve supply conditions for many other products and services.

·         Another benefit is the opportunity to innovate faster, a key success factor for exporters of services. Countries with liberalized markets have been great product and process innovators.

·         Service commitments under the GATS foster foreign direct investment, bringing technology transfer and new skills and technologies that benefit the wider economy.

·         The GATS will result in greater transparency, allowing firms to provide their services under predictable, stable conditions. They are able to plan for the future with greater certainty, encouraging long-term investment. Ultimately, service exporters and consumers in both industrial and developing countries will be the winners from the agreement.

 

 

Approaching Deadline

            In the current round of negotiations, 30 June 2002 was the deadline for requests for market access in the various sectors, and members have until March 2003 to make liberalization offers.

 

            As member economies take stock of their initial requests for market access and prepare to make their final offers, it is crucial that service exporters and industry associations familiarize themselves with the GATS and be vocal about the trade-related issues of their industry.

 

            To maximize gains from the GATS negotiations, developing country governments should revise their national GATS schedule to reflect the needs and growth potential of their domestic service industries. Knowing what their service exporters need from the GATS will help governments to determine negotiating priorities – and trade and industry associations are well placed to give them this information.

 

 

GATS Consultation Process

            ITC has developed the GATS Consultation Kit, to help prepare TSIs to advocate on behalf of their service sectors, and provide input to trade officials on:

·         services trade dynamics;

·         the types and volume of local service exports; and

·         the particular challenges faced by service exporters.

 

            The process is described in full in ITC’s GATS Consultation Kit available online, with a descriptive video.

 

            The GATS Consultation Kit, consisting of two parts, can help to obtain detailed private sector feedback on the domestic impact of GATS since 1995, to assess the national schedules of commitments in relation to service industry needs and to identify the concessions service exporters want from trading partners.

 

            It helps TSIs to hold three different consultations with service exporters, or to combine the questions listed into a single session. The online GATS Consultation Kit lists other useful advice and several alternatives for formatting the consultations in order to help the facilitator prompt participants for more detailed information.

 

            Part 1 assists with reviewing national GATS schedules and can be used either to assess the existing national schedule of commitments of the TSI’s country and/or assess the commitments made by key trading partners.

 

            Part 2 provides a series of detailed questions to elicit input from service exporters, divided into three sets of consultation questions on:

·         the application of trade principles;

·         modes of supply and their impact on export opportu-nities; and

·         domestic regulations and their impact on export competitiveness.

 

 

Part 1: Re-evaluate Commitments

            The current negotiations are a time to re-evaluate the national commitments governments undertook after the first round of GATS negotiations. The GATS schedules are complex, which can make assessing a country’s liberalization commitments a daunting task. Using the schedules, TSIs have to identify restrictions that are applicable to all service sectors, then determine whether or not their specific sector is scheduled for negotiations. To get a complete picture of the trade commitments facing the entire service industry, they must also familiarize themselves with their country’s other trade obligations, including regional agreements and customs unions.

 

 

Part 2: Monitor Trade Principles...

The four basic trade principles around which the GATS is structured are:

·         transparency — policies and regulations should be clear and readily accessible to foreign service exporters;

·         most-favoured nation treatment — services and service providers from foreign markets should all be treated the same;

·         national treatment — foreign services and service providers should be treated the same as domestic services and service providers; and

·         market access — access to the domestic market should not be trade-distorting.

 

            TSIs need to focus on any difficulties exporters may have had in these areas since GATS came into effect in 1995. Sample questions to ask exporters:

·         How easy is it for them to find out about the regulatory environment in another country?

·         How is the service exporter treated in that foreign market?

·         Are the enquiry and contact points able to answer the service exporter’s questions?

 

 

...exploit modes of supply...

            In services trade negotiations, all liberalization “requests and offers” are framed in terms of four modes of supply, which are:

·         Mode 1: Cross border — only the ser-vice moves (e.g., by e-mail, Internet or courier).

·         Mode 2: Consumption abroad — the customer travels to the supplier’s country.

·         Mode 3: Commercial presence — the supplier sets up an office in the customer’s market.

·         Mode 4: Presence of natural persons — the supplier travels temporarily to the customer’s market.

 

            TSIs need to learn about what modes of supply their service exporters use and in which modes they experience difficulty in accessing export markets. Sample questions:

·         What barriers do service exporters face in trying to trade cross border?

·         Are there restrictions on Internet access?

·         How easy is temporary business entry?

·         Are service exporters treated the same when investing in a local office?

 

 

...and assess domestic regulations

            Most domestic regulations concerning the supply of services were developed without much analysis of their impact on services trade flows. While the GATS negotiations are not intended to eliminate domestic regulations, they try to prevent trade distortions from them.

 

            TSIs need to determine whether and how their government should change the domestic regulatory environment to facilitate trade. They can also suggest that their government request foreign governments to make changes in their regulations. Sample questions:

·         Are regulations enforced consistently?

·         Are service exporters aware of the regulations that are covered by the GATS?

·         Are there regulations in place for the licensing of professionals or for codes of conduct?

 

 

Dialogue is Key

            Trade and service industry associations can play a key role in informing trade officials about services trade issues. Thorough, honest dialogue between service exporters and their industry representatives is crucial to drawing up policy recommendations that are truly reflective of the industry’s interests. Only such recommendations will be credible and useful for GATS negotiators and trade officials.

 

 

Negotiations Framework

            The GATS covers trade in 150 services in 12 service sectors. It is different from the General Agreement on Tariffs and Trade in four significant ways:

·         The agreement covers both the service and the service provider.

·         Liberalization focuses on making sure that domestic regulations do not distort trade flows, rather than on reducing or removing tariffs.

·         Members make liberalization offers in terms of four “modes of supply” of a service rather than simply by service.

·         Members grant each other market access and national treatment by sector and mode of supply.

 

 

Finding Schedules

            Schedules can be found on the WTO web site (http://www.wto.org) by clicking on “Trade Topics”, then “Services”. Schedules of specific GATS commitments for trading partners are available by clicking on “GATS Text” under “Services”, then on “List of Schedules of Specific Commitments” (under “Appendix”) and then on the name of the country.

 

 

Service Sectors Covered by the GATS

·         Business services

·         Communication services

·         Construction and related engineering services

·         Distribution services

·         Educational services

·         Environmental services

·         Financial services

·         Health-related and social services

·         Tourism and travel-related services

·         Recreational, cultural and sporting services

·         Transport services

·         Other services not included elsewhere

 

 

* This article was prepared by Prema de Sousa and Doreen Conrad using material developed by Dorothy Riddle. For more information about the GATS Consultation Kit (an introduction to the Kit is available online. For other services-related material from ITC, contact Doreen Conrad, Head, Trade in Services Unit, at conrad@intracen.org.

** International Trade Forum, Issue 2/2004, pp.18-20.

*** Required permission for re-publication was taken from the ITC. The translated Turkish version of the article is available at: http://www.akademiktisat.net/calisma/hizmet/gats_hizmet_birlikleri.htm

 

 

 

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