Feb 13, 1986

GATT GROUP ON SERVICES SEEKS UNCTAD VIEWS.

GENEVA, FEBRUARY 11 (IFDA/CHAKRAVARTHI RAGHAVAN)— The GATT "group on exchange of information on services" has sought the views of the UNCTAD secretariat on the question of services and the development process, it is learnt.

The Secretary-General of UNCTAD is being requested to furnish copies of an UNCTAD study on the issue of services, and to nominate an authorised representative to participate in the next meeting of the group (on March to 26), to present the report and elucidate UNCTAD secretariat views on the subject.

GATT in Geneva, and the World Bank and IMF in Washington, have always distanced themselves from the rest of the UN system, and seldom is there any reference in the literature of these institutions to the viewpoints or literature of the other parts of the UN system.

Against this background, the GATT "invitation" to UNCTAD is seen by third world countries as a kind of "revolution"

The 1982 GATT Ministerial declaration, in its decision on services, had recommended national examination of issues in the services sector (by interested contracting parties), and for the exchange of information on such matters inter alia through international organisations such as GATT.

The 1982 declaration had also decided to review the results of these examinations, along with information and comments provided by relevant international organisations, and consider "whether any multilateral action in these matters is appropriate and desirable".

Since 1985, the GATT group, chaired by Felipe Jaramillo of Colombia, has been undertaking the exchange of information on the basis of national studies on services.

So far only the industrial countries have prepared studies and circulated them via GATT.

None of the third world countries have so far done so, though several of them have been participating in the exchange of information under Jaramillo, but without prejudice to their basic stand, namely that GATT has no jurisdiction to deal with services.

The annual session of the GATT contracting parties in November 1985, has mandated the Jaramillo group to continue with its work of exchange of information, and also to come up with recommendations, on the question whether "multilateral action on services is appropriate and desirable".

At a meeting last week, the Jaramillo group is reported to have discussed its tentative work programme for 1986, in the light of the decisions of the contracting parties at their November 1985 session.

In a report to the annual session in November 1985, Jaramillo had outlined the considerable gaps and problems remaining to be tackled in the exchange of information.

These included the difficulties in defining precisely the term "services", in defining "traded" or "tradeable" services, in identifying the "obstacles" to trade in services and distinguishing them from obstacles to "investment" or "establishment", and the lack of data on services, and lack of any international understanding on data collection, classification, data needed for any analysis, and problems of confidentiality.

At the meeting of the "services group" last week, third world countries participating in the exercise would appear to have objected to the emphasis in the proposed agenda, for focussing future activities of the group on "issues on services" with a view to making recommendations to the next session of the contracting parties.

They are reported to have underscored the considerable gaps in the process of exchange of information in 1985 brought out by the chairman of the group in his report to the CPS, and stressed the need to continue with this exercise before attempting to tackle the issue of recommendations.

Also, the third world participants are reported to have underlined that the only "recommendations" the group could tackle was whether "multilateral action on services is appropriate and desirable", and not whether there should be any negotiations on services in the new round or what issues should be negotiated in the new round.

In giving some support to the third world views and calling for consideration of the UNCTAD views, the European Communities would appear to have pointed out that the national studies so far circulated via GATT, and considered by the group, all related to industrial countries, and there was thus "an obvious bias" in the GATT consideration of the issue.

The UN Conference on Trade and Development, the EEC expert is reported to have pointed out, had done some work on the services issue, and had brought out a report on "services and the development process", and the UNCTAD secretariat should be invited, both to present the report to the GATT group, and send an authorised representative to attend the next meeting of the group (March 24-26) to explain the report on the subject and clarify its views.

In its study presented to the trade and development board in 1984, UNCTAD secretariat has questioned the "three-stage theory" of development, namely that development moves from agriculture to manufacturing and then to services.

UNCTAD had argued that services played an important role in the process of development, and that through control over supply of services, the existing comparative advantage of countries in production and export of goods could easily be negated and reversed.

Also, the secretariat report had challenged the view that "free trade theories" determined the trade flows in services. UNCTAD had also cautioned against confusing problems of "trade" with problems of "investment" or "establishment".

Since 1982, the U.S. has been resisting any involvement of UNCTAD or other international organisations on the services issue, and has been trying to insist that any such role would have to be matched by agreement on a role for GATT and its secretariat.

GATT itself is only a provisional treaty, and the general agreement does not even mention the GATT secretariat.

At the time the general agreement was signed, the general expectation had been that the Havana charter and the international trade organisation and its secretariat would come into being soon, and take over the functions of GATT.

But when this proved not feasible, there was an effort to provide GATT with an institutional framework, and formalise the role of the GATT secretariat, on the lines of other international secretariats.

But this move failed.

And in the case or services, as on other issues, the GATT secretariat is able to undertake only such tasks as are specifically agreed upon by all the contracting parties.

The U.S., last week, is reported to have sought to balance the invitation to UNCTAD with a mandate for the GATT secretariat, to formulate its views on "trade in services" and "obstacles to this trade".

A GATT secretariat "non-paper" produced for the group would appear to have sought authorisation for the secretariat to prepare a note analysing the issues and concepts relating to national regulations affecting domestic sales of services by suppliers of foreign origin, the motivations behind (...), and suggest possible approaches to deal with such matters.

India, supported by the EEC, would appear to have objected to such terms of reference to the secretariat.

The EEC would appear to have underscored the point made in several national studies (of industrial countries) that the national regulations were in many cases per se valid and motivated by regulatory considerations and had (...) "trade in services", and thus could not be objected to as such.

India and other third world countries, as well as the EEC, would appear to have challenged the capacity or the desirability of the GATT secretariat getting involved in questions of "motivations" behind such regulations or how to tackle them.

The U.S. would appear to have sought a "flexible mandate" for the GATT secretariat to enable it to identify "obstacles" to trade in services and how to deal with them.

India and other third world countries however objected to this on among other grounds the fact that the question of GATT jurisdiction was yet to be agreed upon, and the secretariat could only play a role that was acceptable to all participants.

It was also noted that even in an area where there was general agreement, as in trade in goods, the very same countries now seeking definition of "obstacles" to trade in services were arguing (in UNCTAD) that it was not possible to define of non-tariff "measures" and "barriers" to trade.

The view that the GATT secretariat should not undertake " an ambitious" role at this stage, and define "obstacles" to trade in services or " possible approaches" to deal with them, found support from France.

Normally in GATT, member-countries. of the EEC do not speak or intervene, and only the EEC presents a community view.

Ultimately, the U.S. withdrew its insistence for a "flexible" GATT secretariat mandate.

The GATT secretariat, it was agreed, should prepare a note analysing the issues and concepts related to national and international regulations affecting international transactions in services, with specific reference to their tradeability, drawing on the information available in national studies and discussions that had taken place in the group so far.

The secretariat was also asked to formulate questions regarding these issues and concepts.

Third world participants in the discussions said that it was becoming increasingly (...) that as the group got into detailed discussions on services, there was not only a vast gap between the positions of the U.S. and the third world, but also among the industrial countries themselves - both between the U.S. and the EEC as such, and among the EEC countries themselves, with the position of France and some others not too different from that of India and other third world countries.