Mar 7, 1990

SERVICES - THIRD WORLD COOL TO SECTORAL DISCUSSIONS NOW.

GENEVA, MARCH 5 (BY CHAKRAVARTHI RAGHAVAN) -- Attempts of the major Industrial Countries to carry on parallel discussions on sectoral annotations to a multilateral framework on services and seek the legitimisation and blessings of the Group of Negotiations on Services for discussions on this among themselves have been opposed by the Third World countries.

During last week's meetings of the GNS, it was apparent that the US and EEC were holding discussions outside on the issue of sectoral annotations to the multilateral framework, focussing specifically on the financial services sector.

The structure of the proposed multilateral framework envisages a general framework of rules and principles to be applicable to all "trade in services", with provisions for details and sectoral annotations on specific points for individual sectors wherever it is considered necessary.

The agreed work programme of the GNS envisages discussions on sectoral issues only at the May meeting.

Last week, during the informal meetings the GNS would appear to have discussed mainly the draft framework and approach put forward by a group of Latin American and Caribbean countries, all of whom in effect insisted on a discussion of their paper.

In the discussions two points of difference between the approaches of the ICs and that of the Third World countries, and especially the Latin American sponsors of the paper, emerged.

The first related to whether the framework should be based on t positive list approach of the Third World, namely, cover services to be listed in an annex, or the U.S. negative list approach, namely all "traded services" should be covered, but with each country excluding in an annex any specific sector or sub-sector.

The former would enable Third World countries to make sure that sectors of interest to them are included as a price for inclusion of sectors of interest to the ICs. The latter would enable ICs to exclude the labour-intensive services.

While all ICs would like to exclude labour and labour-intensive services, the U.S. is also under pressure from its domestic lobbies to exclude sectors like maritime transport and some subsectors of financial services.

The second issue related to the question whether there should be parallel negotiations for an initial level of market access commitments, with each signatory committing itself to such an initial level as a kind of entry fee to join the agreement.

The ICs want such an initial level of commitment which, in their view, would include a "freeze" on new regulations not in line with the framework, while all existing regulations would be saved and be only the subject of future liberalisation negotiations a step that would suit them.

Third World countries have generally taken the position that they cannot contemplate any negotiations for initial level of access commitments without knowing the nature of the framework, and that the first round of negotiations for liberalisation could take place only after the entry into force of the general framework.

They have rejected the analogy of the GATT where its provisional application and entry into force involved each signatory including a schedule of its tariff concessions, which had been negotiated side by side.

Side by side with the formal and informal meetings of the GNS, it would however appear that the US and EEC, and perhaps a few other ICs, had been holding discussions on the issue of sectoral annotations to the framework.

Even the Chairman of the GNS was not aware of and excluded from these discussions of the major trading partners whose main objective has been to negotiate among themselves and cook up an agreement and then present it to others for formal adoption.

The discussions were reported to have focussed on the Financial Services - an area where there are some sharp differences between the U.S. and EEC approaches, with the U.S. wanting to exclude some subsectors. The situation is further clouded by the EEC's moves for single European market in 1992, when banks established in one member-state would be able to operate freely in others. The differences between the U.S. and EEC revolve round the question of the ability of the banks to operate in other financial services like trading in securities and other new financial instruments.

The two sides reportedly are far apart.

When the limited consultations outside became known and met with some criticism, the U.S. and EEC would appear to have sought to legitimise it by suggesting that the GNS would be kept informed about the progress in these talks and that it would be open to those who wished to join.

India, supported by a few others, however reportedly objected to such sectoral discussions now, pointing out that the timetable agreed to in the GNS envisaged such discussions in the future after discussions and negotiations on the basic structure of the multilateral framework.

Transparency, India reportedly said, did not merely mean that others should be kept informed of when and where of discussions elsewhere but an opportunity for others to participate meaningfully. This was not possible at this stage without a clear idea of the framework and its rights and obligations.

The GNS could not also reach an agreement on an Australian suggestion that the GATT Secretariat should produce a paper on the issue of "subsidies" in services sector.

Brazil and other Latin American countries, supported by India and others, noted that their framework text draft had made a reference to the framework covering anti-competitive activities of service suppliers.

In this overall context they could agree to a secretariat paper covering all aspects of anti-competitiveness, and not merely those from governments through subsidies. The restrictive practices and restrictive business practices of the enterprises and provisions in national and international agreements to deal with them should also be covered.

A secretariat clarification that it could, from its GATT experience, produce a paper on "subsidies", but that it had no experience in the area of RBPs and hence it would be more difficult did not satisfy Third World participants who insisted that the services framework had to cover both governmental actions that restrict or distort trade as also those of service suppliers.

The U.S. was agreeable to a secretariat paper on "subsidies" as a distortion to trade, but not on restrictive business practices arguing mainly that the attempts at Punta del Este and at Montreal to include RBPs in the Uruguay Round had not received a consensus and hence it could not be covered.

This was not acceptable to others however.

Some participants noted that at Punta del Este, the references to the RBPs related to the decision of the Contracting Parties to launch the GATT multilateral negotiations on trade in goods, and the dispute whether GATT covered only governmental actions or those of private parties.

There was however no such restriction or stipulation in the negotiations on services, which were outside the GATT framework and every issue, was wide open.

The next meeting of the GNS is scheduled for March 26-30.