Jul 3, 1986

LITTLE COMMON GROUND ON SERVICES BETWEEN NORTH AND SOUTH.

GENEVA JULY 1 (IFDA/CHAKRAVARTHI RAGHAVAN) -- A stocktaking exercise within the GATT group on services this week has brought out the considerable gaps in the perceptions of the industrial and third world nations, on various issues in the area of services and how to proceed further, according to third world sources.

While all seem agreed that a number of questions and issues have been thrown up as a result of the "useful exchange of information", there is considerable, unbridgeable, difference on how to deal with them.

The U.S. and its supporters believe that the questions and issues should be addressed and answered in negotiations for a multilateral framework within GATT.

The third world nations are of the view that these have to be answered and clarified, through a continued exchange of information, before attempting to answer the question of desirability and appropriateness of multilateral action.

Otherwise any answer now could only be negative, most of the third world nations who spoke reportedly insisted.

South Korea, the only third world countries who supported multilateral action, would appear to have agreed that a number of questions still required clarification, but that it preferred multilateral action in view of the severe bilateral pressures upon it on services issues.

The 1982 GATT Ministerial Meeting, which considered the services issue, invited interested GATT CPS to undertake national studies, putting off to the future any decision on the issue of multilateral action.

Since 1985, the exchange of information is being carried out in a separate exercise in GATT, at meetings organised and chaired by Felipe Jaramillo of Colombia, who was chairman of the GATT CPS in 1985.

At the November Session of GATT CPS, this group had been asked to make recommendations to the CPS, at their next session, to enable them to decide on the issue of multilateral action.

The group at eight meetings in 1985, and six this year, exchanged information on 16 national studies (all from OECD countries). It also had before it information/documentation from 14 international organisations, and heard the views of three of them – UNCTAD, UNCTC and ITU.

At the sixth meeting Friday and Monday, after discussing various issues relating to possible multilateral actions, the group also undertook a "stock-taking exercise" but found itself unable to decide on further work, third world participants said.

One of the participants said that much would depend on the decision, yet to be taken on the September GATT meeting at Punta del Este – whether it would be an ad hoc ministerial meeting or a meeting of the GATT CPS at ministerial level.

If the latter were the case, the group would have to meet again, before the September ministerial meeting, to consider the kind of report or recommendations it should make.

If the September meeting is not to be a CPS session, the group could meet later, the participants said.

On Friday, Japan is reported to have said that the exchange of information and thrown up some useful elements for multilateral action: definition and coverage of multilateral action, Most-Favoured-Nation (MFN) Treatment, national treatment, transparency of national regulations and decision-making, dispute settlement, development issues, public monopoly entities in services, and rights and obligations of constituent states in a federal structure.

The U.S. is reported to have suggested that the basic question whether or not there was a consensus on need for multilateral action should be addressed, rather than the various detailed questions.

However, in the Yugoslav view, the question of multilateral action if posed at this stage could only get a negative answer, since much work remained to be done.

India is reported to have underlined that a number of questions had been raised, and remained to be addressed.

The "national treatment" in GATT on goods arose only after a product crossed national boundaries and had been subject to customs and tariffs.

In the case of services, there was no question of tariffs, and the sponsors seemed to want "national treatment" to apply to foreign suppliers as for domestic suppliers.

This concept of equal treatment to foreigners and nationals, or equality of opportunity in employment for foreigners and nationals, was not known to GATT.

On dispute settlement, not a single potential dispute that would need to be settled had been provided in the exchanges.

GATT’s own dispute settlement mechanism in trade in goods was "in shambles", and it was not easy to understand how the proponents of multilateral action on services could call the GATT mechanism "the ideal".

Though the third world countries had not put forward any national studies, they had raised a number of issues of concern to them.

These were "developmental issues, alien to GATT’s – the role of transnational corporations, restrictive business practices, access to technology and transfer of technology. They could not be addressed in GATT, and it would be hence inappropriate to say that multilateral action on services could take place only in GATT.

A deliberate confusion had also been created between international trade and international transactions in services, and between Foreign Direct Investment (FDI) and "some form of commercial presence".

Several of the national studies of industrial countries had in fact included extensive discussions on FDI issues, which were not within the purview of GATT.

A number of FDI instruments in countries had been regarded as barriers to trade and their elimination or reduction made an objective of liberalisation of trade in services.

The national studies had not made a clear-cut distinction, as in the case of goods, between FDI and trade in services.

Establishment of foreign affiliates has been projected as one of the forms of international trade in services, to be considered on an equal footing with trade across the borders.

Policy instruments of countries in FDI – in the sectors of banking, insurance, and other sectors – had been listed in many national studies as obstacles to exchange of services.

All these issues would have to be clarified and resolved, before any answer to the appropriateness and desirability of multilateral action could be considered.

Till now "reciprocity" was the underlying principle in key service sectors – banking, civil aviation, etc.

If services were to be brought into GATT would there be "unconditional MFN", as GATT required in trade in goods, and what would be its implication for an across-the-board approach on services?

Would a country be forced to concede access to telecommunications in return for landing rights in civil aviation? Would unemployed Yugoslav hairdressers be accepted in the U.S. in return for Yugoslavia accepting more U.S. tourists?

Or would there only be sectoral MFN, and would the proponents of multilateral action in GATT agree with it?

Japan is reported to have said that its call for MFN and national treatment in services meant that these "useful concepts" in GATT should be applied "pragmatically" to the services sector.

Egypt is reported to have pointed out that there was considerable uncertainty even in regard to compilation of data, and clarifications were needed in many areas. Only 25 percent of the CPS, and all of them from industrial countries, had submitted national studied, and the group had not even listened to the views of all the international organisations involved, but only of three.

More time and clarifications were needed. Without it, "we are not convinced of the advisability and desirability of multilateral action, in an across-the-board approach".

Tanzania is reported to have recalled that even in 1982, it had placed reservations on the services question on grounds of lack of GATT jurisdiction, and nothing heard in the exchanges had convinced Tanzania of any need to lift its reservations.

There were already various international organisations dealing with various service sector aspects, several of them with their own multilateral framework.

The discussions in GATT suggested that they would be discussing "the sovereign policies of governments".

Tanzania could not also understand the talk of "pragmatic application of MFN".

Either one applied MFN, gave national treatment to foreign enterprises, or one did not. There could be no pragmatic compromises on this, the Tanzanian delegate is reported to have added.

The EEC would appear to have suggested that the exchange of information was only to identify problems. Only negotiations could resolve them. The multilateral action on services, in the EEC view, should take the form of negotiating a framework in GATT.

South Korea is reported to have favoured multilateral action on services, giving as the reason "the increasing bilateral pressures to open up our markets to services".

However, South Korea agreed that the national examinations had focussed on and dealt only with the interests of the advanced countries, and there was a clear imbalance.

South Korea could not accept the concept of "one-sided benefits". It was interested in the "movement of manpower", and this should be included in any discussion on services.

Brazil reportedly said that at this stage its answer would be negative to the question whether multilateral actions were appropriate and desirable.

Nigeria stressed the need for further studies and exchange of information, since there was not even an agreement yet on the definition of services. The role of multilateral institutions in various services sectors had not been fully explored and examined.

Without this, it was not possible to say whether an across-the-board approach to services was feasible and desirably and whether the forum for this would be GATT or some other institution.

In Nigeria’s view there was "a clear divergence of views", and a large number of CPS were not mentally ready to take up multilateral negotiations in services. The only solution was to continue with the exchange of information.

Argentina reportedly agreed that a number of issues raised had not been addressed or answered.

The question of national treatment sought for services had little to do with the concept of national treatment in GATT.

Also, the role of other international organisations in the services sectors had not been fully explored.

Canada was of the view that the exchanges had brought out the growing volume of international service transactions and the number of government-created barriers to such transactions. GATT was the only forum where these trade policy concerns could be addressed.

The U.S. delegate is reported to have argued that the resolution of some of the fundamental issues raised could be part of the process of the process of negotiations on a multilateral framework. The U.S. favoured multilateral actin "based on many of the basic principles of GATT" implying that the rules and principles of GATT as such could not be applied).

Australia agreed that a large number of issues raised had not been resolved, but felt that sufficient ground had been covered to embark on negotiations.

India took the position that the discussions in the exchange of information had not been successful in obtaining answers or clarifications to the questions posed. None of the basic concerns of India had been addressed, leave aside resolved.

Perhaps, the questions posed had not been answered because India was not considered important, or because the conclusions about multilateral action were already "pre-meditated" and the exchange of information was a mere formality.

In a GATT-like approach, the development role of services, and the issue of TNCS, raised by India and others, had very limited scope of being addressed.

Industrial countries may view them as mere "trade issues", but to India and other third world countries it was not so.

It was also "very touching" to see the faith of industrial countries in the GATT principles for services. But in the area of GATT responsibility in goods – whether in agriculture or textiles – the same countries were not ready to apply the GATT rules and principles. They should do so before seeking action on services.

Any negotiations on services could be possible only after the issues were identified and defined. Also, the negotiations must take place in "a more universal forum than GATT".

Yugoslavia complained there had been no balance achieved in the consideration of the issue. None of the services of interest to the third world countries had been considered, such as movement of labour, role of TNCS, etc.

Exchanges of information should be continued, and the issues discussed more thoroughly on a sectoral basis.

Referring to the absence of even statistical data, the Yugoslav delegate reportedly pointed out that two-thirds of Yugoslav earnings on services was due to remittances of workers. Would the issue of labour movement be examined under services?

The EEC is reported to have suggested that so far the views of those seeking multilateral action, and of those against, had been heard, but not the views of the third group who were silent.

The EEC delegate is also reported to have again stressed that in its view services could not be covered by "a GATT-like approach", and the GATT as such could not be applied to the services.