Jul 21, 1988

MEXICO SPELLS OUT DEVELOPMENT CONTENT OF SERVICES AGREEMENT.

GENEVA, JULY 19 (IFDA/CHAKRAVARTHI RAGHAVAN) -- Mexico has spelt out some of the concepts and details of what a multilateral framework for trade in services should contain in order to subserve the objective of "development of developing countries".

This is one of the two objectives mandated by in the Punta del Este declaration, the other being the economic growth of all trading partners.

"Liberalisation" of trade in services is not an objective at all, and the mandate only envisages as a secondary objective "the expansion" of trade in services "under conditions of transparency and progressive liberalisation".

In the more than 18-months of discussions in the Uruguay round Group of Negotiations on Services (GNS), industrialised countries have present proposals and ideas on the basis that "liberalisation" of trade in services is the objective of the negotiations.

While a number of third world countries in their interventions and statements, have been underscoring the development dimension, Mexico in its communication has spelt out some of the details to achieve the development objective.

In March, Argentina had tables a paper on the possible elements of a framework in services, which also dealt with the development issue.

A Mexican communication, circulated to the GNS, noted that Mexico’s participation in these negotiations was on the premise that negotiations and their results would promote its economic development.

This concept of development, Mexico has said, should be "an integral part of the framework agreement and of sectoral agreements...and not a series of waivers, exceptions or ‘special treatment’, as has so far been done in GATT".

Such a special treatment or waiver, the Mexican communication points out, had not brought "tangible benefits" to third world countries.

To give real content to the development objective, it would be necessary to establish a number of secondary objectives.

The secondary objectives should achieve sustained growth of production and productivity of the service sector in the third world, in particular of the "new" producer services, which enable increase in efficiency and productivity of all economic activity, especially manufacturing, and including exports of goods and services.

They should also enable sustained growth of employment in the services sector in the third world, especially that of the "new" producer services, which provided the highest salaries and had a multiplier effect on incomes and employment in the rest of the economy, Mexico has suggested.

This is presumably an answer to those pushing for free trade in services on the ground that it could increase employment in the third world, but envisage such employment in low-paid service jobs in retailing or Macdonald-type fast-food shops, etc. (where northern enterprises will earn profits through franchising), while "reserving" the paid and more remunerative services to the enterprises of the north.

The subsidiary objectives, the Mexican communication said, should also enable:

--Improvement of international competitiveness of raw materials and processed and semi-processed goods as well as services produced by third world countries,

--Sustained growth of exports of third world countries on the world market for services, including "new" producer services, and

--Fair and equitable access to new technologies generated or distributed internationally by the services sector.

On the last, Mexico has said, that technologies relating to telecommunications and data processing, including remote date processing and telematics were of particular interest as they represented about 80 percent of the new technologies.

Similarly, access to world information networks was also extremely important to third world countries.

But these objectives would never amount to more than "a list of good intentions", unless concrete measures were adopted in the framework agreement and sectoral agreements to be negotiated during the Uruguay round or subsequent rounds of negotiations.

Spelling out some of these concrete measures, Mexico has suggested the establishment of the principle of "relative" reciprocity in recognition of the fact that there could not be "equal treatment among unequal parties".

Labour and labour-intensive services in which third world countries are competitive should be the subject of negotiations in the Uruguay round.

The framework agreement to be adopted should not only deal with regulations having a negative impact on trade in services, but also labour flows. The latter should be included to compensate, albeit marginally, for the fact that industrialised countries controlled more than four-fifths of international trade in services.

The negotiations should not include the "right" of establishment or commercial presence of Direct Foreign Investment (DFI), in view of the fact that the Punta del Este mandate referred only to "trade" and not to "international transactions" in services.

Industrialised countries should undertake not to impose any further restrictions on imports of services from the third world, as from the mid-term review meeting to be held in December 1988.

Laws and regulations already in existence or adopted in future in the third world countries concerning the "new" services or the greater transportability of the "traditional" services, should not be considered barriers.

Laws and regulations concerning DFI, equal treatment for services whether domestic or imported, which do not include DFI, and non-discrimination among foreign international suppliers of services, but without implying the same treatment as for domestic suppliers of same or like services, should not also be considered barriers.

Industrialised countries should grant third world countries unconditional and unrestricted most-favoured-nation treatment, both in the framework agreement and in sectoral agreements.

In negotiating sectoral agreements, preference should be given to liberalisation of services exported by third world countries.

Also, ways and means should be studied to speed up the transfer of technology from industrial to third world countries.

Towards this end, the GNS should study the code of conduct on transfer of technology, which had been the subject of negotiations in UNCTAD for ten years.

If the code is not found to be sufficient to attain the objectives of transfer of technology, further measures should be studied.

The framework agreement and sectoral agreements should reflect the fact that one of the main national policy objectives of laws and regulations of third world countries is their economic development.

These laws and regulations for promoting economic development partly reflected the infant industry argument and partly the fact that only the countries themselves could determine their own development needs.

Mexico itself did not believe in a "perpetual infant industry" as had been shown by the broad external liberalisation of its markets for goods.

However each third world country is the best judge of how to serve its development interests.

The sectoral agreements to be established under the framework agreement, at least in the case of third world countries, should be considered as independent both of each other and of the results of the negotiations in goods, Mexico added.