Nov 5, 1987
U.S. PROPOSES FRAMEWORK AGREEMENT ON SERVICES.
GENEVA NOVEMBER 4 (IFDA/CHAKRAVARTHI RAGHAVAN) – The U.S. proposals of concepts and elements for a general framework agreement in services came in for some sharp criticism from third world countries at the meeting of the Uruguay round group on services Tuesday, according to participants. Japan, Canada, Australia, New Zealand, and the Nordics reportedly gave general support to the U.S. The EEC welcomed it as a "contribution" but reserving its comments after study. But India, Brazil and others saw the proposals as contrary to the Punta del Este mandates. Besides the U.S., Sweden for the Nordics and Mexico also put forward papers. Participants reportedly offered preliminary comments on the U.S. paper, reserving their views for the next meeting. The U.S. proposals were tabled in the GNS, and copies of its proposals were made available by the U.S. negotiator on services, Richard Self, at a press briefing Wednesday. Participants said the U.S. proposal had met with some sharp criticism and questioning by third world delegations and several of the questions posed by them, including some that figured at his press conference, had elicited no response at all. Third world delegations, they said, complained that though the U.S. claimed in its paper that it had taken into account discussions in the GNS in formulating its proposals, none of the points raised by them or their concerns had been addressed. The U.S. had not addressed the issue of "development" which was "the yardstick" provided by the Punta del Este declaration nor the question of definition of "services" and what constituted "trade". A number of countries including India, Pakistan, South Korea, Jamaica, and Mexico said there could be no service agreement without the inclusion of labour and labour-intensive services. There was also criticism of the U.S. "dichotomy", in seeking a "general" framework on services without specifying or defining the sectors, while in other negotiations it sought sectoral agreements before moving to the general. Several countries noted that at the September meeting of the GNS, they had raised the "development" issue and underscored their view that all proposals would have to be tested by that yardstick. But the U.S. had ignored this. India reportedly said that the U.S. approach seemed to be that "liberalisation" and "opening of markets" was the end objective, and that "development will be a by-product". While the mandate dealt with "trade in services", the U.S. did not define "trade" at all, but was seeking an agreement to cover production, distribution and marketing of services. The U.S. concept of "subsidies" (domestic and export) to be prohibited was tighter than that for goods in GATT. "Do not do anything to promote services in your domestic economy, since it would be a potential danger to foreigners", seemed to be the U.S. approach. India also sought clarification as to how the U.S. proposals for "national treatment" and "non-discrimination" would apply to labour and labour intensive services. This issue, India reportedly noted, had been raised in the GNS as early as march 1987, and a number of third world countries had said that labour and labour-intensive services should be included, but still there had been no response. The U.S. said that in regard to labour services there was "the problem of sensitivity of markets". But third world countries said that services like financial or data services were also "sensitive" to them. The EEC agreed that "all difficulties and sensitivities of all countries" should be discussed, while Hong Kong felt that sectors like air services, shipping and telecommunications should be excluded. In its paper, the U.S. said the GNS should concentrate its efforts on elaboration of the service framework, and work towards agreement as soon as possible. The framework should be designed to achieve a "progressive liberalisation" of a wide range of services sectors in as many countries as possible. While countries should have the sovereign right to regulate their service industries, the framework should deal with measures whose purpose of effect was to restrict access and operations of foreign service providers, and against adoption or application of measures whose purpose or effect would be restrictive or distortive of trade. The framework should apply to cross border movement of services as well as to the establishment of foreign branches and subsidiaries for purposes of producing or delivering the service within the host country. Countries should also agree to avoid adopting new restrictive measures on Foreign Service providers and apply the framework to the greatest extent possible to existing measures. Third world sources later said that this would mean that industrialised countries that already had regulations and restrictions would not be affected, while third world countries would be precluded from introducing regulations or restrictions. On the development issue, the U.S. said the framework should benefit every country "regardless of its stage of economic development" and should result in a "progressive and time-phased liberalisation of world services". This would contribute more positively to development by providing a more competitive environment, enabling consumers to utilise services with the most advanced technology at the lowest possible prices. Once the content of the framework was agreed upon, the GNS should extend coverage to a wide range of services, and using the framework as a reference negotiate individual sector agreements with additional and more detailed rules and greater precision and flexibility. There should be also be an obligation for transparency. Government promulgated service regulations for reasons unrelated to trade, but the framework should allow for examination of such measures to identify intended and unintended effects on access and treatment of foreign services and service providers. There should be the obligation to publish proposed and final rules, and interested parties should be given opportunity to comment on proposed rules. Once the rules were proclaimed and effective, provisions inconsistent with the framework should be subject to review under consultation procedures. The agreement should apply without discrimination to signatories, but not apply to non-signatories. Signatories should also be able to except some of their service sectors from the agreement, but there should be provision to limit such exceptions, such as by a non-application clause to those who have excessive exceptions. Another fundamental element should include national treatment to Foreign Service providers, including access to local distribution networks, local firms and personnel, customers, licenses to operate and right to use brand names. The framework should have rules governing use of subsidies, whether domestic or export, and deal with adverse effects on foreign competitors in their own market, third country markets and of the subsidising country. There should also be provision, analogous to those in GATT in articles XXII and XXIII for consultation and settlement of disputes.