Jun 16, 1998

EXPERTS FOR GATS SECTORAL PROTOCOL ON TOURISM

 

Geneva, 12 Jun (Chakravarthi Raghavan) -- An expert meeting on Tourism, under UNCTAD auspices, has recommended negotiation of a sectoral protocol on tourism in the WTO's General Agreement on Trade in Services (GATS) - providing for further liberalisation commitments in the sector and a reference paper on regulatory issues.  

The expert meeting (June 8-10) under UNCTAD's Commission on Trade in Goods and Services and Commodities had examined ways and means of strengthening the capacity for expanding the tourism sector in developing countries, with particular focus on tour operators, travel agencies and other suppliers, and also the related sector of air transport and the global distribution systems in tourism sector.  

In opening the meeting, UNCTAD Secretary-General Rubens Ricupero underscored the powerful contribution that the tourism sector has given to the development process, particularly in least developed and island developing countries -- where often tourism is one of the few, if not the only option, in the medium term for export-oriented development.  

But the positive effects of tourism and its contribution to the development process, Ricupero said, could be jeopardised by the leakage of foreign exchange earnings obtained by developing countries from international tourism -- a problem particularly acute for countries at lower stages of development.  

An UNCTAD secretariat document before the experts noted that the tourism sector has been expanding at double the rate of economic growth over the last 30 years, and that international trade in tourism services creates additional employment, generates added value and tax revenues, and attracts foreign investment and enables foreign currency earnings. While traditionally, tourism services have been concentrated in the industrialized countries, the share of developing countries in world tourism has been rising slowly to almost a third of the total.  

For many developing countries it is a fundamental source of income and foreign exchange, and one of the few development opportunities available, particularly for the least developed and island countries.  

Tourism services are supplied by hotels, tour operators, travel agents and transport companies. In their business relations with tour operators, many suppliers (hotels, tourism guides and land-transport providers etc) of tourism services in developing countries are hampered by their weak bargaining position and lack of negotiating skills, often resulting in unfavourable contractual obligations, UNCTAD says.  

The international tourism industry, Ricupero said, is also undergoing rapid change, as a result of long-term macroeconomic and technological transformations. It was impossible also to discuss trade in tourism without examining its relationship with the air transport sector, a sector which too has been expanding at a quicker pace than overall economic growth. The air transport sector itself is being transformed by rapid economic and technological change -- with a process of consolidation, concentration, privatization and internationalization involving establishment of mega-carriers and large international alliances.  

At institutional level this is exerting pressure for change in air transport policies and regulations - both in the domestic and international areas. An example is the establishment of regional and sub-regional regulatory frameworks.  

Technological changes are also having an important impact on tourism and among its main suppliers - with the Global Distribution Systems (GDS) becoming an essential tool for marketing. Access to the GDS is of key importance to suppliers of tourism services worldwide, and control of the major GDS by a small number of companies may be a market access barrier to small suppliers.  

UNCTAD points out that benefits and costs of package tour to service suppliers in developing countries depend to a large extent on the nature of the contracts between them and the tour operators. The contracts involve a block reservation for a future period at a negotiated price and specify the terms governing risk sharing in the event that not all the packages are sold. The tour operator has normally the greatest bargaining power during contract negotiations, and often exercise a monopsonistic power over the local suppliers - such as hotels - since, for the latter, serving package tours is a means of securing occupancy rate.  

The asymmetry of bargaining power is often revealed in the terms of the contract - with contracts often for a year or more and risks inherent in a long-term contract to a tour operator (such uncertainty of future demand for the package tour) reduced by negotiating various conditions favourable to the operator. Often the contracts provide for a substantial discount on the room price, no requirement of a deposit for booking, payment being made long after departure of the tourists, and tour operator retaining the right to return ('release back') of unfilled rooms shortly before arrival date - without any need to pay compensation.  

While the UNCTAD report, and those of the World Tourism Organization, highlight the potential for foreign exchange earnings, some non-official, country-specific studies, have brought out that with hotels run under franchise, most of the supplies (including comestibles) for tourists often imported, and other fees etc, the actual value-added remaining in the country can be a very small proportion.  

The experts suggested that an internationally agreed definition of the tourism sector should be universally applied - so as to facilitate acceptance and implementation of a uniform system of tourism accounting measures ('satellite accounts') to provide a clear measurement of the role of the tourism sector in economic development and trade. "Such a system," the experts said, "could then be used in international negotiations on services, for which adequate statistics are a necessary pre-requisite."  

With respect to services sector as a whole, the trade in services data is obtained as a residual in the IMF balance-of-payments statistics. While this issue, and need for proper data collection, through agreed definitions, in national accounting systems, and need for data including directions-of-trade data for services negotiations (to enable countries to know what they gain or lose) was raised at the beginning of the Uruguay Round by the UN's statisticians, it does not appear to have made much progress -- though a second round of GATS negotiations are to be held in 2000.  

The experts recommended that further liberalization commitments on trade in tourism should be negotiated under GATS. A sectoral protocol on tourism services may be required, including a reference paper on regulatory issues such as definitions, competitive safeguards, access to information, fair and transparent use of GDS, linkages between tourism and air transport, and security conditions for service contracts.  

Articles IV and XIX of the GATS should also be effectively applied to the tourism sector, by adopting measures which effectively foster greater participation by developing countries in international trade in tourism services, the experts said.

There should be effective mechanisms, including for joint implementation, to deal with anti-competitive practices in tourism and related sectors. Such practices should be identified in order to deal with the effects on trade of contractual practices relating to exclusive dealing, vertical integration and abuse of dominance.  

Multilateral and regional financial institutions were also invited to give priority to appropriate strategies for the economically and financially viable sustainable development of tourism and related sectors - in particular in financing infrastructure projects, provision of modern telecommunication services under pro-competitive regulatory regimes and human resource development activities.