Professor Centre for WTO Studies

Professor Centre for WTO Studies

INTRODUCTION IMPORTANCE OF SERVICES 4 June 2013 2

Services : Their Economic Importance India Total share of services in the GDP is almost 57% India: Sectoral Share of GDP [ 2009-10] Primary 15% 57% 28% 4 June 2013 3

GATS 4 June 2013 4

The Background GATS Framework It envisages [Art. II] According MFN treatment to all member countries [Art. III] Maintain transparency in all measures of general application [Art. IV] Progressive liberalisation [Art. XVII] According same national treatment to service providers from all member States 4 June 2013 5

The Background GATS Framework Also provides for Selective liberalisation of services for developing countries Regulation of services provided by national and foreign service providers May exclude trade in services in the larger social and national security interests 4 June 2013 6

The Background Doha Declaration November, 2001 Article 15 Negotiation on Trade in Service shall be conducted with a view to: A. Promoting economic growth of trading partners B. Development of developing and least developed countries [LDCs] C. Guidelines and procedures adopted for negotiations by the Council for Trade in Service in March, 2001 reaffirmed D. Submit Initial Request for specific commitment by 30 th June, 2002 and Initial Offers by 31 st March, 2003 E. All negotiations should be completed by 2005 4 June 2013 7

How to make commitments Schedule of commitments A positive aspect A government makes commitments only for those sectors it wishes to open A negative aspect a listing of all the conditions (or limitations) a country intends to place on trade in services (regarding market access, national treatment and others) 4 June 2013 8

Countr y A Modes of Supply of Services Mode 1 Countr y B Service Provide r Consu mer 4 June 2013 9

Countr y A Modes of Supply of Services Mode 2 Countr y B Service Provide r Consu mer Consu mer 4 June 2013 10

Countr y A Modes of Supply of Services Mode 3 Countr y B Service Provide r Consu mer 4 June 2013 11

Countr y A Modes of Supply of Services Mode 4 Countr y B Service Provider Service Provide r Consu mer 4 June 2013 12

Countr y A Modes of Supply of Services Mode 4 Countr y B Service Provider Service Provide r Consu mer 4 June 2013 13

Countr y A Modes of Supply of Services Mode 4 Countr y B Service Provide r Service Provide r Consu mer 4 June 2013 14

World Trade in Services Source: WTO, 2005 1% 28% 57% 14% Mode 1 Mode 2 Mode 3 Mode 4 4 June 2013 15

Rights and Obligations under GATS Progressive Liberalization (Article XIX) In each successive round of negotiation and should be done in a way to promote economic growth of all trading partners and development of developing countries The basic aim being to reduce any measures that have a trade distorting effect and at the same time respecting each individual national policy objective 4 June 2013 16

Rights and Obligations under GATS Transparency (Article III) Each trading partner is under an obligation to notify and identify its regulations, policies or administrative procedures that might affect services or service providers in any way to the Council on Trade in Services Under this governments are to maintain an inventory of all the regulations that affect services and establish Enquiry points to which trading partners can address their queries to 4 June 2013 17

Rights and Obligations under GATS Most Favored Nation (Article II) 4 June 2013 18

Rights and Obligations under GATS National treatment (Article XVII) 4 June 2013 19

Mutual Recognition Agreements Article VII Allows scope for recognition of education or other qualifications obtained by an individual supplier in other member states, without MFN obligations Such recognition can be granted through agreement or on autonomous basis Provided such recognition is not on exclusive basis, i.e. members are given opportunity: to negotiate their accession to such agreements; or to demonstrate that their requirements be recognised as well overall trade barriers are not raised for non-participants 4 June 2013 20

Domestic Regulations Purpose of regulation The right of the member to enforce domestic policy Trading partners need to be aware of the state of play Expected efficiency gains from liberalisation made without compromise on quality or other policy objectives 4 June 2013 21

Domestic Regulations Disciplines Needed to ensure regulations do not act as barriers to trade Hence a three step test envisages that domestic regulations are: Based on objective and transparent criteria, such as competence and ability to supply the service; Not more burdensome than necessary to ensure quality of the service; In the case of licensing procedures, not in themselves a restriction on the supply of the service 4 June 2013 22

Domestic Regulations Mandate for disciplines on Qualification Requirements and Procedures (QRP) Licensing Requirements and Procedures (LRP) Technical Standards 4 June 2013 23

Services Negotiations

Mechanism of negotiation Requests and Offers Requests made on individual trading partners on bilateral or plurilateral basis Offers made to all member states on multilateral basis Offers and commitments Offers are documents for negotiations and can be altered Commitments are binding 4 June 2013 25

Mechanism of negotiation Interests Offensive Defensive 4 June 2013 26

Mechanism of negotiation Offensive Interests Identification of interests Assessment of regulatory regime in target market Be ready for reciprocal demands in the same or other sectors 4 June 2013 27

Mechanism of negotiation Defensive Interests Identification of interests Assessment of the extent to which domestic regulations can protect the sector Look for suitable regulatory modifications In an expanding market condition, domestic market generates offensive interest 4 June 2013 28

Mechanism of negotiation Balancing Interests Sectoral interests need not match national interests Sectoral interests can be sacrificed if overall interest served on the balance Sectoral definitions not harmonised across jurisdictions: Hence negotiations can be complicated 4 June 2013 29

Issues/Concerns Unknown territory first time negotiation on services Methodology for Negotiations still evolving definitions being modified Long term impact Economic, social & cultural Lack of information Service providers, local regulations, etc. 4 June 2013 30

Issues/Concerns Advantage developed countries! More sophisticated economies have more sophisticated: Negotiating strategies Regulatory regimes Databases Legal systems Academic and research backup 4 June 2013 31

Issues/Concerns Advantage developed countries! Developed economies offer: More services in trade More reciprocal opportunities at lower end of the value chain May lock in the upper end of the value chain though 4 June 2013 32

Issues/Concerns Changes in Policy will be necessitated to regulate foreign service providers No regulators Many sectors do not have national level regulators Difficult to monitor Intangible nature of Services 4 June 2013 33

Thank you 4 June 2013 34