Much to the disappointment of Council for Trade in Services (CTS) Special Session Chair Ambassador Jara, Members convening for a 9 December CTS negotiation meeting were again unable to agree on a Chair's proposal on the establishment of modalities for obtaining 'credits' for autonomous liberalisation (AL) in the services sector. Jara's most recent draft was blocked chiefly by a group of developing countries demanding differentiated treatment between developed and developing countries requesting 'credits' for liberalisation measures undertaken unilaterally. Notably, least- developed country (LDC) Member Zambia submitted a new proposal on the treatment of LDCs in the services negotiations, which was received by key trading partners as "interesting" but partly too prescriptive and ambitious.

'Credits' for autonomous liberalisation (AL)

The revised Chair's draft on AL modalities issued on 20 November (JOB (02)/35/Rev.2) came after a half-year logjam in the AL discussions. Members have thus far been split over four main issues left from a previous debate over how to handle countries' services liberalisations undertaken unilaterally since the conclusion of the Uruguay Round (see BRIDGES Weekly, 4 June 2002). The four items include: newly acceded Members; 'credits' for developed countries; concessions on trade in goods; and binding AL commitments.

Addressing the major remaining question of whether both developing and developed countries should be equally eligible for 'credits', the new Chair's draft, in general, puts both groupings on equal footing, but adds that Members, when granting 'credits', should take fully into account developing countries' flexibilities under the General Agreement on Trade in Services (GATS) (particularly those set out in GATS Articles IV and XIX:2), as well as "the lower level of development of individual developing country Members, particularly the least developed among them." This language had been added to the previous modalities draft due to pressure from a group of 24 developing countries demanding that -- at least -- no full reciprocity would be required from developing countries receiving 'credit' request from developed country trading partners (see BRIDGES Weekly, 31 October 2002).

However, these countries, including Brazil, Argentina, India, Pakistan, Egypt, Indonesia and Thailand reportedly rejected the new wording, as they considered it to contain the notion of graduation (i.e. differentiated treatment) within developing countries themselves - an idea which is currently being pushed by Members such as the EC and the US in the overall framework of the Doha Round negotiations. Instead, larger developing countries said they preferred the notion of 'lower level of development of developing countries' as a whole, and not only of "individual" developing country Members.

Furthermore, some eastern European Members, including Hungary and Bulgaria -- backed by the European trade bloc -- did not agree to the proposed text as they also claimed a need for a certain degree of flexibility for economies in transition. One observer reported that the Chair of the special session had expressed "his frustration about Members' nitpicking in negotiating a political decision that is not legally enforceable anyway". Nevertheless, a trade delegate explained, developing countries would still push for a more favourable special and differential treatment language in the AL modalities to at least avoid the possibility that "the developed Members could turn the whole 'credit' issue against the developing countries."

Zambia's proposal on LDC modalities

Zambia, on behalf of the least-developed country (LDC) Members, tabled an informal proposal on modalities for the special treatment for LDCs in the current services negotiations (JOB(02)/205). Building on an earlier informal submission tabled by Uganda (JOB/(02)/30), Zambia stated that requests presented to LDCs should be "limited in terms of numbers of sectors and modes of supply and scope of commitments." In terms of detail, the LDCs inter alia demanded that they should not be requested to remove conditions attached to new market access commitments; they should not be requested to make "additional commitments" under GATS Article XVIII on their domestic regulation; full market access and national treatment should be granted to LDCs in sectors of interest, especially in mode four (movement of natural persons); Members shall facilitate access to LDC services through intergovernmental cooperation and through disciplining "certain business practices that restrain competition and thereby restrict participation of LDCs" in services trade; and that LDCs should not be requested to grant 'credits' for autonomous liberalisation. Additionally, the group requested Members to finance technology transfer to, and training for, LDCs and to effectively assist them to conduct national assessments, to strengthen supply capacity, to identify their export interests and to enhance their participation in the negotiations.

In their preliminary comments on the Zambian proposal, Members such as the EC, the US and Japan generally welcomed the paper as an interesting and useful contribution which showed the interest of LDCs in the negotiations and their interest in participating. However, they said that several issues raised, particularly the provision on technical assistance, would go beyond the scope of the negotiation mandate, whereas other proposals would prejudge the negotiating outcomes, as in the case of providing full national treatment. The EC argued that the modalities should help LDCs participate in these negotiations, not exclude them.

Some Members further stated that, in order to take into consideration the particular export interests of the LDCs in the offers to be drafted, they needed to know the LDCs' interests in specific sectors and modes. Consequently, they encouraged the LDCs to submit their requests to trading partners so that more help could be offered in detail. On the other hand, several major trading partners reportedly signalled their sympathy e.g. for the proposal not to seek 'credits' for autonomous liberalisation from LDC Members.

As the CTS special session was not able to address all agenda items of the 9 December meeting, the Council will resume -- after the WTO's winter break -- on 13 January.

The subsidiary bodies to the CTS submitted their annual reports to the Council. The submitted reports are:

Committee on Trade in Financial Services (S/FIN/8, searchable at http://docsonline.wto.org; Committee on Specific Commitments (S/CSC/7); Committee on GATS Rules (S/WPGR/8); and Committee on Domestic Regulation (S/WPDR/4).

ICTSD reporting.