SERVICES COUNCIL APPROVES MODALITIES FOR AUTONOMOUS LIBERALISATION

After more than two years of discussions, the special session of the Council for Trade in Services (CTS) approved modalities for the treatment of autonomous liberalisation on 6 March. The new agreement on modalities for autonomous liberalisation entails a sign of momentum at a time when WTO negotiations in most areas are stalling. One observer noted that the services negotiations function as the engine of the Doha Round, and WTO Secretary-General Supachai Panitchpakdi stated that "this agreement should inject new dynamism not only in the services negotiations but also in other areas of the Doha agenda". As reported last week, countries had reached near-agreement already on the subject, but needed to iron out some concerns expressed by Bulgaria, Jordan, the Kyrgyz Republic and Oman regarding newly acceded Members (see BRIDGES Weekly, 6 March 2003).

Autonomous liberalisation measures refer to measures undertaken unilaterally by WTO Members to liberalise their services sector, as a consequence of their own national liberalisation processes or World Bank/IMF structural adjustment programmes since 1995. The negotiating mandate on autonomous liberalisation under the General Agreement on Trade in Services (GATS) was oriented toward the recognition of negotiating credits (benefits in subsequent negotiations under GATS) for national-level efforts in this regard.

During the special session of the CTS, the Kyrgyz Republic indicated that newly acceded Members -- including Albania, Croatia, Georgia, Jordan, the Kyrgyz Republic, Lithuania, Moldova and Oman -- had already undertaken major liberalisation efforts in their WTO accession processes, and thus had little or no margin for further flexibility. The US stressed that the modalities did not affect rights and obligations under the GATS. In response, various developing countries, including Peru, Uruguay, Brazil, Thailand, and Venezuela, indicated that the negotiations on autonomous liberalisation were separate from other negotiations under the GATS. They stressed that autonomous liberalisation must be recognised independently of the modalities for credits according to article XIX of the GATS (which sets out the negotiating mandate for credits for autonomous liberalisation).

Autonomous liberalisation: definition and value

The recently approved modalities, or guidelines for the granting of autonomous liberalisation (JOB(02)/35/Rev3, searchable at http:///docsonline.wto.org) define two important elements: what an autonomous liberalisation measure (ALM) is; and the criteria for assessing the value of an ALM. According to the decision, an ALM is:

* subject to scheduling under Part III (Specific Commitments) of the GATS, and/or leading to the termination of a most favoured nation (MFN) exemption;

* compatible with the principle of most-favoured nation (MFN);

* undertaken by the liberalising Member unilaterally since previous negotiations, in accordance with article XIX of the GATS; and

* applicable to any or all service sectors.

The criteria for assessing the value of an ALM may include:

*sectoral coverage;

* liberalising nature of the measure concerned (e.g. elimination of measures restricting market access; elimination of existing measures that are inconsistent with national treatment and/or MFN);

* date of entry into force and duration of the measure;

* share of the sector in the total trade of the trading partner;

* share of the trading partner in the total trade in the sector autonomously liberalised by the liberalising Member;

* importance and impact of the autonomous liberalisation measures on the liberalising Member's economy;

* market potential in the liberalising Member for the trading partner; and

* opportunities for the expansion of foreign participation in the sector after the introduction of the measure.

The granting of credit for ALMs will be advanced through bilateral negotiations. According to Chair Ambassador Jara's (Chile) statement, "the modalities do not create any legal obligations nor do they establish any automatic right to credit or recognition". This means that the modalities function as a predictable and transparent framework for bilateral procedures when seeking and consolidating credit, while there is some political control by the CTS on their general application. Nevertheless, this does not imply automatic recognition of credit for autonomous liberalisation.

Members interested in seeking credit would have to engage in bilateral negotiations and can, if they so wish, notify the CTS of this process. The type of credit that a Member can seek can take the form of: a liberalisation measure to be undertaken by a trading partner in sectors of interest to the liberalising Member under the GATS; a decision to refrain from pursuing a request addressed to the liberalising Member; or any other form that the liberalising Member and its trading partner may agree upon.

The new modalities apply to all WTO Members. Any Member that has engaged in autonomous liberalisation can request credit in the current negotiations. In the application of the modalities and in the recognition of credit, Members shall fully take into account flexibility provided for individual developing countries as well as the level of development of developing countries. Many developing countries consider this a small advancement toward recognition of the objectives of the GATS of increased participation of developing countries in the trade of services.

CTS request process slows down - developing countries remain active

Meanwhile, the end-March deadline for the presentation of requests for specific commitments in the services negotiations is rapidly approaching (the current negotiations include a request-offer approach to expand market access on a bilateral basis). At the beginning of March, only 30 WTO Members had presented requests to other Members. According to the head of the WTO Services Division, it is unlikely that the WTO would see a significant number of further offers coming in by the deadline. There are two main reasons for this. Firstly, although the services negotiations are the most advanced, failures in other areas of political importance -- such as access to essential medicines, special and differential treatment for developing countries, and lack of movement in agriculture negotiations -- have undermined the motivation of many countries to keep to the deadlines. Secondly, many developing countries are preparing their requests with care, to try to obtain actual concessions in this round of negotiations. In the previous Uruguay Round of negotiations there was no request/offer process, only an offer process, making it difficult for developing countries to obtain specific commitments in the areas of interest from their counterparts.

Developing countries have been active participants in the current request phase. At least one third of all requests presented come from developing countries. One source has indicated that Chile, China, Hong Kong-China, India, the Mercosur countries, Mexico, Panama, Pakistan, and Thailand already have presented their requests. Many of these requests have been very focused and oriented towards obtaining concessions in areas where these countries have a competitive advantage in the services field. Developing country requests basically emphasise four aspects:

* the need to leave some horizontal limitations including residence requirements, property limitations and authorisations for foreigners, minimal participation and visa granting processes;

* the need to reduce or eliminate restrictions for computer and related services;

* the need for particular treatment of mode four (Movement of Natural Persons) in a multilateral manner and deep liberalisation in this mode; and

* the need to widen the definition of professional services so as to include "occupations" according to the International Standard Classification of Occupations (ISCO) of the International Labour Organization (ILO).

Even if the services negotiations have been held back by the lack of will in other areas, the number, the type of focus and main aspects of developing country requests shows a raise in interest and an important level of sophistication and engagement by developing countries in current negotiations.

ICTSD Reporting; "WTO Official Says Limited Number Of Services Offers Expected by April," WTO REPORTER, 10 March 2003.