INDIA SUBMITS CAUTIOUS SERVICES OFFER

India circulated its initial offer in ongoing services negotiations under the WTO General Agreement on Trade in Services (GATS) on 12 January. The offer (TN/S/I/IND, available at http://www.ictsd.org/issarea/stsd/resources/docs/India_offer.pdf) indicated India's commitment to liberalising its economy in certain modes of supply in sectors such as professional businesses, engineering, tourism and transport. Nevertheless, the offer maintained some spaces for public policies and for the use of a range of economic instruments. Preliminary reactions from WTO Members ranged from welcoming remarks by certain developing countries to disappointment over the low level of commitments by key developed country Members such as the EC.

The services negotiations are currently in their request-offer phase. In this phase, countries present other WTO Members with their commercial demands, and commitments they would be willing to make in this round of negotiations. India's services offer comes as global players such as the US and the EC are displaying an effort to move the Doha round forward. This offer, like the offers from other WTO Members, is conditional on the overall outcome of negotiations underway, and also to the sensitive issue of developing general disciplines for domestic regulation.

Moderate market access improvements

India's services liberalisation offer focuses primarily on modes one (cross-border supply), two (consumption abroad) and four (movement of natural persons). The offer contains various horizontal limitations on mode three (commercial presence). The offer improves market access and national treatment commitments in the following sectors and sub-sectors: accounting and book-keeping services; engineering services; computer services; medical and dental services; services provided by midwives nurses, physiotherapists and para-medical personnel; construction and engineering services; financial services; tourism services; and maritime transport services. Market access limitations under mode three are retained in these sectors, including limits on the ownership of Indian firms. Moreover, in many cases national treatment in mode three is kept unbound (not committed).

With regard to mode four, there are almost no limitations for certain professions including business visitors, intra-corporate transferees, managers, executives, specialists and employees of foreign companies for short periods of stay (less than one year).

Emphasis on policy objectives

By leaving horizontal market access and national treatment in modes three and four largely unbound, India incorporated various treatment limitations in its initial offer. According to a trade source these limitations are apparently designed to safeguard constitutionally designated territorial areas and certain policy instruments that India considers necessary to pursue public policy objectives. As this scheduling would not result in new tangible commitments, some sources speculate that the limitations were included for reasons of transparency and clarity.

The main market access limitation relates to "Scheduled areas and Tribal areas," which the Indian president can designate under the Indian Constitution. While market access is not prohibited per se in these scheduled areas, it can be denied. The main reason these areas have been specifically designated is because of their special character and culture due to a predominantly tribal population.

The national treatment limitations take the form of policy instruments that India can use in a potentially discriminatory manner (favouring nationals over foreigners). These instruments include the following: performance requirements regarding technology transfer; approval of foreign investments in certain cases; taxation; subsidies; and special treatment to scheduled castes, tribes and weaker sections of society.

Mixed preliminary reactions

The Indian offer has been sent to the WTO Secretariat and will be formally presented to the Services Council Special Session in March 2004. In a preliminary reaction to the offer, one trade source considered it "a good first step, the fact that it is being presented gives impetus to the current GATS offer and request process". Most developing countries have yet to submit their offers in this request-offer phase of the services negotiations. Among the around twelve developing countries that have presented their offers at this stage, India's offer is considered key due to the country's leadership in WTO negotiations.

Some Members reacted by commending the efforts by India in making new openings in the areas of computer and related services, and in the financial and maritime sectors. However, not all responded warmly. The EC indicated its "disappointment with India's offers on trade in services and hopes this country would improve it". According to Trade Commissioner Pascal Lamy, "India's offers fails to redress the current low level of Indian GATS commitments, and in some areas does not even reflect the current level of openness in the Indian market". The areas the EC would have liked to see more movement in included the telecom, distribution, or environmental services sectors.

ICTSD reporting.