SERVICES: MEMBERS DISCUSS MODE 4, DOMESTIC REGULATION

The 7-25 February 'cluster' of services negotiations continued this week at the WTO. The bilateral process of requests and offers of market access remains well behind schedule, although Indonesia gave it a boost on 21 February by announcing its initial offer to liberalise certain services sectors. In spite of the slow pace of the request-offer process through which services trade liberalisation actually takes place, the intensity of the talks has picked up. During the 21-22 February meeting of the Special Session of the Council for Trade in Services (CTS) Members discussed 15 separate proposals on issues ranging from domestic regulation to postal services. They also discussed 'Mode 4' of the General Agreement of Trade in Services (GATS), which deals with the cross-border movement of service providing individuals.

Supporters of further services liberalisation have been putting forward proposals and draft schedules for making liberalisation commitments in an effort to get support for their ideas before Members make their revised market-opening offers by the May deadline set out in the July Package (WT/L/579).

Indonesia boosts request-offer process

Indonesia's initial offer proposed opening parts of its education, energy, and health sectors to foreign service providers. Indonesia also offered to deepen its commitments on construction, financial, and maritime services, allowing overseas companies to increase their ownership of locally incorporated banks and construction firms from 49 percent to over 50 percent.

In spite of the Indonesian initial offer, the request-offer process is proceeding sluggishly. In his presentation to Members on the status of the offers that have been made thus far, Services Chair Ambassador Alejandro Jara of Chile indicated that only 47 countries had put forward initial offers. Furthermore, the actual market access offered by developed and developing countries was quite low, both in terms of the extent of liberalisation and the sectors covered. Significant markets including South Africa and the Philippines are yet to table their initial offers.

Members discuss classification under Mode 4

Members considered two proposals for defining and classifying different kinds of service-providing professionals under GATS Mode 4, which governs the so-called 'movement of natural persons.' Both proposals said that a common system for all Members to classify their Mode 4 market access commitments would facilitate deeper liberalisation across a wider range of sectors, as well as simplifying temporary entry and reducing the costs of doing business associated with such service provision.

Many trade scholars contend that liberalised temporary labour movement is the part of the multilateral trading system that offers the greatest potential returns for developing countries.

A joint communication (TN/S/W/31, not yet derestricted) from Argentina, Bolivia, Brazil, Chile, Colombia, India, Mexico, Pakistan, Peru, the Philippines, Thailand, and Uruguay proposed classifying professionals as 'intra-corporate transferees,' 'business visitors,' contractual service suppliers,' and 'independent professionals,' with a provision for Members to make commitments in categories that do not fit under the first four. A joint submission (TN/S/W/32) from Bulgaria, Canada, the EU, and Romania offered an essentially identical system of classification.

The two proposals differed in that the developing country paper included a section linking the shared categories of professionals to some potential common elements on market access, such as permissible duration of stay and other disciplines governing entry restrictions. For instance, they suggested that professionals classified as 'business visitors' be allowed to stay in the destination country for a duration of six months, with a provision for renewal. While recognising each Members' right to decide on market access conditions associated with their scheduled commitments, the proposal suggests prohibiting countries from imposing 'economic needs tests' before granting entry "except under exceptional circumstances which should be specifically stated."

The EU and Canada said that the proposed classification system was merely a tool for making commitments, specifying that different countries would reserve the right to grant different levels of market access. The developing country proposal, on the other hand, noted that "merely having an understanding on categories without linking it to market access may not be meaningful."

Informal papers presented on domestic regulation

According to GATS Article VI:4, Members are supposed to develop disciplines that may be necessary to ensure that domestic regulations (specifically qualification requirements and procedures, technical standards, and licensing requirements) "do not constitute unnecessary barriers to trade in services."

During the services meetings, a group of developing countries including Brazil, Colombia, and the Philippines tabled an informal 'room document' containing draft disciplines on domestic regulation, including definitions of the different types of domestic regulations mentioned above and transparency requirements for their promulgation and application. The draft rules strongly reaffirmed each Member's right to regulate and to introduce new regulations, as well as to define "the kind of universal service obligation it wishes to maintain." They also specified that countries would take into account the "degree of development of services regulations and of institutional capacities" in a particular Member when applying disciplines or judging whether it is in conformity with its obligations. The proposed disciplines also provided for special and differential treatment for developing countries, including longer time-frames for compliance and a call for Members to ensure that domestic regulations "do not create unnecessary obstacles to exports from developing country Members."

Additionally, the group's document proposed applying disciplines on regulatory measures to Members' procedures regulating the entry into their territory of professionals under GATS Mode 4. Although the paper did not specifically mention visa procedures -- which, if too onerous, can restrict cross-border movement -- it prompted some Members, in particular the EU and Japan, to assert that visa procedures should be outside the remit of disciplines on domestic regulation.

The US tabled an informal paper on transparency with regard to domestic regulation. It called for a 'prior comment period' before the entry into force of a proposed regulation, during which stakeholders would be able to comment on it. In addition to requirements to clearly publish regulations, the proposal would have Members provide 'inquiry points' to which interested parties would be able to address questions about a particular regulatory measure.

Both documents will be discussed in the Working Party on Domestic Regulation before the next 'cluster' of services talks.

Cluster to conclude 25 February

The WTO Secretariat opened the 21 February meeting of the CTS Special Session with a presentation focusing on the need for Members to be able to assess the potential effects of services market access offers before they table them.

During the past two weeks, Members have held several bilateral and plurilateral meetings; the different groups that work on particular issues in the services talks also met.

The current services cluster will conclude on 25 February with a meeting of the Special Session of the CTS. The next services cluster is due to take place in late June.

ICTSD reporting; "Indonesia makes WTO offer, helps talks on services," REUTERS, 21 February 2005.