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Regulations for international trade in the service sectors (for instance, cross-border transactions by banks, insurance companies, the legal profession, accounting, telecommunications) were first negotiated in the Uruguay Round (1986-1994). At the end of that round, many observers argued that only a skeletal framework had been constructed for services and that real liberalization awaited future negotiations. An eight-year gap between the Uruguay and Doha rounds has led to further inaction.
Thus, services form an important component of negotiations in the current Doha Round of trade talks. Yet because other politically more volatile and difficult issues--agricultural trade reform, patents and AIDS, textiles, and apparel--have stolen the spotlight in the run-up to the ministerial meeting in Cancun, little public analysis has emerged regarding feasible goals for the Doha services negotiations. AEI has asked authorities on services trade issues to assess the state of services negotiations--what is possible and what are the major substantive and political barriers to greater trade liberalization in major trade service sectors.
| 10:00 a.m. | Registration | |
| 10:15 | Panelists: | Ashraf M. Hayat, Embassy of Pakistan |
| Stephen Canner, U.S. Council for International Business | ||
| James Mendenhall, Office of the U.S. Trade Representative | ||
| Robert Vastine, U.S. Coalition of Services Industries | ||
| Flavio Marega, Embassy of Brazil | ||
| Moderator: | Claude E. Barfield, AEI | |
| Noon | Adjournment | |
August 2003
Trade in Services: Is More Liberalization Possible in the Doha Round?
On August 18, 2003, AEI held the second conference in a trade policy series leading up to the World Trade Organization (WTO) ministerial meeting in Cancun. This particular conference addressed trade in services and the possibility of increased liberalization in upcoming negotiations. Participants in the panel discussion included Robert Vastine, U.S. Coalition of Services; Stephen Canner, U.S. Council for International Business; Ashraf M. Hayat, Embassy of Pakistan; and Flavio Marega, Embassy of Brazil. The panel was moderated by AEI’s director of trade policy studies, Claude E. Barfield.
Robert Vastine
U.S. Coalition of Services
It is a toss-up whether Cancun will succeed or fail but, in terms of services, a success at Cancun will depend on a workable formulation agreement on agriculture. All agree that services is one of a few major elements in the Doha Round. This is the first round in which services has been fully negotiated, with the exception of airlines services. The General Agreement on Trade in Services (GATS) was reintroduced in Uruguay in 1994 to provide a framework for negotiations. However, countries made only low-level commitments and were not prepared to take significant steps toward liberalizing their economies. GATS recommended future negotiations in sectors in 1995 and as a whole in 2000. However, we had failed negotiations in 1995 in financial services and in 1996 in maritime. Telecommunications agreements were made in 1997, and financial services were again discussed and considered to have reached successful agreements. In 2000, the comprehensive round of services and agricultural negotiations were to take place. However, substance was lacking and too much time was spent on rules without any serious steps towards liberalizing. Consequently, Doha was necessary and was to provide new motivation for continuing discussions, along with a timetable to track progress.
Countries have taken actions toward negotiations, but the energy has been lacking. And while the timetable has been observed, it has lacked conviction. There have not been enough players to make serious commitments, due in part to agricultural uncertainties. Yet there have not been any contingent offers to produce any hope. However, the serious problem remains that many countries cannot identify their export potential, which simply adds more importance to agricultural negotiations. If Cancun is merely a paper solution, leading to more deadlock and stalemate, there will be no time for a serious negotiation before 2005. The negotiations for services are not a matter of tariffs, but rather an issue of outdated, embedded law and regulation that is difficult and time consuming to change.
Stephen Canner
U.S. Council for International Business
Investment is not near the level of progress as services. We have always advocated high standards in negotiating investment, some of which include a broad base definition of investment, transparency based on rule of law, and investor protection. Many developing countries that are opposing discussions of this level for investment are actually requiring the same standards when negotiating their own agreements, which raises the question that if these countries extend these gestures to their own trading partners, why can they not be extended multilaterally? Unfortunately, discussions at this level are not to be expected. It is my recommendation that investment negotiations should be moved from a separate track from other Doha issues. All countries should submit their best investment standards to the WTO in order to determine a matrix of standards and serve as a floor to move forward.
Ashraf M. Hayat
Embassy of Pakistan
A mistake is to be made if we compare progress in services negotiations to those in manufactured goods. Nevertheless, negotiations should move forward for the benefit of both developed and developing countries. Doha creates the framework to move forward and reduce the barriers. We need a recommitment to the principals, which include progressive liberalization of service trade, flexibility of countries, and more attention to rule-making. A particularly challenging area for developing countries is identifying sectors of interest. Policy development and regulatory issues are also difficult issues for developing countries. The negotiations themselves also involve horizontal issues like rule-making, and it is being done with an element of uncertainty so long as answers on subsidies are deferred. This is an added constraint for developing countries and may be best performed in a horizontal environment where there can be a common platform. All said, the participation of developing countries has improved. As far as Cancun is concerned, it is likely that we all will maintain a cautious approach.
Flavio Marega
Embassy of Brazil
Brazil attaches considerable importance to multilateral negotiations in trade in services, especially given the growing relevance of this sector in the world economy. However, we cannot fail to recognize that this sector of trade in services is, save few exceptions, one in which developed countries do have a wider range of export interests than developing countries.
There are two main aspects Brazil believes to be crucial to these negotiations: First, no actual liberalized steps can be taken in GATS without parallel and consistent commitments in the same liberalizing sense in which the trade interests of the WTO developing countries are structurally threatened by unfair, yet mostly legal, trade distorting measures, which are adopted by WTO developed country members. This can be seen in the agricultural negotiations where developed countries such as the United States and the European Union give large subsidies. Second, it is absolutely essential to enforce the elements that are contained in the GATS that assure flexibility, especially with the rules. The right to regulate is important and while the United States has over seventy years experience, Brazil’s regulatory history remains quite new and undeveloped in comparison. While it is in the making, it makes it difficult to lock in offers when no clear regulatory framework exists. To liberalize the services sector, the executive branch must be in sync with the legislative branch. Therefore, flexibility with regards to objectives of national policy and liberalization must be at the level of developing members of the WTO.
