Can services revive Doha?
Published: The Kathmandu Post, 29 March 2006
By: Shyamal Krishna Shreshta


Three months after the Hong Kong Ministerial, the fate of the Doha Round hangs in balance as 149 World Trade Organization (WTO) Members have been unable to reach agreements, mainly on agriculture and industrial market access. The latest meeting of the G-6, viz., Australia, Brazil, the European Union (EU), India, Japan, and the United States (US) held in London on 10-11 March, failed to break the deadlock in the trade negotiations. The prevailing scenario not only makes it virtually impossible to reach some sort of agreement when the WTO General Council is due to meet in end-April but also endangers the prospects of the current round, slated to be completed by 2007. Divergence has centered on two main issues: agriculture --- pertaining to domestic support, export subsidies and market access - and non-agriculture market access (NAMA).

Progress in Services is equally vital to move the Doha Round towards a successful conclusion. General Agreement on Trade in Services (GATS) was included in the WTO mandate since its formation in 1995. Services are the fastest-growing component of the global economy. Studies show that countries that have fully liberalized trade and investment have been found to grow, on average, 1.5 percentage points faster than others during the 1990s. It has been found that the increase in real income from a cut in services protection by half would be five times larger than that generated from comparable merchandise (goods) trade liberalization. Despite the potential benefits, negotiations in this area have been tardy. Industrialized countries want developing countries to liberalize sectors such as banking, finance and insurance whereas developing countries have demanded greater labor mobility in rich nations.
During the Hong Kong Ministerial, industrialized countries were able to extract a major concession from developing countries. The Ministerial Declaration states that Members agreed to complement the process of bilateral request offers in services liberalization with a plurilateral approach wherein groups of WTO Members would circulate collective requests for countries to open their markets to foreign services providers.

The plurilateral requests identify the demandeur countries and specify that they "are also deemed to be recipients" of the request that they are sponsoring. Demandeurs seek commitments, for example, on the removal of limitations on foreign ownership, discrimination between domestic and foreign services suppliers, prohibitions on the cross-border supply of services, unfriendly regulatory policies, and barriers to the international movement of people to provide services. This does not mean that all demandeurs agree to the entire list of requests. For instance, the United States specifically opts out of seeking liberalization of the temporary access for their individual workers ('Mode 4') but will formally receive the request for such commitments. There is a perception among developing countries that the plurilateral approach significantly reduces their policy flexibility; effectively making them unwilling partners to any eventual agreement that will emerge in Services.

As mandated by the Hong Kong Ministerial Declaration, groups of WTO Members circulated collective requests for countries to open their markets to foreign services providers from 28 February until 7 March. Members (both demanders and recipients) are currently in the process of discussing how to schedule the plurilateral market access negotiations that will follow these requests in a manner that does not overburden the limited negotiating capacity of developing country delegations. Argentina, Brazil, China, Egypt, India, Indonesia, Malaysia, the Philippines, South Africa and Thailand have received many of the collective requests. The bulk of demandeurs are industrialized countries such as Australia, Canada, the EU, Japan, Norway, Korea, Singapore, Taiwan, and the US; but some developing countries - Chile, India and Pakistan - have also participated in collective requests.

It may be noted that on the eve of the Hong Kong Ministerial, the World Bank commissioned a study titled 'Trade, Doha and Development' in which proposals for overcoming inertia in the Doha Round (including Services) are identified. Considering the frustrations in the past, a set of desirable and feasible goals are identified for Members to give direction and momentum to negotiations in this area. These are: realizing the development benefits of services reform, preempting protection in cross-border trade in services, and reaping the gains from the temporary migration of service providers.
Furthermore, the first proposal relates to adopting the plurilateral approach, which has, in effect, materialized. The second proposal calls upon the international community to establish a mechanism to provide policy advice to developing countries considering liberalization as a voluntary option.
According to the last proposal, GATS commitments on Mode 4 should be made transparent and conditional on source-country cooperation and economic condition in host country.

The adoption of the plurilateral approach marks a renewed attempt to facilitate reciprocal liberalization in many sectors across a wide group of countries. This would not have been possible without the consent of developing countries. Hence, the onus now lies with industrialized nations to show flexibility in agriculture and NAMA. This would kick-start the much delayed Doha Round.