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    Making the Most of Services Talks in Cancún…And Beyond


    © International Trade Centre, International Trade Forum - Issue 2/2003

    Service sectors have been underrepresented at the international trade negotiations table. Despite the launch of the GATS negotiations in early 2000, many service sectors in developing countries are poorly placed to provide inputs to the process - although studies project that they stand to gain most from liberalization. The Cancún Ministerial Conference is an opportunity to take stock and allows the service sector to make its voice heard ahead of the GATS negotiations deadline in January 2005.

    Despite numerous service sector-specific associations in developing countries and transition economies, government trade negotiators rarely hear the service sector view on trade liberalization. As a result, the negotiators representing national interests face a tough challenge to formulate policy recommendations that truly correspond to the interests of their domestic service sectors.

    Service firms' views rarely heard

    The fact that the services business voice is not heard more clearly in the WTO is surprising given the scale and sheer economic force of services trade. Worldwide, the economic importance of services is undisputed as the value added by service businesses - ranging from account-ancy and advertising to construction and engineering services - as a percentage of total domestic output climbs steadily in many countries. In an increasing number of developing economies, the service sector is the single largest contributor to economic output, ahead of either agriculture or industry.

    Deadline from Doha

    Since Doha, the clock has been ticking for the service sector. Service businesses, covering 12 key sectors and including trade in over 150 services essential to any country's economic well-being, have been the focus of the WTO negotiations on its General Agreement on Trade in Services (GATS) for more than three years. The Doha Declaration endorsed the work undertaken in GATS since 2000 and established 1 January 2005 as the deadline for concluding the services negotiations. During the Fifth WTO Ministerial Conference in Mexico later this year, governments will take stock of developments with respect to liberalization of trade in services.

    The absence of the service sector view from the WTO GATS process may be partly explained by the fact that, for many decades, companies worldwide have exported their services despite non-tariff barriers to trade. Working on the rule that if "it isn't broken, don't fix it", service sectors may not see the driving incentive to become active in a complex and time-consuming process not directly connected to immediate bottom-line benefits. However, this is a mistake. By being proactive, service sector representatives in the trade liberalization process will realize, in time, more profitable and successful service sector businesses. A supportive rather than a protectionist policy environment is of great benefit to service exporters. Ensuring that the policy framework is balanced and supportive of business reality requires active, engaged and contributing service sectors in the WTO GATS negotiations.

    Honest exchange lacking

    To date, in many developing countries, the two-way dialogue and honest exchange of informed views between public and private sectors with respect to services has been lacking. There are several reasons for this, including:

    • At the national level, service sector associations do not generally focus on international trade liberalization and, as a result, trade-related policy recommendations that truly reflect service industry interests are not forged and then communicated to trade officials.

    • Service businesses prioritize member-ship of professional bodies ahead of membership of trade support institutions (TSIs) where WTO-related issues are higher up the agenda.

    • With professional associations not focused on international trade issues and the historically low involvement of service businesses in TSIs, there are limited domestic mechanisms bringing the service sector view onto the desks of government trade negotiators.

    • All over the world, service associations have focused on domestic issues and broader WTO-related issues, if covered at all, are lower on the agenda.

      Here Doreen Conrad, Head of the Trade in Services Unit at ITC, answers some commonly asked questions about the role of the services sector in the WTO GATS negotiations:

      Given the limited involvement of service sectors in services trade negotiations, what type of mechanisms or organizations can play a catalytic role to change this?

      ITC is promoting the notion of establish-ing services 'umbrella' organizations within developing countries, like the Uganda Services Exporters Association. They attend major WTO meetings on behalf of all service sectors.

      How can the public and private sectors in the developing world interact to ensure the best service sector representation?

      There is a heightened awareness of the GATS and its importance within governments in developing countries but they need assistance to understand how to solicit input from businesses, especially if the associations are not aware of the importance of the GATS process. The ITC GATS Consultation Kit is an excellent place to start for someone seeking ways to promote more effective interaction between service organizations and their domestic governments.

      What role do TSIs play in representing the services case, particularly for small and medium-sized (SME) service businesses in developing and transition economies?

      SMEs generally belong to their own sector-specific association, for example, accounting and architecture associations, and often do not have the time or resources also to belong to a general business association, such as a chamber of commerce. Chambers, generally speaking, do not have huge service representation in developing countries. There are designated WTO-related staff in some chambers where membership is mandatory for all businesses, like in Croatia.

      Which sectors have the greatest export potential?

      ITC believes that one of the areas with the greatest potential to increase exports of services is in the business and professional services sector, and it works closely with them. Tourism is another area of increasing opportunity.

      The GATS timetable­-still time to contribute

      The Doha negotiations confirmed the GATS timetable. Key landmarks and deadlines are as follows:

    • March 2001: GATS negotiating guide-lines and procedures agreed.

    • 30 June 2002: Deadline for governments to submit market access requests.

    • 31 March 2003: Governments make initial offers of market access.

    • September 2003: Stocktaking of GATS by governments meeting for the Fifth Ministerial Conference in Cancún, Mexico.

    • 1 January 2005: Deadline to conclude GATS negotiations as part of a single undertaking.

      When advocacy works

      During the Uruguay Round nego-tiations for a trade in services agreement, there were several examples of services-related business advocacy successes, based on a targeted approach by well-resourced lobby groups.

      Essentially, two strong groups influenced the final shape of the GATS to suit their needs. First, multinational service companies were successful in their efforts to smooth rules governing the establishment of offices abroad and the associated transfer of staff between markets and, second, there was a significant impact by the lobby group representing individuals who work abroad temporarily, for a year or two, such as nurses and teachers.

      At the same time, the needs of large numbers of small service firms without a well-organized lobby were overlooked. This group, which is representative of the service sector in many developing countries, does not want to set up an office abroad, but does need to travel temporarily into foreign markets for business purposes - usually for less than ten days. There are lessons here for developing country service sector organizations preparing for the on-going GATS negotiations.

      A clear focus, dedicated resources and a strong message are key ingredients for successful business advocacy, although early action based on sound planning is the critical foundation of such an effort. There are a number of approaches that a developing country TSI or an umbrella group of services exporters might take to influence the GATS negotiations in a positive way for their members.

      Applying lessons from successes

      If, for example, a developing country business lobby wished to address the issue of entry visas for its service exporters, how could it approach the matter in the context of GATS?

      The problem of entry visas for small service exporters is well documented. All too often, service exporters from developing countries are required to go through lengthy procedures in order to obtain an entry visa into a country where new business may be emerging.

      These procedures are not only costly in time and money, but they also prevent service exporters from taking advantage of last-minute opportunities. A group of developing country TSIs or more general business associations may wish to raise this with their governments ahead of a GATS meeting where the issue is to be considered.

      The business lobby, ideally working collectively across a group of countries in the same region, should aim at highlighting the cost implications, negative general business impacts and bureaucratic inefficiency that a slow entry visa process can create. The business representatives should seek to identify where the entry visa issue is in conflict with the over-arching goals of the GATS process.

      A strong case, a clear message and an effective delivery mechanism to ensure domestic government trade officials are aware of their business communities' concerns can be highly effective. The reality is that, all too often, service exporters in developing countries approach the advocacy process too late and in a disjointed manner. This must change if the service sectors are to become more effective at representing their interests within the GATS process.

      Using the GATS Consultation Kit

      ITC's GATS Consultation Kit assists trade support institutions to advocate on behalf of their service sectors. The kit enables TSIs to give meaningful input to their government's trade officials and helps them to identify the concessions service exporters want. It also highlights the domestic impact of GATS since 1995 and details national schedules related to service liberalization.

      The GATS Consultation Kit can be found online at http://www.intracen.org/worldtradenet/docs /information/referencemat/gats_consultation_kit.htm

      Alison Clements-Hunt contributed this article based on interviews with senior ITC staff and drawing on information available on the WTO and several international trade-related web sites. For more information about preparing for GATS negotiations, contact Doreen Conrad, Head, ITC Trade in Services Unit, at conrad@intracen.org