negotiations on trade in services

REPORT by THE CHAIRMAN, h.e. ambassador gabriel duque

to the trade negotiations committee

Friday, 31 July 2015

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Since the beginning of this year, the Special Session has focused on developing the services elements of the 'clearly defined work program' required in paragraph 1.11 of the Bali Ministerial Declaration. During this period, great efforts have been made to reach a common view on the substantive and procedural elements that could be included in it.

In pursuing this objective, I have conducted numerous meetings and consultations aimed at achieving convergence on the service elements of the work program. In the course of our work, delegations have benefited from two separate briefings from the Secretariat, providing valuable background information on the services negotiations in general (10 March) and on the negotiations on domestic regulation (June 1). Additionally, I have circulated an informal Chair Note^[1] (18 February) updating Members on my consultations and indicating possible ways forward, and an informal Chair Summary^[2] of a dedicated discussion (20 April) on the services elements of the work program.

It is with considerable disappointment therefore that I must report that, despite our best efforts, it has not proved possible to agree on a work program in services. Although various interesting ideas have been put forward by Members in the course of our discussions, ultimately there has been no convergence toward any text containing a clearly-defined work program in services.

1  Consultations

1.1.  Despite the failure to achieve a work program in services over the last semester, delegations' full engagement in the consultations has nonetheless succeeded in clarifying areas of greater convergence, and shedding light on others where significant differences among Members remain.

1.2.  Overall, Members recognize that the services negotiations form an essential part of any DDA outcome. During the discussion, different Members highlighted the crucial importance of services for the growth and development of their national economies, and for world trade including in global value chains.

1.3.  Members accept that the services outcome needs to be realistic, and aim at a result which is doable and balanced.  However, they have divergent views on what those terms imply.

1.4.  Most Members accept that the services negotiations need to be 'calibrated' in some way with those in agriculture and NAMA. However, there is a wide range of views on the nature of the calibration and, for these purposes, whether the services negotiations are 'ahead' of or 'behind' those in other DDA pillars. Many Members emphasize that the level of ambition achieved in agriculture is of primary importance, and should determine the results achievable in services. Others hold that, while services should not be entirely delinked from those pillars, they should not lag behind. Some point out that the services negotiations cannot await the outcome of work in agriculture and NAMA, since services negotiations, especially the request/offer process, are particularly time-consuming and require an early start.

1.5.  Some convergence exists on the importance of previous milestones in the services negotiations, especially Annex C of the Hong Kong Ministerial Declaration. Annex C is thought by a significant number to be an important guide in determining the objectives of the negotiations. It is noted that Annex C already provides for bilateral and plurilateral market access negotiations, text-based negotiations on domestic regulation, focused discussion on the three GATS rules areas, provisions for due consideration of trade-related concerns of small economies, implementation of LDC modalities, targeted technical assistance, and timelines for requests and offers. Less convergence exists however on the importance of other milestones, such as existing initial offers and revised offers, the plurilateral requests, and the 2008 Signalling Conference. For some Members, these milestones do not reflect subsequent changes in patterns of trade, and further autonomous liberalization.

1.6.  Some Members point to the desirability for the work program to map or give further precision to a services outcome. For several, there is a need to define the perimeter of the outcome, give a sense of direction or ambition in market access, and establish a time frame for final offers. A few others think there is no requirement to set dates until there are indications of further progress in the other negotiating pillars.

1.7.  Many Members underline the importance of the development dimension of the negotiations. In this respect, some point to the importance of the flexibilities granted to developing country Members in the GATS itself, such as in Article XIX:2, as well as in milestones such as Annex C.

1.1  Market Access

1.8.  With respect to market access, most Members accept that a result is essential for any services outcome. Many say Annex C is an important guide for determining the market access content of the work program, and that it provides much flexibility and could embrace most outcomes. Some note also the relevance for the market access negotiations of previous milestones such as revised offers, plurilateral requests, and indications from the Signaling Conference.

1.9.  Different Members mention the following elements as being part of a possible market access outcome: a much broader participation beyond the limited number of Members having made previous offers; wider sectoral and modal coverage; deeper commitments; greater uniformity in the level of commitments between countries at similar levels of development; the reduction or elimination of MFN exemptions; and delivery on the development mandate.

1.10.  Varying views on the desirable levels of improved sectoral and modal coverage, and depth of commitments, exist among Members. Some say that the binding of a significant portion of 'water' in GATS commitments is a realistic and doable outcome. One Member, for example, proposes a minimum binding of sectors in existing GATS commitments at the level applied domestically or in its RTAs, followed by a request/offer process for sectors currently outside the schedule with a view to achieve bindings at the applied level. Other Members however maintain that any outcome in market access would need to be calibrated with other negotiating areas, primarily agriculture.

1.11.  During the process of the consultations, some Members have expressed in specific terms their interest in a very wide range of individual priority areas in terms of sectors and modes.

1.12.  There are different views however among Members on whether there should be a focus on certain sectors or modes, for reasons of simplicity, doability and time constraints. One Member suggests that priority should be given to a series of fundamental market access issues on which offers should at a minimum deliver, and identify possible landing zones, replacing individual/plurilateral requests. A group of Members points to a number of cross-cutting issues: global supply chains, services related to goods, mode 4, tourism, ICT and professional services. However some Members disagree, seeing this approach as 'cherry-picking', or as pre-emptively narrowing the list of sectors or modes to negotiate.

1.13.  The need to provide for transparency and predictability on the eventual outcome in market access is emphasized by several Members. One Member notes that while Annex C market access objectives remain flexible and appropriate, they are not formula approaches and are not as detailed as modalities in the other DDA pillars, and cannot therefore achieve a similar level of transparency and predictability of outcome.

1.14.  Different views are expressed on the starting point for Members’ contributions to the market access negotiations. One Member holds that the submission of revised offers should occur by the end of September, after which Members would undertake intensive negotiations to submit final offers by December 2015, allowing a legal review to be completed before summer 2016. On the other hand, some Members take the view that the submission of any revised offers should be subject to more clarity in other pillars of the negotiations, especially agriculture.

1.15.  Most Members say that the market access part of the services negotiations needs to fully express the development dimension. One Member representing a group points to the importance of the flexibilities granted to developing country Members in GATS Articles IV and XIX:2, Annex C, and the Negotiating Guidelines. The expectation of this group is that Members bind market access and national treatment in all modes of supply in favour of developing countries in an illustrative list of sectors.^[3]

1.16.  Recently acceded Members (RAMs) have emphasized their generally higher level of GATS commitments compared to other Members, and called on them to narrow the gap. The special concerns of small and vulnerable economies (SVEs) have also been highlighted.

1.17.  The importance of LDC interests is raised by many Members, who note the priority LDCs give to mode 4, especially with respect to independent professionals and contractual service suppliers. Some Members recall that the Bali Ministerial Declaration requires Members to pursue issues of interest to LDCs on a priority basis, and to grant preferences under the LDC services waiver.

1.2  Disciplines on domestic regulation

1.18.  A large number of Members acknowledge that domestic regulation should be part of any services result. Some Members emphasize the balance to be struck between preserving Members' regulatory authority, and the establishment of effective disciplines. Some support an ambitious outcome, while the majority wishes to work towards a practical, realistic, and pragmatic outcome that concentrates on issues that enjoy broad support.

1.19.  Several Members suggest that a narrower focus of work on licensing and qualification procedures, and transparency, could define a realistic landing zone. Some stress that an important function of the disciplines would be the facilitation of professional services, particularly through mode 4. A few warn that deep horizontally-applicable disciplines, including a necessity test, would not be feasible if overall ambition is being reduced. A few other Members think it too early to exclude any specific issues from the scope of the disciplines. 

1.20.  Some Members underscore the need for special and differential treatment provisions that link the obligation to implement regulatory disciplines to the acquisition of capacity through the provision of adequate assistance and support for capacity building, as well as self-selection of transition periods.

1.21.  On the way forward, many Members call for the swift resumption of text-based negotiations, while others argue that concrete work on the services pillar should commence only once more clarity in the negotiations in other pillars is achieved.  For many Members, the 2009 Chair text is seen as the natural starting point for continued work, while others argue that the 2011 Chair's progress report should form the basis of future work, as it also reflects the work undertaken between 2009 and 2011. Some delegations are flexible on the choice of text, as long as all work undertaken is taken into account.

1.3  GATS rules

1.22.  On GATS rules, a group of Members call for continued work on an emergency safeguard mechanism. All other Members addressing the issue acknowledge the GATS' built-in negotiating agendas for emergency safeguards, government procurement and subsidies, but note that none of the topics has progressed to text-based negotiations. For those Members, given the lack of progress to date, the three issues were not mature enough to be included in the work program, but work on them should instead continue in line with the existing mandates.

2  Considerations on the way ahead

2.1.  There is a need to reflect on what needs to be done in services after returning from the summer break in September. Even without an agreed work program, I believe that delegations would still be committed to the substance of the DDA negotiations, and wish to continue to advance toward a significant result by the Nairobi ministerial in December. Given the nature of the services negotiations in market access, with request/offer as the principal negotiating method, early consultations and preparation, including in capitals, of revised offers would appear necessary. It would also seem vital to start work as early as possible after the summer break so that services do not hold up agreement in Nairobi on an overall package.

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