Scopin Study oping Scoping Study peci Differential erenti Special and

Scopin Study oping Scoping Study peci Differential erenti Special and Differential Treatment otonou pos -Cot in post-Cotonou Service Negotiation ations Services Negotiations Dirk Willem te Velde Ian Gillson Sheila Page Overseas Development Institute Final repor eport: February for Dut Ministry Foreign Affair utc orei airs Final report: 23 February 2004 for The Dutch Ministry of Foreign Affairs Scoping Study Special and Differential Treatment in post-Cotonou Services Negotiations Dirk Willem te Velde, Ian Gillson and Sheila Page Overseas Development Institute 111 Westminster Bridge Road London , SE1 7JD dw.tevelde@odi.org.uk Final report: 23 February 2004 for The Dutch Ministry of Foreign Affairs Overseas Development Institute Executive summary This scoping report highlights the issue of post-Cotonou negotiations on services. The Cotonou Partnership Agreement (CPA), signed in 2000 and ratified in 2003 by a sufficient number of states, allows Economic Partnership Agreements (EPAs) between the European Union (EU) and African, Caribbean and Pacific (ACP) countries to be extended to services. The agreement provides for applying special and differential treatment (S&D) in services negotiations in order to benefit the ACP and this report discusses how that might be done. The three objectives (terms of reference) of this report are to: 1. identify the provisions on services in existing agreements and assessment of the pros and cons of these provisions; 2. provide an overview of possible benefits to ACP countries (if possible with differentiation between regions) of EU liberalisation sectors, regulations and modes of supply; 3. conduct a stocktaking of the possibilities for S&D for the ACP countries in the framework of the General Agreement of Trade in Services (GATS) and assess options for incorporating S&D in services in Cotonou over and above the level in the GATS. To examine these objectives this report combines S&D in GATS, Provisions in Regional Services Agreements, and Services Provisions in the Cotonou Partnership Agreement, with an analysis of ACP services export capacity and current EU GATS commitments. GATS and Special and Differential Treatment Chapter 2 introduces GATS and the concept of S&D as applied to services negotiations. This is relevant as it can provide a template for the structure (including S&D options) of possible regional services negotiations and also a background against which regional negotiations take place (at least for ACP countries that are also WTO members). There are several S&D provisions in the GATS: • Provisions aimed at increasing participation of developing country members in world trade, with specific attention to least-developed countries. • Provisions under which WTO members should safeguard the interests of developing country members through the Council of Trade in Services by carrying out assessment studies and establishing negotiating guidelines. • Provisions that allow flexibility of commitments by developing countries, flexibility of action with regard to establishment of enquiry points and use of policy instruments, and flexibility to developing countries with respect to services commitments in economic integration arrangements. • Provisions specifying the use of technical assistance in developing countries. S&D in GATS is difficult to measure, not yet fully operational and often not mandatory. Negotiations on emergency safeguard measures are also ongoing. The ACP group will be interested in the development of S&D in GATS, as it will inform their negotiations with the EU on a possible services agreement under Cotonou. However, this does not preclude thinking on how S&D can be applied in Cotonou, before S&D negotiations in GATS have finally finished. 1 Services Provisions in Regional Trade Agreements (RTAs) Chapter 3 examines in more detail services provisions in RTAs such as NAFTA, CARICOM, MERCOSUR, ANDEAN, ASEAN, COMESA and SADC. It highlights a number of aspects relevant to post-Cotonou negotiations on services. The main conclusion is that RTAs differ with respect to coverage, liberalising principles and depth of commitments, and this also applies to recent EU RTAs with developing countries (South Africa, Chile, Mexico etc.). In particular, we highlighted • Depth of commitments, • General provisions related to cross-border supply of services and consumption abroad (modes 1 and 2), • Treatment of investment (mode 3), • Treatment of movement of natural persons (mode 4), • Government procurement of services. Importantly, therefore, the elements of post-Cotonou negotiations on services and its strategy are, in principle, negotiable. The differing approaches to services provisions in regional trade agreements reflect a range of factors, including cultural and historical ties, the degree of geographical proximity of the parties, similarities in their levels of development and interests with countries or sectors to push items on the agenda. There is one further unresolved complication in that all EU agreements (with exception of ongoing EU-MERCOSUR negotiations) are based on agreements between the EU and a single developing country, unlike expected EPAs. Services Provisions and post-Cotonou Negotiations Chapter 4 reviews the provisions in the Cotonou Partnership Agreement relevant for planned EPA negotiations on services. In principle the ACP is not obliged to start negotiations, but the EU and the ACP agree to extend their partnership to encompass the liberalisation of services in accordance with the provisions of GATS. There are separate provisions for maritime services, information and communication technologies, and information society, and tourism. The CPA incorporates a reaffirmation of GATS commitments and underlines the need for S&D for ACP suppliers of services, such as through consideration to the ACP states’ priorities in the EC schedule and through strengthening the ACP supply capacity, especially in labour, business, distribution, finance, tourism, culture and construction and related engineering services. Phase 1 negotiations started in September 2002, and the outcome of phase 1 ACP EU negotiations was made public in October 2003. Phase 2 negotiations have now been launched in several African EPA regions (ECOWAS, CEMAC, ESA) and are expected elsewhere. Phase 1 negotiations concluded that services liberalisation in an EPA should be progressive, based on a positive list, adapted to the level of ACP countries and their sectors and specific constraints, and underpinned by principles of S&D, asymmetry and positive regional discrimination. The EC agreed to discuss liberalisation in mode 4 (temporary movement of natural persons) in the context of EPA negotiations. This issue is sensitive for the EU but crucial to the ACP. The EU and the ACP also agreed that support for the development of services sectors should be provided to ACP countries within the context of EPAs, but there is disagreement 2 over the need for additional funds which can be used flexibly and rapidly (ACP) as opposed to no additional (EU) beyond existing EDF commitments. Finally, while the EU argues for a WTO-plus agreement, the ACP group is unlikely to want to go (significantly) beyond commitments in the WTO. WTO Compatibility of S&D in EPAs on Services Chapter 5 discusses which GATS provisions allow services negotiations in RTAs and shows the flexibility that is available for the ACP in WTO compatible services EPAs. It concludes that there are provisions that relate to developing-developed country arrangements, including EPAs between the EU and ACP regions, which would allow flexibility (or S&D) for developing countries in EPAs in terms of coverage and removal of discrimination, while the EU would liberalise more/substantially all sectors and modes to ACP regions (while not doing the same to other WTO members). ACP exports of Services to the EU: Performance and Barriers Chapter 6 provides an overview of the performance of ACP exports and the barriers they face in the EU at present. An analysis of the data on services (which unfortunately are not of high quality) finds that • The average share of services in GDP is 50 percent for the ACP but varies widely across countries; the share of services in total exports ranges from over 75 percent for a number of Caribbean countries (typically high because of tourism) to under 5 percent for several African countries. • Despite strong growth in the value of ACP exports of services (US$8 billion in 1980 to US$20.8 billion in 2000), the world share of the ACP dropped from 2.4 percent in 1980 to 1.5 percent in 2000. • In 2000, the largest eight exporters of services in the ACP group accounted for more than half of total ACP services exports. These include the Dominican Republic, Bahamas, Jamaica, Mauritius and Barbados (owing to exports of tourism services) as well as Kenya, Zimbabwe (owing to exports of transport) and Nigeria (owing to exports of business services). • For the ACP group of countries the largest export sector is travel, which accounts for more than half of all ACP services exports, followed by transport, business services and government services. • Almost three-quarters of recorded African ACP exports of services have gone to the EU. Seven percent of extra-EU trade in services is with the ACP. Exports of services account for one-third of all ACP exports of goods and services to the EU. Benefits of EC liberalisation by mode of delivery, sector and regulation The chapter then discusses in general terms possible benefits of removing EC barriers to ACP exports in a two stage procedure: • Identify EU barriers to ACP exports in services (sectors, modes, and specific regulations) to be liberalised, using consolidated EU GATS schedules • Identify the supply response of the ACP to EU liberalisation (by mode, sector, country and region), in other words, whether ACP counties are sufficiently competitive and have the domestic capacity to supply services to the EU. 3 The present study is a scoping study, and thus provides only preliminary answers. Strengths of services exports in many ACP countries are through modes 1, 2 and 4. Mode 4 is by definition labour intensive, and, vis-à-vis the EU, the ACP has a comparative advantage in labour due to relative labour abundance (though not necessarily in highly skilled services). However, mode 4 delivery is seriously hampered by the current EU trade regime in the form of economic-needs tests and diploma and nationality requirements, as well as outright restrictions on movement of less-skilled workers or short-term workers for ACP companies. Linking mode 4 delivery to commercial presence (mode 3), or cross-border delivery (mode 1) delivery to mode 3, constitutes another barrier to the ACP, because the ACP has a comparative disadvantage in setting up a commercial presence. Mode 1 delivery has become more important over time owing to technical improvements in telecommunications and information networks. Bound commitments in mode 1 by the EC would safeguard cross-border ACP exports of services, but there are several unbound mode 1 commitments. Most back office service sectors have been fully committed by the EC (e.g. computer-related services CPC 84), but not all, e.g. collection, telephone answering and duplicating services. Mode 2 is the main mode of ACP supply of services (tourism) and features few barriers. An exception may apply to coverage of national health insurance for EU nationals outside the EU. It is also possible to review benefits of EU liberalisation to the ACP by sector and type of regulation. We would need to consider EU-wide (where services have been liberalised internally) and country-specific regulations. In business services, many individual member states include requirements for a university degree, professional qualifications and several years’ professional experience, for accountants, lawyers, etc. In the case of medical and dental services, access can be restricted to natural persons and often includes economic-needs testing and a residence requirement. Removing these restrictions would benefit countries with a relevant supply capacity. The inclusion of postal, courier and audiovisual services (many of which are uncommitted) could also benefit ACP exporters with relevant export capacity (ranging from high to low: Jamaica, Dominican Republic, Guyana, Côte d’Ivoire, Barbados, Tanzania, Kenya, Ethiopia, Mauritius). For construction and related engineering services, there are EC member state nationality requirements in market access under mode 3 and qualification requirements in mode 4 (e.g. degree and professional experience in the Netherlands), while mode 1 is largely unbound (though France has an economic-needs test). Removing these restrictions would benefit those ACP countries with a relevant export capacity (ranging from Tanzania, Madagascar, Cameroon, Ethiopia, Mauritius, Côte d’Ivoire, Barbados). Removing residence requirements in distribution services (e.g. wholesale trade) could benefit ACP countries. Removing nationality conditions in France, Denmark and Ireland could help ACP exports of education services (e.g. Caribbean and African universities). Removal of a nationality or residence requirement in mode 4 of financial services in Austria, Denmark, Spain and Italy could lead to benefits for ACP countries, but these are not expected to be big. Countries with reported export values in insurance service, ranking from high to low, are: Barbados, Mauritius, Trinidad and Tobago, Côte d’Ivoire, Antigua and Barbuda, Cameroon, Tanzania, Bahamas, Jamaica and Botswana. But there is a question whether ACP insurance firms can compete on the EU market. ACP banks and financial institutions may not be able to withstand 4 competition in EU markets, but there may be exceptions, e.g. Trinidad and Tobago. Obstacles more difficult to overcome (for reasons of prudence) relate to depository assets and transparency requirements for offshore banking (resulting in blacklisting of certain ACP countries). On the other hand, labour-intensive financial services such as data processing and call centres could be done more cheaply in the labour abundant countries. For this, safeguards regarding mode 1 in the EU would be effective (although many such services would fall under business services). The potential for ACP exports of health services is significant. Removing restrictions in health services in modes 3 and 4 (economic-needs tests) or including it as committed sectors (as many EU health sectors are unbound, or uncommitted) should help such exports significantly. There are also EU-wide and member state-specific regulations relating to health tourism and cutting waiting lists that would fall under government procurement and hence not under business services negotiations. But it is clear that ACP health operations can be more competitive than EU operations. The main source of exports of tourism and travel related services is in mode 2. This is already relatively free of restrictions. Removing restrictions (esp. in Southern European countries) on tourist guides (mode 4) could give marginal benefits to ACP countries. Anecdotes suggest that removing mode 4 restrictions in recreational, cultural and sporting services, including economic-needs tests (Italy), main profession (Austria), employment contract with authorised enterprise (France), and others would facilitate ACP exports of services, including entertainment groups. Many transport service sub-sectors have been excluded from commitments. New commitments e.g. in maritime shipping could benefit ACP countries (e.g. Kenya). There are also various unbound transport sub-sectors. Only road-transport services include commitments, subject to limitations such as economic-needs tests (mode 3 and 4). However, the removal of mode 3 restrictions does not seem of major interest to the ACP due to capital requirement. Finally, it would be of interest to examine more closely which regions are expected to gain from EU liberalisation and which countries within regions. For instance, CEMAC and ECOWAS did not report high increases in exports of services since the 1980s, while EAC, SADC and COMESA did. It is also clear that specific countries within regions are expected to gain, depending on sectoral composition and other issues, such as cultural and linguistic links with the export market. Special and Differential Treatment in post-Cotonou Negotiations Chapter 7 “scopes in” 10 possible options for the inclusion of S&D in post-Cotonou negotiations on services (detailed case studies should assess relative importance): 1. Financial support for services export capacity building; 2. Facilitation of the recognition of professional credentials between the EU and the ACP by setting up one-stop shops in ACP countries (e.g. establish an ACPPASS initiative similar to a recently announced EUROPASS initiative); 3. Information centres for ACP exporters of services; 4. Increase in technology transfer to the ACP services sectors using “home country measures” (e.g. PROINVEST, EIB Investment Facility); 5. Full credit for autonomous ACP liberalisation of services 5 6. Fewer or no services commitments by ACP/LDC countries (affirming GATS commitments); 7. EU commitments over and above GATS. This should cover more liberal mode 4 conditions (e.g. an ACP business travel card), safeguarding mode 1 supplies, and removal of restrictions in mode 3 and mode 4 in specific sectors such as business services, construction and related services, health and education services, recreational, cultural and sporting services, and tourism services. Lifting of some restrictions can be achieved more easily at ACP level than in the GATS, but EPAs should be formed under GATS article V (on Economic Integration). 8. Inclusion of (parts of) EU government procurement (e.g. health and IT); 9. Operationalise Emergency Safeguards Measures for the ACP; 10. Flexible implementation time period (this could apply to mutual recognition of qualifications and inventories of restrictions). After resolving general issues, such as agreeing on who will negotiate EPAs (see chapter 4 on ACP groupings), we suggest at least four ways forward: 1. No services agreement or new resources. 2. No services agreement, with some S&D options such as additional resources. 3. A limited services agreement. No ACP commitments beyond GATS, but (significant) new EU commitments and inclusion of several S&D options. 4. Advanced services agreement, with both the ACP and EU committing more than under GATS. There would need to be regional coordination of services commitments within ACP regions before engaging with the EU, and further discussion of liberalising principles and rules, as we argued before that these are in principle negotiable, and inclusion of S&D. Conclusions and areas for further work Chapter 8 concludes with areas for further research required to assess the importance of services negotiations within the CPA at a more detailed level. The need for more detailed research will depend on which negotiating option will be chosen. We highlight a few options below and suggest to begin with ESA and CARICOM regions as both have expressed an interest in thinking further about services negotiations: • For each EPA region, identify the country and sector specific effects of financial resources on ACP services productivity and export capacity; • For each EPA region, identify at the country/sector level, the effectiveness of the above 10 S&D options; • Initiate public-private dialogue to examine which trade barriers should be lifted by the EU to trigger a supply response in the ACP;. • Initiate a mode 4 study to examine feasibility and effects of a possible ACP business travel card. It should be noted that in order to obtain at least modest gains from a services agreement, the ACP would need to table specific S&D options: requests for the lifting of certain barriers in the EU, for EDF resources in specific areas, etc. Now is the time to consider which specific options are likely to be most effective, as this process may be lengthy. It is not possible to wait until current GATS 2000 negotiations have been finalised, as different requests (for the lifting of barriers, or other S&D options) can be made under Cotonou whereas GATS 2000 negotiations may not have finished by 2005, with Cotonou services negotiations possibly starting in 2006. 6 List of abbreviations ACP ANDEAN APEC ASEAN CARICOM CARIFORUM CEMAC CGE CPA CRTA CTD CTS DFID EAC EC ECDPM ECOWAS EDF EDI EPA EU EU-CEECs Europe Agreements FDI FTA GATS GATT GDP IMF LDC MA MFN MERCOSUR MNE MS NAFTA NT OAS OECD R&D RTA RoO S&D SACU SADC SMEs TDCA UEMOA UNCTAD WDI WTO African, Caribbean and Pacific countries Andean Community Asia-Pacific Economic Cooperation Association of South East Asian Nations Caribbean Community and Common Market Caribbean Forum Communauté Économique et Monétaire de l'Afrique Centrale Computable General Equilibrium Cotonou Partnership Agreement Committee on Regional Trade Agreements Committee on Trade and Development Council for Trade in Services UK Department for International Development East African Community European Community European Centre for Development Policy Management Economic Community of West African States European Development Funds electronic data interchange Economic Partnership Agreements European Union Central and Eastern European Countries Foreign Direct Investment Free Trade Agreement General Agreement of Trade in Services General Agreement on Tariffs and Trade Gross Domestic Product International Monetary Fund Least-Developed country Market Access most-favoured-nation Mercado Común del Sur (South American Common Market) Multinational Enterprises Member State North American Free Trade Agreement National Treatment Organization of American States Organisation for Economic Co-operation and Development research and development Regional Trade Agreement Rules of Origin special and differential treatment Southern African Customs Union Southern African Development Community small and medium-sized enterprises Trade, Development and Cooperation Agreement Union Économique et Monétaire Ouest-africaine United Nations Conference on Trade and Development World Development Index World Trade Organization 7 Table of Contents Executive summary......................................................................................................1 Table of Contents .........................................................................................................8 List of Appendices........................................................................................................9 Chapter 1 Introduction and Overview..................................................................10 Chapter 2 GATS and Special and Differential Treatment..................................12 2.1 GATS ..........................................................................................................12 2.2 GATS commitments ....................................................................................12 2.3 GATS 2000 requests and offers ...................................................................13 2.4 Special and differential treatment in GATS.................................................14 Chapter 3 Services Provisions in Regional Trade Agreements ..........................19 3.1 Developing country Regional Trade Agreements and services ...................19 3.2 Services provisions in Regional Trade Agreement with the EU .................25 3.3 Conclusions and relevance for post-Cotonou negotiations.........................28 Chapter 4 Services Provisions and post-Cotonou Negotiations..........................30 4.1 Services provisions in the Cotonou Partnership Agreement........................30 4.2 Post-Cotonou Services negotiations so far ..................................................31 4.3 Post-Cotonou Services negotiations: undecided issues ...............................31 Chapter 5 WTO Compatibility of S&D in EPAs on Services .............................33 Chapter 6 ACP Exports of Services to the EU: Performance and Barriers......35 6.1 Performance of ACP trade in services .........................................................35 6.1.1 Share of services in GDP .............................................................................35 6.1.2 Share of services in total trade .....................................................................36 6.1.3 Growth in services trade ..............................................................................36 6.1.4 The composition of ACP services exports...................................................38 6.1.5 ACP regional exports...................................................................................40 6.1.6 The composition of services exports from ACP regional groups ................41 6.1.7 ACP trade in services with the EU ..............................................................41 6.1.8 ACP exports and imports of services by mode of supply............................43 6.1.9 ACP services companies exporting to the EU .............................................44 6.1.10 Conclusions..................................................................................................45 6.2 EU barriers to ACP exports .........................................................................47 6.2.1 General barriers to trade in services.............................................................47 6.2.2 Trade barriers to ACP-EU trade in services: anecdotes...............................48 6.2.3 EU GATS schedules ....................................................................................48 6.3 Possible benefits to ACP of removing EU barriers to ACP exports............54 Chapter 7 Special and Differential Treatment in post-Cotonou Negotiations ..58 7.1 Negotiations so far .......................................................................................58 7.2 Options.........................................................................................................59 7.3 Political and negotiating issues....................................................................61 Chapter 8 Conclusions and areas for further work.............................................63 References .................................................................................................................65 8 List of Appendices Appendix A: Appendix B: Appendix C: Appendix D: Appendix E: Appendix F: Table F1: Table F2: Appendix G: Appendix H: Appendix I: Table I.1: Table I.2: Table I.3: Table I.4: Table I.5: Table I.6: Table I.7: Table I.8: Table I.9: Table I.10: Appendix J: Table J.1: Appendix K: Services Sectoral Classification List.................................................67 GATS commitments...........................................................................74 EC requests in GATS 2000................................................................77 Types of natural persons supplying services (horizontal commitments) .....................................................................................78 Cotonou Partnership Agreement: services related articles. ..........79 EU trade with ACP, list of ACP countries.......................................82 EU trade with ACP ..............................................................................82 List of ACP countries with WTO and LDC status ..............................83 Regional Trade Agreements Notified (and in Force) to the WTO 85 S&D in GATS.....................................................................................86 Background data................................................................................93 Services as a Percentage of GDP for ACP Countries 2000 .................93 ACP Services Exports as Percentage of Total Exports........................94 ACP Services Exports ($ Millions)......................................................95 ACP Services Exports by Sector 2000 ($ millions).............................96 ACP Services Exports by Region, 1980 -2000, $ mn..........................98 EU Trade in Services ...........................................................................99 EU Member state trade in services ....................................................100 EU Services Trade with ACP as a Proportion of Total EU Services Trade ..................................................................................................103 EU Exports and Imports of Services 2001 ($ millions).....................104 Composition of exports for selected ACP countries..........................106 Business Process Outsourcing to Developing countries. ..............107 Business Process Outsourcing in the UK financial services industry108 Consolidated EU GATS schedule...................................................110 9 Chapter 1 Introduction and Overview1 The Cotonou Partnership Agreement (CPA) was signed in June 2000 and entered into force on 1 April 2003. The agreement allows for negotiations between the EU and the ACP on reciprocal trade and investment relationships in goods and services. Among others, the CPA includes two new approaches compared to previous EU-ACP arrangements. First, it will mark the eventual abolition of unilateral tariff preferences in goods trade, which has long been granted by the EU to ACP countries. Secondly, beyond the goods trade, it is expected that negotiations will cover investment and trade in services. Negotiations are expected to proceed in the form of regional economic partnership agreements (EPAs) between the EU and ACP regions. The purpose of this scoping paper is to inform ACP negotiations on the issue of trade in services and on how to incorporate special and differential treatment (S&D), as advocated in the CPA. While the Cotonou mandate allows for S&D, both the EU and the ACP have tabled few concrete proposals in this area, even though for some ACP regions substantive phase 2 negotiations began in October 2003. Special and differential treatment has long been practised in the EU-ACP context. However, it has dealt with trade negotiations in goods, which are now about retaining, not securing, further special market access. So it is only in services that the ACP can make demands for more access. There has been no real progress on thinking about how S&D can be applied to post-Cotonou service negotiations.2 Some would argue that the (likely) nature of service agreements at WTO and EU-ACP level, i.e., a positive list approach, is inherently consistent with S&D, as each country has sufficient flexibility in terms of committing sectors and restrictions. However, S&D in services can be about more than flexibility in offering services sectors. S&D could include: increased access to partner markets, in particular through mode 4; increased technology transfer, especially in mode 3; allowances for emergency safeguards for committed sectors and credits for autonomous liberalisation; and others. The three objectives (terms of reference) of this study are to: 1. identify the provisions on services in existing agreements and assessment of the pros and cons of these provisions; 2. provide an overview of possible benefits to ACP countries (if possible with differentiation between regions) of EU liberalisation sectors, regulations and modes of supply; 3. conduct a stocktaking of the possibilities for S&D for the ACP countries in the framework of the General Agreement of Trade in Services (GATS) and assess options for incorporating S&D in services in Cotonou over and above the level in the GATS. We are grateful to Marjolein Geusebroek and her colleagues at the Dutch Ministry of Foreign Affairs for their comments. 2 A discussion with Bridget Chilala indicated that the Commonwealth Secretariat has conducted a study on services in Cotonou (Arkell and Johnson, 2003). In line with the Terms of Reference, our study focuses on S&D in services in Cotonou, thereby paying more attention to services provisions in regional trade agreements, data issues and options to include special and differential treatment. 1 10 The structure of the rest of this report is as follows: Chapter 2 introduces GATS and the concept of S&D as applied to services negotiations. This is relevant as it can provide a template for the structure of possible regional services negotiations and also a background against which regional negotiations take place (that is for those countries that are members of the WTO). Chapter 3 examines services provisions in Regional Trade Agreements in more detail. These provisions, in particular those negotiated in EU FTAs, may provide a useful starting point for services negotiations in EPAs. Chapter 4 reviews the provisions in the Cotonou Partnership Agreement relevant for (possible) future EPA negotiations on services. Chapter 5 discusses which GATS provisions allow WTO compatible services negotiations in RTAs and shows possible flexibility in services EPAs available to ACP countries. Chapter 6 provides an overview of the performance of ACP exports, the barriers they face in the EU at present and possible benefits the ACP derive from lifting these barriers. Chapter 7 sets out possible options for the inclusion of S&D in post-Cotonou negotiations on services. Chapter 8 concludes with a list of areas for further research required to assess the importance of services negotiations at a more detailed level. 11 Chapter 2 GATS and Special and Differential Treatment 2.1 GATS At the multilateral level, the General Agreement on Trade in Services (GATS) governs liberalisation in trade in services. The GATS consists of three core elements. The first consists of general rules and principles governing trade in services. Among others, these rules provide for disciplines on transparency (Art. III) and mostfavoured-nation (MFN) treatment (Art. II), although derogations are possible (under Art. II –exemptions and Art. IX:3 – waivers). The framework is still incomplete, and modalities on certain issues, such as emergency safeguard measures (Art. X), subsidies (Art. XV), domestic regulation (Art. VI) and government procurement (Art. XIII) continue to be developed. Secondly, the GATS includes a series of specific annexes pertaining to regulatory principles agreed in specific service sectors (air transport, financial services, maritime transport, and telecommunications) and decisions on specific issues (movement of natural persons). The third element of the GATS consists of schedules of commitments which outline the liberalisation of each Member. Sectoral schedule commitments concern market access (Art. XVI) and national treatment (Art. XVII) within designated sectors. Such commitments identify the services by mode of supply (cross-border trade, consumption abroad, commercial presence and movement of natural persons) for which the Member guarantees market access and national treatment and any limitations that may be attached. Members can also make market access and national treatment commitments across sectors (again for each mode of supply) in what are known as horizontal schedules of commitment. Members are free to tailor as they see fit the sector coverage and substantive content of sectoral and horizontal schedules. GATS Art. XIX allowed the start of a new round in 2000, due to finish by the end of the Doha Round in 2005. The article says that this process of liberalisation should take place with due respect for national policy objectives and the level of development of individual Members, both overall and in individual sectors; that there will be appropriate flexibility for individual developing country Members to open fewer sectors, liberalise fewer types of transactions, progressively extend market access in line with their development situation and, when making access to their markets available to foreign service suppliers, attach to such access conditions aimed at achieving the objectives referred to in Art. IV. 2.2 GATS commitments WTO members made GATS commitments in 1995 or, afterwards, on entry into the WTO. There are various ways to examine schedules of commitments made in GATS. One is a description of commitments by mode of supply (World Bank, 2002; WTO, 1998 and 1999). Countries can make unbound or partial and full commitments. There are four modes covering cross-border supply and returns to cross-border movement of factors. • Mode 1. Cross-border supply: when a service crosses a national border. An example is the purchase of insurance or software by a consumer from a producer abroad. • Mode 2. Consumption abroad: when a consumer travels abroad to consume from the service supplier, such as in tourism, education, or health services. • Mode 3. Commercial presence: when a foreign owned company sells services (e.g. foreign branches of banks). 12 • Mode 4. Temporary movement of natural persons: when independent service providers or employees of a multinational firm temporarily move to another country. Countries have also had to decide which sectors to include (unbound, or bound with or without market access and NT/MFN exemptions). The basic list (more detailed in appendix A) of GATS sectors is • Business services • Communication services • Construction and related engineering services • Distribution services, • Educational services, • Environmental services, • Financial services, • Health-related and social services, • Tourism and travel-related services, • Recreational, cultural and sporting services, • Transport services, • Other services. Appendix B contains a very brief summary of commitments in these twelve sectors. Sectors least committed are social sectors, such as educational and health-related services. Sectors most committed include communication services, financial services and tourism. WTO member states have made significant (full) commitments for mode 1 and especially mode 2 (few countries prevent tourism), but far fewer (and partial) commitments in mode 3 and especially mode 4. Mode 3, commercial presence, is a contested area since it relates to the impact of foreign direct investment. Entries vary by sector, and partial bindings are commonplace for this mode, which is more restrictive in financial services, infrastructure services and consumer-oriented businesses. Mode 4, in which there are no full horizontal commitments, is also a contentious area. WTO (1998) shows that most of the mode 4 entries scheduled (240 out of 328) concern executives, managers and specialists. Of these, 135 entries explicitly relate to intra-corporate transferees and are thus related to commercial presence or Mode 3 commitments (see Appendix D). The focus on employed persons is further reflected by use of employment links such as a market access criterion; among all relevant restrictions ‘pre-employment’ ranks top, by a wide margin. Others include numerical quotas and economic-needs tests. The schedules are biased in favour of qualified labour. Only 17 percent of all horizontal entries cover low-skilled persons as well (‘business sellers’, ‘non specified’ and ‘other’). 2.3 GATS 2000 requests and offers GATS 2000 is currently at a request-and-offer negotiating stage. The Doha ministerial instructed that GATS 2000 should be part of a single undertaking, due to finish by 2005. After failing to progress substantially at the Cancún ministerial, it has become more likely that the 2005 deadline will be pushed backwards (probably also despite a letter by the US trade negotiator aimed at speeding up the current round). 13 Nevertheless, progress in GATS should be carefully watched, as this provides a background for services negotiations in Cotonou due to finish by 2008. Request and offers under GATS are usually not public. But the requests of the EU to 109 countries, including ACP countries, were leaked. (The requests to the EU have also been made public, but not by country.) Appendix C contains a summary table. The tables in Appendix C are simplifications, and they do not reveal whether a sector is completely liberalised or only partly (e.g. in one mode, based on one principle, etc.). They also do not tell us whether the commitments (and requests) describe the status quo, or whether requests to developing countries will actually result in offers from developing countries. More detailed analyses would be needed to answer such questions (see e.g. Gillson and Ojowu, 2003, for Nigeria). The requests by the ACP to the EU are not publicly available. A summary is available: by 2002, three ACP countries (Kenya, Mali and Mauritius) had requested changes to the EC schedule. 2.4 Special and differential treatment in GATS The WTO has included special provisions for developing countries in many of its agreements, including: • longer time periods for implementing agreements and commitments, • measures to increase trading opportunities for these countries • provisions requiring all WTO members to safeguard the trade interests of developing countries • support for capacity building in developing countries so that they can negotiate in the WTO work, handle disputes, and implement technical standards, and • additional provisions related to least-developed country (LDC) Members. The WTO (www.wto.org) describes nine special and differential treatment provisions in the GATS, broken down as follows: • Provisions aimed at increasing trade opportunities: Article IV:1 and Article IV:2 • Provisions under which WTO Members should safeguard the interests of developing country Members: Article XIX:3 • Flexibility of commitments, of action. and use of policy instruments: Article III: 4 (enquiry points), Article V:3 (MFN exemptions and RTAs), Article XV:1 (use of subsidies), and Article XIX:2 (coverage) • Technical Assistance: Article XXV:2 and Paragraph 6 of the Annex on Telecommunication. • Provisions relating to least-developed country Members: Article IV:3. In addition, the preamble of the GATS recognises the particular need, among others, for developing countries to exercise the right to regulate, or introduce new regulations on the supply of services within territory in order to meet development objectives. The table in Appendix H lists the relevant WTO-GATS articles including relevant comments made in WTO official documents after the conclusion of GATS. It also includes a column for the proposal by the African group made to the CTD (Committee on Trade and Development) of the WTO regarding S&D. Very often, S&D needs further operationalisation before it will really increase developing-country opportunities in exports of services. For instance, a draft report of the CTD 14 (TN/CTD/W/25/Rev.1) states that ‘the General Council agrees that the information to be provided by Members shall indicate how the requirement that special priority be given to least-developed country Members in the implementation of paragraphs 1 and 2 of Article IV is being met, and that contact points, in this context, shall provide information of particular interest to services suppliers from least-developed country Members.’ To this end the African group proposes (TN/CTD/W/28) that the CTD set periodic benchmarks on financial and technical cooperation and other mutual arrangements under which developed country Members accord to developing-country Members special and differential treatment and undertake commitments in negotiations, as and when held, designed to ensure: (a) the strengthening of the capacity, efficiency and competitiveness of domestic-service industries of developing-country Members and to effect technology transfer to developing-country Members; (b) access by domestic service industries of developing-country Members to distribution channels and information networks of developed-country markets; (c) liberalisation of market access in sectors and modes of supply of export interest to developing-country Members. Indeed, with this debate ongoing it is clear that the implementations of S&D is slow to occur or not at all. Three areas can be highlighted. First, the need to implement S&D relating to liberalisation of modes of export interest of developing countries is exemplified by the fact that developing countries frequently argue that commitments on mode 4 are important to them. However, data have indicated that there were 100 horizontal limitations with respect to mode 4, compared to 20 for mode 2. Secondly, some S&D options have yet to be used, e.g. Art. V:3. Thirdly, there has been limited progress on other S&D options, including technical assistance. Regarding technical assistance, a draft report of the CTD (TN/CTD/W/25/Rev.1) states that ‘the General Council instructs the WTO Secretariat to pursue with a view to concluding arrangements with relevant international institutions that have the technical assistance capacity to assist developing and least-developed country Members in addressing their supply-side and infrastructural constraints and their development needs in the services sector. This shall be without prejudice to the prerogative of the Council for Trade in Services to decide upon technical assistance to developing countries which shall be provided at the multilateral level by the Secretariat, in accordance with Article XXV.2.’ Data from the Trade-Related Technical Assistance and Capacity Building Database at the WTO (http://tcbdb.wto.org/) show 149 entries for services-related technical assistance, spread over 2001 (34), 2002 (82) and early 2003 (33). More than 100 of these were done by the WTO for the benefit of developing countries. The total amounted to US$5 million in 2002 and US$18 million in 2003. The UK Department for International Development is supporting an UNCTAD/World Bank programme for the benefit of developing country negotiations in GATS. Recently, some progress has been made in the area of finalising S&D modalities in services. First, the LDC group tabled various proposals (TN/S/W/13, 2003) on how to operationalise S&D for LDCs: 15 • • • • • • • • • Considering the serious difficulty for LDCs, Members shall present requests which are limited in terms of numbers of sectors and modes of supply and scope of commitments. Members shall not seek the removal of conditions imposed by LDCs. No LDCs shall be required to offer national treatment. Members shall grant full market access and national treatment to LDCs in the sectors and modes of supply of export interest to them. Developed-country Members shall promote and strengthen their investment and export/import promotion programmes for LDCs. Members shall assist least-developed countries in obtaining training and transfer of technology, and making appropriate financial resources available for such specific measures. Members shall facilitate and ensure the improvement of access to services and service suppliers of LDC Members to distribution channels and information networks, especially in tourism, transport, audiovisual, and construction services, inter alia through promotion of intergovernmental cooperation programmes. Members shall undertake commitments to provide access to all categories of natural persons from LDCs, particularly unskilled and semi-skilled persons, for supplying services under the GATS without the application of economicneeds test. LDCs shall be granted maximum credit for their autonomous trade liberalisation without scheduling them as binding commitments. Technical assistance shall be provided to LDCs to carry out national assessments of trade in services. The ACP declaration on the fifth ministerial conference of the WTO, on 1 August 2003, discusses services in the context of GATS, including S&D. The main conclusions were: • That the principle of progressive liberalisation should be respected, in particular (i) the flexibility offered to ACP states and other developing countries in opening up fewer sectors; and (ii) liberalisation by developed countries of sectors and modes of export interest to the ACP, particularly mode 4. • That, due to capacity constraints, the ACP had not taken part in the current request and offer negotiations. • That the WTO should finalise modalities for LDCs. • That the importance of GATS Article IV should be highlighted. • That assistance should be given to ‘carry out an assessment of the effects of previous services liberalisation and the potential effects of future liberalisation in ACP States individually and as a Group, so that our negotiating position may be more informed’. In its contribution to the CTD, the EC (TN/CTD/W/26, 2002) said it thought decisions would be possible on ‘the proposals of the LDCs to take account in a more systematic manner of the priority sectors or interests of LDCs in the GATS negotiations, including possibly a special session of the Council for Trade in Services (CTS) on this subject’. 16 A special session of the CTS took place on 3 September 2003 and agreed on modalities for the special treatment for LDCs. The contents of modalities followed largely the proposal by the LDC group, but has been toned down in some areas (e.g. on mode 4, or autonomous credit): • Members shall exercise restraint in seeking commitments from LDCs (e.g. in terms of national treatment), • There shall be flexibility for LDCs in offering fewer sectors and modes, • Members shall provide effective market access in sectors and modes of supply of export interest in LDCs, • Members shall develop mechanisms to implement Article IV:3, • Members shall take measures such as promoting investment in LDCs, reinforcing export/import promotion programmes, improve LDCs’ access to distribution channels and information networks, • Members shall assist least-developed countries through training and transfer of technology, enterprise schemes, intergovernmental cooperation programmes and financial resources, • Members shall to the extent possible consider undertaking commitments to provide access in mode 4, • LDCs shall be granted appropriate credit for their autonomous trade liberalisation without scheduling them as binding commitments, • Further work on GATS rules shall include the interests of LDCs, • Technical assistance shall continue to be provided to LDCs to carry out national assessments of trade in services and build national capacities. There has however been no call for this to be implemented, e.g. at Cancun, so the effectiveness of this can be doubted. It would be important to see which new concrete examples could be most effective in achieving GATS Article IV. Hoekman et al. (2003) discuss new options that could be considered in the WTO in providing special and differential treatment to small and low-income countries. While suggesting a number of steps to make S&D more effective and the Doha Round more supportive of development, they advocate just two new measures in relation to services: • A binding commitment by developed countries on services, to expand temporary access for service providers by a specific amount, e.g., equal to three percent of the workforce. Winters (2002) finds that an opening of developed countries to allow temporary entry by foreign workers, equal to three percent of the current workforce, would generate welfare (real-income) gains that exceed those from full merchandise trade liberalisation. • A commitment not to restrict cross-border trade (e.g., via telecom channels). Many developing countries are using the internet and telecommunication networks to provide services through cross-border trade. Currently such trade is free of restrictions, but this is not locked in through the GATS. The first point has also been emphasised in the proposal by the African group (TN/CTD/W/28, 2003): ‘Developed country Members shall reserve quotas for supply of services by developing country suppliers as may be appropriate in sectors that developing country suppliers have interests, and that developed country Members shall not adopt horizontal limitations with respect to movement of natural persons and 17 shall over a period of two years phase out the limitations they maintain at the adoption of this decision.’ Overall, while S&D proposals have been tabled in GATS, they have not been (fully) operationalised and are in a number of cases not mandatory or are difficult to measure. Negotiations on emergency safeguard measures are also ongoing. The ACP groups will be interested in S&D in GATS, as it will inform their negotiations with the EU on a possible services agreement under Cotonou. However, as we will also explain later, this does not preclude thinking on how S&D can be applied in Cotonou, before S&D negotiations in GATS have finally come to an end. 18 Chapter 3 Services Provisions in Regional Trade Agreements This chapter describes services provisions in Regional Trade Agreements (RTAs) because this can provide insight into how negotiators have in the past approached services liberalisation at a regional level, or how they could approach it in the future including at the EU-ACP level. The description of services provisions in RTAs will be performed at two levels. We will compare services provisions in the main developing country RTAs (3.1) and we will also compare a selection of RTAs concluded between the EU and developing countries (3.2). Section 3.3 concludes. 3.1 Developing country Regional Trade Agreements and services Over the past decade and a half, developing countries have begun to design provisions in RTAs addressing trade in services, in parallel with GATS negotiations. GATS Article V required a higher degree of liberalisation in RTAs than in GATS (until both are fully liberalised). RTAs should have substantial sectoral coverage and provide for the ‘absence or elimination of substantially all discrimination’ through elimination of existing discriminatory measures and/or the prohibition of new or more discriminatory measures, either at the entry into force of the agreement or on the basis of a reasonable time-frame. The substantial sectoral coverage in services refers to the number of sectors, volume of trade affected and modes of supply. No mode of supply should be excluded a priori. We discuss this issue in more depth in Chapter 5. Stephenson and Prieto (2002) define the components often found in regional (Western Hemispheric) service agreements on the basis of three elements: coverage, liberalising principles and depth of commitments (similar to GATS provisions). • Coverage describes the four modes of supply (as in GATS: cross-border delivery, consumption abroad, commercial presence, and movement of natural persons), and whether the agreements take a negative-list approach where all services sectors are included, subject to exceptions (called non-conforming measures), or a positive-list approach specifying the type of access offered to service suppliers in scheduled sectors. Liberalising principles include: the fundamental principles of National Treatment (NT – no discrimination between foreign and domestic suppliers); Most Favoured Nation (MFN – no discriminations amongst source of foreign suppliers); local presence requirement (whether a local presence is required to supply the service); quantitative non-discriminatory restrictions (e.g. on number of TV frequencies). Depth of commitments includes transparency (informing members of existing restrictions on services trade), ceiling binding, a freeze or standstill on nonconforming measures (no return to less liberalisation), ratcheting, list or loose (non-conforming measures can be maintained only when they are listed in appendices) and future liberalisation. • • 19 Table 3.1 compares RTAs in the area of services recently concluded by Asian and Western Hemispheric countries. The following points emerge: • • • Western Hemispheric RTAs are based on a negative-list approach, excluding MERCOSUR. ASEAN is based on a positive-list approach. RTAs offer MFN, with the notable exception of CARICOM; RTAs based on a negative-list approach offer NT. ANDEAN, NAFTA and CARICOM require transparency, whereas ASEAN and MERCOSUR do not have such provisions. Transparency is required when changing measures relate to trade in services. Most agreements include a standstill clause, i.e., no new restrictions are allowed. Some (NAFTA) of the above agreements have separate rules governing investment in services (mode 3 of services), though MERCOSUR regards investment in services as mode 3 of services supplies. ASEAN does not have a special chapter on monopoly practices, while ANDEAN, NAFTA and MERCOSUR do. CARICOM has a separate agreement on competition. MERCOSUR and NAFTA (and CARICOM) require member states to encourage recognition of titles of other member states, while in ASEAN tiles may be recognised. NAFTA includes provisions on government procurement of services. MERCOSUR has ongoing negotiations on this. Other regions do not appear to include this. Treatment of mode 4 (temporary movement of natural persons) varies considerably. In MERCOSUR it depends on the scheduled commitments, and in NAFTA there are limited provisions related to business-services providers only. CARICOM is in an advanced stage, allowing movement of natural persons based on foreign establishments, and (when the protocol is ratified) allowing free movement for ‘skilled nationals’ and access to labour markets. Some RTAs may not grant right of entry but have established a scheme to facilitate the entry of business visitors. Regarding APEC (OECD 2002a): The APEC Business Travel Card is valid for three years and provides multiple shortterm business entries, with stays of two or three months on each arrival. Cardholders are required to present their passports, but receive expedited airport processing and are not required to submit separate applications for business visitor visas. Participating economies commit to implement the scheme on a best endeavours basis and are free to maintain existing visa requirements for business visitors. All economies retain the right to refuse an individual without providing reasons or to refuse entry to APEC Business Travel Card-holders at the border. • • • • • • • ASEAN and MERCOSUR do not have rules regarding non-conforming measures, while ANDEAN, CARICOM and NAFTA are not allowed to schedule any new non-conforming measures. Most RTAs need to be and are ambitious, aiming to reduce all restrictions on trade in services within the coming two decades. It would be of interest to examine the effects of each individual trade measure. This would contribute to an understanding of which provisions and commitments are important, in which mode, in which sector, etc. Much will depend on specific 20 circumstances, and we will examine the context of ACP countries in mode detail in Chapter 6.3 Table 3.1 Sectoral coverage Negotiating modality Most favoured nation National Treatment Transparency Services components in selected RTAs ASEAN Universal, according to schedules Gradual, positive list Subject to sectoral exemptions scheduled sectors subject to bound commitments Not included ANDEAN Universal Negative list Unconditional General obligation MERCOSUR According to schedules, all sectors by 2010 Gradual, positive list Subject to sectoral exemptions scheduled sectors subject to bound commitments Each Party shall publish all measures NAFTA Universal Negative list Unconditional General obligation CARICOM Not determined Negative list Not specified Yes Each Party will promptly publish all measures of general application Procedures to be established to notify restrictions Treatment of investment Commercial presence covered by specific sectoral commitments; also separate investment disciplines Right of establishment guaranteed for service providers (commercial presence); separate investment disciplines. Commercial presence covered by specific sectoral commitments; separate investment disciplines Investment rules in separate chapter, no local presence required, Safeguards Monopoly practices Provisions exist for Emergency Safeguard Measures and Restrictions to Safeguard the Balance of Payments No Provisions exist for Restrictions to Safeguard the Balance of Payments Provisions exist for Emergency Safeguard Measures and Restrictions to Safeguard the Balance of Payments Disciplines to be developed for monopoly practices and exclusive service suppliers Recognition of titles Each Member State may recognise the education or experience obtained, requirements met, or licenses or certifications granted in another Member State. Disciplines to be developed for monopoly practices and exclusive service suppliers Each Party shall recognise the licenses, certifications, titles of professions, and diplomas, accorded by other Member Country, in which activity of services requires of such instruments, according to the established criteria in a Decision dealing with the matter. No provision for safeguard action in services, but provisions in case of balance of payment difficulties (different for tare in financial services) Yes, for monopolies and state enterprises No, but when ratified the protocol requires notification of existing restrictions and provisions on services providers While no national treatment is provided, it does establish that members shall not introduce in their territories any new restrictions relating to the right of establishment of nationals of other members states. Provisions to safeguard the Balance of Payments Monopolies not specified, but Agreement on competition Provision to establish common standards and measures for accreditation or, when necessary, for the mutual recognition of diplomas, certificates and other evidence of qualifications of nationals of CARICOM members Each state shall be encouraged its competent authorities to develop together with those of the other Parties mutually acceptable standards or criteria regarding the exercise of professional activities related to trade in services Annex on professional services which requires members to encourage the relevant bodies in their respective territories to develop mutually acceptable standards and criteria for the licensing and certification of professional service providers, to provide recommendations on mutual recognition to the parties and to develop procedures for the temporary licensing of professional service providers of another party There is more information on benefits from multilateral service liberalisation than from regional service liberalisation. It may be useful to restate some key results of multilateral services liberalisation studies. Results of global CGE models suggest global gains in economic welfare of around US$250 billion per annum for a 50 percent cut in (all) services trade barriers, occurring over a five to ten year period, and equally distributed across all countries in proportion to their GDP (George and Kirkpatrick, 2003; OECD, 2002b). Importantly, most gains are obtained through liberalising a country’s own services sector (not through negotiations), rather than obtaining further access to foreign markets. Most models surveyed (eight) do not explicitly model different modes of services supply. But some models do include FDI in services sectors (mode 3), suggesting a global gain of US$60 billion per annum for this mode alone (but benefits skewed to Asians). Regarding mode 4, if rich countries permitted movement of labour up to three percent of the total labour force, world incomes would rise by US$156 billion (Winters, 2002). Developing countries would be the main gainers and the net welfare for the home region for Africa would be US$14 billion. 3 21 RoO Benefits are denied to a service supplier who is a natural person of a non-Member State Government procurement No Benefits of the protocol can be denied to a service provider from another member party, given notification and consultation, when this party demonstrates that the services provided by a person or country not part of Mercosur. Government Procurement disciplines to be applied to services, once developed Freedom of Temporary movement guaranteed. Benefits of the protocol can be denied to a service provider from another member party Subject to prior notification a Party may deny the benefits to a service provider of another Party It seems possible to deny benefits of the protocol to a service provider from member an nonmember parties. To be developed, but to be applied to services Includes government procurement of services in separate chapter on government procurement Not mentioned Movement of natural persons No No, depends on scheduled commitments Commitment regarding temporary movement of business services providers Dispute settlement A specific dispute settlement mechanism may be established Exceptions Restricting Nonconforming measures No No Provisions provide for procedures in the case of rules of origin dispute, including consultation Yes No party will increase the number of existing nonconforming measures Disputes are to be settled according to the dispute mechanisms of MERCOSUR Yes No Access to investor-state dispute mechanisms under chapter 11 on investment, see e.g. financial services chapter Yes Parties need to make reference to law when scheduling commitments. Temporary movement of persons as services providers in connection with foreign establishment, including (family of) management, supervisions and technical staff; CARICOM skilled nationals act to be ratified before 2005 by all members. No mentioning of this in the chapter on services Special provisions Future liberalisation of trade in services Financial services, basic telecommunication, maritime transport, movement of natural persons, and audiovisual Gradual liberalisation through exchange of lists commitments. Financial services, basic telecommunications, and professional services will be elaborated in a near future Progressive liberalisation of a list of commitments through negotiations within a period of 5 years (by 2005). Financial services, basic telecommunications, maritime transport, movement of natural persons, and audio-visual Financial services, air services, land transport, telecommunications, professional services, Temporary Entry for Business Persons To remove restrictions but allow for exceptions and reservations. Yes Members will not introduce any new restrictions on the provision of services in the Community (standstill) Professional services, air transport Progressive liberalisation of a list of commitments through negotiations within a period of 10 years (by 2007). To achieve a complete elimination of the identified restrictions to the movement of natural persons and capital throughout the region by 2005 Sources: OAS website and RTA chapters/protocol related to services. Notes: see Te Velde and Fahnbulleh (2003) for investment provisions in regions There are far fewer services provisions and agreements in African ACP regions. Below we discuss the coverage of services in ECOWAS, CEMAC, EAC, SADC, COMESA, SACU. Under the ECOWAS protocol on the free movement of natural persons and property, individual countries have abolished the need for visas for Member country nationals. For instance, ECOWAS nationals are free to visit and work in Nigeria for a period of 90 days, after which an extension must be sought from the Nigeria Immigration Service. Similar efforts have been ongoing in CEMAC and EAC. A December 2001 summit announced that CEMAC aimed to introduce a CEMAC passport, whose modalities are still to be announced. There were also discussions on a common air transport policy and on insurance announcing the creation of an office in each 22 member country for the delivery of international vehicle-insurance cards. The card, which would be issued with a common insurance policy, aimed to provide an effective solution to problems arising from cross-border accidents. There are at least three SADC protocols on: energy; tourism; and on transport, communications and meteorology (signed 1996). These govern cooperation on trade in services in areas such as harmonisation of regulations. SADC has also formulated and is discussing a Draft Annex on Trade in Services, with provisions on definition, market access, MFN, NT, trade liberalisation, right to regulate, mutual recognition, provision of information, effective and transparent regulation, promotion of trade and investment in services, competition policy, transfers, denial of benefits, general exceptions, waiver of obligations, labour-market integration agreements and consultation and dispute settlement. The horizontal approach is not consistent with the so far sectoral approach. Chapter 15 of the 2001 EAC Treaty is on cooperation in infrastructure and services. It has articles on • Common transport and communications policies • Roads and road transport • Railways and rail transport • Civil aviation and civil air transport • Maritime transport and ports • Inland waterways transport • Multimodal transport • Freight booking centres • Postal services • Telecommunications • Meteorological services • Energy Chapter 11 of the 1993 COMESA Treaty is on cooperation in the development of transport and communications. It includes articles on common transport and communication policies; roads and road transport; railways and rail transport; air transport; maritime transports and ports; inland waterway transport; pipeline transport; multimodal transport; freight booking centres; freight forwarders; customs clearing agents and shipping agents; meteorological services; postal services; postal services; telecommunications; radio and television; common provisions. Most articles deal with cooperation and harmonisation. For instance, in May 1999 COMESA introduced the COMESA Regulations for the implementation of liberalisation of air transport services. This entailed two phases. The first phase has been implemented by 12 member states and provides for: free movement of intra-COMESA cargo and non-scheduled passenger services; free movement of intra-COMESA scheduled passenger services with a frequency limit of up to two daily between any city pairs; adoption of multiple designation; and elimination of capacity restrictions. Phase 2 provides for free movement of intraCOMESA air transport. 23 Chapter 28, Article 164 of the COMESA Treaty, on free movement of persons, labour, services, right of establishment and residence, stipulates that • Member States agree to conclude a Protocol on the Free Movement of Persons, Labour, Services, Right of Establishment and Right of Residence. • Member States agree that the Protocol on the Gradual Relaxation and Eventual Elimination of Visa Requirements within the RTA adopted under the PTA Treaty shall remain in force until such time that a Protocol on the Free Movement of Persons, Labour, Service, Right of Establishment and Residence enters into force. Whalley and Leith (2003) report that SACU has not covered services, and that services are relatively regulated in SACU countries. Licensing of banks in each SACU member is done by each individual member, despite the fact that four out of five members share a common currency. RTAs clearly differ with respect to services provisions, for various reasons. It appears that Latin American RTAs (including CARICOM) are most liberalised, followed by ASEAN in Asia while African RTAs (COMESA) have only just started to consider services (though there are several sectoral agreements). Nikomboriak and Stephenson (2001) discuss differences among RTAs. In particular, they highlight the different approaches taken in Asian agreements (ASEAN) and those in the Western Hemisphere. The latter are based (mostly) on a negative list approach with commitments being ‘GATS-plus’. ASEAN on the other hand is based on a positivelist approach and has been less ambitious, with similar commitments to those in GATS. The following factors were noted to explain these differences: • • • • Unilateral trade liberalisation was being carried out more rapidly in Latin America. Privatisation (in telecommunications, transport, financial and energy sectors) was more widespread in Latin America. The ASEAN Framework Agreement on Services was seen as originating from a political desire to speed up integration rather than as being backed by private sector service providers. There was a more informal mode of functioning in ASEAN. NAFTA on the other hand, provided an important example of services agreements throughout the Western Hemisphere (including by Mexico). The Latin American RTAs may have achieved a higher degree of liberalisation than GATS, by including more transparency and stability for services providers through a negative-list approach and a list of non-conforming measures (liberalising framework), and has also included more liberal schedules (commitments). However, this seems more questionable in the case of other developing regions. There is no evidence to suggest how developing country RTAs have (or have not) boosted trade in services, relating to what type of RTAs provisions are most effective. For instance, OECD (2003) argues that it would be of great practical value to know whether the biggest gains from liberalisation arise from removing market access limitations, or removing restrictions on national treatment, i.e., whether the entry of additional domestic suppliers is important for the impact of liberalisation. Finally, RTAs have, with few exceptions, and with the exception of government procurement, made little 24 progress in tackling the key ‘unfinished’ rule-making items on the GATS agenda (OECD, 2002a) – such as emergency safeguard mechanism and Subsidies. Most RTAs have gone further than GATS in some respect, partly because Article V of GATS requires this and partly because it might be easier to arrive at a consensus. However, it should be noted that when parties have arrived at such a consensus, they often need to modify domestic regulations, laws and procedures. Once that has been done, it can usually be achieved (and often more cheaply) on an MFN basis world wide. An important question is thus whether, and if so when, it would be desirable for a country to schedule services provisions and commitments at regional rather than at GATS level. To understand the economic rationale behind this question, Stephenson (2000) defines four different categories of services 1. Infrastructure-type services: financial, telecom, energy and transport; 2. Business-type services: distribution, professional services, other business services, tourism, construction and engineering services, and environmental services; 3. Social services: educational and health services; 4. Other services: recreational, cultural. It is argued that in order to attract the most efficient service providers in the capitalintensive category 1, it would make sense to liberalise beyond the region (though RTAs could bind GATS and current commitments). For less capital-intensive category 2, tourism is already a liberalised sector; construction and engineering services and professional services on the other hand depend on qualifications and national standards, so RTAs may play a useful role in facilitating recognition across borders (within the region first). The third type of sectors is sensitive to national concerns and it could be easier to liberalise these sectors amongst countries with similar levels of development, language, culture, etc. RTAs could act as a catalyst. The fourth category is mixed. Hence, for some sectors RTAs might be a politically and culturally appropriate starting level. The situation would probably be different for mixed regions, such as in the case of the proposed EPAs amongst developed and developing countries. 3.2 Services provisions in Regional Trade Agreement with the EU The EU has signed several free trade agreements which have included provisions on trade in services. We compare EU association agreements: with the Central and East European countries (CEECs) also called Europe Agreements,4 with the Mediterranean countries also called EU-Med agreements,5 South Africa,6 Mexico7 (Decision 2/2000 Europe Agreements are pre-accession agreements, with Bulgaria (into force 1995), Czech Republic (1995), Estonia (1998), Hungary (1994), Latvia (1998), Lithuania (1998), Poland (1994), Romania (1995), Slovakia (1995), Slovenia (1999). 5 Euro-Mediterranean association agreements with Algeria (signed 2002), Tunisia (1998), Israel (1995), Jordan (1997), Lebanon (2003), Morocco (1996) and Palestinian Authority. 6 Trade Development Co-operation Agreement signed in 1999. 7 Economic Partnership, Political Co-ordination, and Co-operation agreement or Global Agreement, signed 2000 and 2001. 4 25 and 2/2001) and Chile8. The EU agreements vary substantially with respect to several important services provisions (see Table 3.2 for a more complete overview): • • Depth of commitments: from not including services liberalisation above GATS (EU-South Africa is confirmation of GATS) to making substantially deeper commitments and more liberalised principles (EU-Chile). General provisions related to cross-border supply of services and consumption abroad (modes 1 and 2): MFN is a general provision in EUCEECs, some EU-Meds and EU-Mexico, and not the others; NT is a general provision in EU-Chile and EU-Mexico, but not in the others. Treatment of investment (mode 3): commercial presence is included in the definition of services (e.g. in EU-Mexico and EU-Chile) but is also included in a separate chapter on establishment. EU-South Africa includes only a desire to ensure free movement of capital. Only the Europe agreements and EU-Chile include provisions for entry of investors (in addition to post establishment). Treatment of movement of natural persons (mode 4): deeper liberalisation under Europe Agreements (employment of key personnel; temporary movement of natural persons related to provision of service) than in EUMexico (managerial and set-up personnel in conjunction with investment, mode 3), or EU-South Africa (where no provisions on mode 4 are included and no commitments beyond GATS). The EU will eventually grant access to the labour market to the CEECs. Government procurement of services: only explicitly included in EU-Mexico and EU-Chile, and the latter includes procurement of government works and for the first time for EU bilateral agreements, a substantive list of sectors. • • • The Europe agreements and EU-Chile are the most liberal in terms of market access commitments and the liberalising framework. This is followed by EU-Mexico which has scheduled to liberalise all restrictions within ten years and where the liberalising principles (on services, public procurement and investment) guarantee predictability and access for EU exporters and investors equivalent to suppliers from NAFTA countries. Provisions on services in the EU-Med and EU-South Africa agreements are least liberal in terms of commitments (e.g. GATS commitments) and framework (sometimes a handful of articles), so can be expected to result in less growth in services trade. It is important to realise that services agreements concluded by the EU vary considerable with respect to key aspects. 8 EU-Chile Association Agreement. 26 Table 3.2 Services provisions in Regional trade agreements involving the EU EU-CEECs Europe Agreements (e.g. ECPoland, EC-Hungary) Universal EU-Chile EU-Mexico EU-South Africa Sectoral coverage EU- Med association agreements (Algeria, Jordan, etc.) -Title III Universal Negotiating modality Most favoured nation National Treatment Market access Agree to widen scope of commitments under GATS, assessed after five years (Morocco) Yes, general provision in e.g. in Art. 30.2 in Algeria, but for Jordan for establishment For Right of Establishment, only in Jordan (art 30), and subject to reservations in annex VI; For maritime transport (Art. 39) No Progressive liberalisation based on negative list approach General provision Universal (except audio visual services, air services and maritime cabotage) Positive listing Universal (over two stages, and except audio visual services, air services and maritime cabotage.) Negative-list approach To be determined 5 years after entry Not included as general provision General provision (Art. 5) If further liberalisation occurs, there will be elimination of all discrimination (Art. 30) Only for commitments under GATS scheduled sectors subject to bound commitments General provision (Art. 98) General provision (Art. 6) Only for commitments under GATS Transparency assessment of achievement after five years scheduled sectors subject to bound commitments, no general provision Not mentioned Treatment of investment Chapter II, Title IV on Establishment. Clauses on establishment for mode 1 and 2 in e.g. Art. 55 for Poland-EC Safeguards Government procurement No No No No Movement of natural persons Provisions vary. No general provisions for Algeria ; reaffirm GATS commitments for Morocco and Tunisia (Art. 69 provides for dialogue on movement of workers; and bilateral agreements with member states possibly more liberalised, Art. 68) Under establishment, Art. 53 (Bulgaria and others), right to employ key personnel covering period of employment; Art. 56 permits temporary movement of natural persons related to provision of services (except for direct sales) General provision (Art. 97) banning several reservations on market access Each party shall respond promptly to information requests by other parties; List of commitments required after 10 year transitional period (Art. 7) Separate chapter on establishment, but this does not cover services. Indirectly covered by provisions on market access of services providers No Separate chapter on government procurement, including public works. Includes substantive list in annex XI and XII. Art. 101: Two years after the entry into force, the Parties shall review the rules and conditions applicable to movement of natural persons (mode 4) with a view to achieving further liberalisation. General provision (Art. 4) Not\mentioned List of commitments required after ten year transitional period (Art. 7) Not\mentioned Covered as commercial presence and under a separate investment chapter Art. 33: Members should ensure free movement of capital No Title III, separate chapter on government procurement including for sectors listed in Annex VIII. Primer for EU agreements. Art. 3ci only managers and set up personnel in conjunction with investment; no access to labour market; key personnel and managers in financial services can be of any nationality, subject to exception (Art. 16 and 17) No No. Art. 45, parties agree to co-operate for a fair, equitable and transparent system. Not included Dispute settlement Restricting Nonconforming measures Special provisions Dispute settlement for financial services Standstill to all modes of supply Standstill on covering commercial presence Yes, separate title on dispute settlement. Standstill Article 104 on dispute settlement Selected: Maritime transport (Art. 56 1) in Hungry-EC and PolandEC, Romania-Ec (Art. 57 1) etc., granting unrestricted market access, and traffic on commercial basis Separate section on Maritime transport, Telecommunications Services, Separate Chapter on Financial Services, Maritime transport, Financial Services Maritime transport (Art. 31), unrestricted access and fair competition Future liberalisation of trade in services Progressive liberalisation within 10 years. View to further liberalisation (Art. 30) Source: Original agreements and OECD (2002a) Note: See ECDPM (2003) on investment provisions in recent EC trade agreements. 27 3.3 Conclusions and relevance for post-Cotonou negotiations This chapter on services provisions in RTAs has highlighted a number of aspects that can be of relevance for post-Cotonou negotiations on services. The main conclusion is that RTAs differ with respect to coverage, liberalising principles and depth of commitments, and this also applies to RTAs concluded by the EU with developing countries. In particular, we highlighted • Depth of commitments, • General provisions related to cross-border supply of services and consumption abroad (modes 1 and 2), • Treatment of investment (mode 3), • Treatment of movement of natural persons (mode 4), • Government procurement of services. Importantly, therefore, the elements of post-Cotonou negotiations on services and its strategy are, in principle, negotiable. The differing approaches to services provisions in regional trade agreements reflect a range of factors, including cultural and historical ties, the degree of geographical proximity of the parties, similarities in their levels of development and interests with countries or sectors to push items on the agenda. While it is thus clear that there are regions specific provisions regarding services, it would need to be discussed whether doing this is effective and efficient. There is a case to be made (e.g. politically or culturally) that some services could be more successfully liberalised within a region (first). Indeed, liberalising principles and coverage are more liberal in RTAs than in GATS. However, so far sector commitments in RTAs seem to be little more liberal than under GATS, although intentions of course are much more substantial. While it would obviously be of interest to examine what negotiating strategy is most optimal, little is known about the optimal strategy or the effects of individual strategies, in particular for EPAs. There is one further complication with respect to regions specific services in EPAs. The above review of EU agreements were all based on agreements between the EU and a single developing country. Clearly, there are ‘market asymmetries’ involved, as the level of development in the EU and its partner country differs. But post-Cotonou negotiations will also be based on regional economic partnerships between regions, and this will involve ‘regulatory asymmetries’ at regional level. Stephenson and Contreras (2002) provide one example of this concerning ongoing EU-MERCOSUR negotiations in the area of services, where there are strong regulatory asymmetries. In the EU the establishment of the Single Market has had an impact on national regulations of many services sectors, and has led to harmonisation of regulation across countries. MERCOSUR, on the other hand, is in an earlier stage of integration of services markets, characterised by ongoing reforms of national regulations in specific services sectors and, to a lesser extent, regulatory harmonisation across countries. Because of these asymmetries, the authors identify a three-phase negotiating strategy departing from GATS: • • Phase I: Identification of (potential) ‘sensitive’ sectors and liberalisation of ‘non-sensitive’ sectors (where asymmetries do not play a major role). Phase II: Regulatory reform/review and political consensus around ‘sensitive’ sectors. 28 • Phase III: Progressive liberalisation after completion of removing regulatory asymmetries through regulatory reform. Berlinski (2003) further mentions the complications that asymmetries would entail: it would be difficult to make WTO-consistent MFN exemptions different for MERCOSUR members and the EU. However, it is expected that any post-Cotonou negotiation in the area of services will differ from this approach, not least because of the emphasis on S&D in CPA Chapter 4. There are no obvious examples of S&D amongst members of RTAs. We will return to S&D options in the context of the CPA in Chapter 7 of this report. 29 Chapter 4 Services Provisions and post-Cotonou Negotiations 4.1 Services provisions in the Cotonou Partnership Agreement The Cotonou Agreement is based on three issues (see Te Velde and Bilal, 2003): (i) the political dimension (with the inclusion of policy dialogue, the promotion of peace and the prevention of conflicts, and the reinforcement of the principles of human rights, democracy, the rule of law and good governance); (ii) regional economic partnerships (the negotiation of new ACP-EU trading arrangements including rules on trade in goods and services and on investment, the strengthening of regional integration initiatives, etc.), which may include reciprocal trade preferences (for both the EU and the ACP), and (iii) aid financed by the European Development Funds – EDF. The ultimate objective of the Cotonou Partnership Agreement is to achieve sustainable development and alleviate poverty in the ACP countries. Within the Cotonou Partnership Agreement, CPA Arts 41-43 deal with planned negotiations in trade in services (see Appendix E), although in principle the ACP is not obliged to start negotiations and in practice only wants to start negotiations in the light of Art. 41.4. In Art. 41.4 the Parties agree under the economic partnership agreements, and after they have acquired some experience in applying the Most Favoured Nation (MFN) treatment under GATS, to extend their partnership to encompass the liberalisation of services in accordance with the provisions of GATS, and particularly those relating to the participation of developing countries in liberalisation agreements. Arts 42 and 43 and 24 describe specific service sectors: maritime services; information and communication technologies, and information society; and tourism. CPA Arts 41.2 and 41.3 provide for an affirmation of GATS commitments9 and underline the need for special and differential treatment for ACP suppliers of services, and the need to give sympathetic consideration to the ACP states’ priorities for improvement in the EC schedule. The need for an ACP position is pressing. The first phase of negotiations started in September 2002 and phase 2 negotiations started in October 2003 and can include substantive issues at sub-regional levels while maintaining the ACP group as a whole. Impact assessments will guide this process. Presumably, ACP players will need to think first about possible outcomes of the GATS negotiations running until the beginning of 2005, and how S&D will be incorporated; and secondly (or simultaneously, being realistic about current GATS negotiations) about post-Cotonou service negotiations and how S&D can be incorporated there. CPA Art. 41.5 states that the EC shall support the ACP States’ efforts to strengthen their capacity in the supply of services. Particular attention shall be paid to services related to labour, business, distribution, finance, tourism, culture and construction and related engineering services with a view to enhancing their competitiveness and thereby increasing the value and the volume of their trade in goods and services. It should be noted that reaffirming GATS commitments is not possible for the 20+ ACP countries that are not a member of the WTO. 9 30 4.2 Post-Cotonou Services negotiations so far Phase 1 negotiations formally started in September 2002. In October 2003 ‘the outcome of phase 1 ACP EU negotiations’ was made public. Six areas of negotiations were conducted during the first phase: • Market access • Agriculture and fisheries • Development issues • Trade in services • Trade related areas • Legal issues Regarding trade in services, the EU agreed that the ACP is not obliged to liberalise services. The Draft Joint Report of the all-ACP-EC phase of EPA negotiations states that • The parties agreed to extend their partnership to encompass liberalisation of services as provided for in CPA Art. 41(4); • Services liberalisation in an EPA should be progressive, based on a positive list, and adapted to the level of ACP countries and their sectors and specific constraints; • Services liberalisation in an EPA should be underpinned by principles of S&D, asymmetry and positive regional discrimination; • Emphasis should be put on a sound regulatory framework, the right to regulate as well as the right to introduce new regulations in order to meet national policy objectives; • With respect to the ACP’s request for improvement in the access of ACP service suppliers to the EC market under mode 4 (movement of natural persons), the EC agreed to discuss this issue of mutual interest in the context of the EPA negotiations (point 21 of joint report); • Both the EU and the ACP also agreed that support for the development of services sectors (CPA article 41.5) should be provided to ACP countries within the context of EPAs (point 22 of joint report); • There was also mention of adequate sequencing between support for services development and services liberalisation (point 23 of joint report). There is, however, also some disagreement over certain areas. While the ACP sees the need for additional funds which can be used flexibly and rapidly, the EU argues that no more funds are needed beyond existing EDF commitments to support servicessector capacity. Regarding movement of natural persons, the ACP sees this as essential to an agreement on services, while for the EU this is more sensitive, given its connotations of permanent migration. Finally, while the EU argues for a WTO-plus agreement, the ACP group is unlikely to want to go beyond commitments in the WTO. 4.3 Post-Cotonou Services negotiations: undecided issues EPA phase 2 negotiations were officially launched in 2003 for selected regions. Other regions may follow. There are some undecided services-related issues that need clarification: 31 • The first issue to be decided upon is which regional groupings are ready to negotiate EPAs with the EU. The following African ACP groupings (comprising 38 countries) have emerged so far • ECOWAS = UEMOA (Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal, and Togo) and Cape Verde, Gambia, Ghana, Guinea, Liberia, Nigeria, and Sierra Leone, and Mauritania linked; phase 2 negotiations officially launched on 6 October 2003 • CEMAC = Cameroon, Central African Republic, Chad, Republic of Congo, Gabon, and Guinea Equatorial, and linked São Tomé and Principe; phase 2 negotiations launched on 4 October 2003 • ESA = Burundi, Comoros, DR Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Uganda, Zambia and Zimbabwe; official launch scheduled for 5-7 February 2004. • This leaves the rest in Africa as SADC (minus): Angola, Mozambique, Botswana, Lesotho, Swaziland, Namibia and Tanzania (but BLNS and South Africa have their own arrangement with the EU) still to decide on how to negotiate EPAs. • The Pacific Forum for ACP Countries in the Pacific. • In the Caribbean, CARICOM (or CARIFORUM) is expected to play a key role. CARICOM = (Antigua & Barbuda, Bahamas, Barbados, Belize, Dominica, Granada, Guyana, Haiti (entered July 2002), Jamaica, Montserrat, St. Kitts & St Nevis, St Lucia, St Vincent & the Grenadines, Surinam, Trinidad & Tobago) and Dominican Republic may also be part of CARICOM-plus negotiations. LDCs may decide not to join EPAs. We counted 39 LDC-ACP countries (more than half of all ACP members) – see Appendix Table F.2 Next a region will need to decide whether to negotiate a services agreement as part of an EPA. This is not obligatory, but would be consistent with the partnership character of Art. 41 (5) and it could result in benefits to the ACP, particularly if S&D is treated seriously. A decision is expected not later than 2006. If it is decided to negotiate a services agreement, there is a need to discuss the liberalising principles, and requests, offers and commitments, based on detailed studies. It needs to be decided whether the ACP will go further than commitments already undertaken in GATS 1995 and likely to be undertaken in GATS 2000. Bearing in mind that not all ACP countries are WTO members, and that GATS may well take longer than one year to conclude, services negotiations by ACP countries will need to operate in parallel with GATS. In particular, ACP countries would need to decide whether, and if so what, offers they are more likely to make in Cotonou than in GATS, and make requests in those sectors which the EU are willing to liberalise in Cotonou rather than in GATS. Determine how the EU can provide S&D in Cotonou over and above what will be obtained in GATS (e.g. LDCs). • • • • 32 Chapter 5 WTO Compatibility of S&D in EPAs on Services EPAs have been advanced to maintain trade relationships compatible with WTO rules between the EU and the ACP. For instance, under successive Lomé conventions, the EU granted the ACP special trade preferences. A waiver of existing trade preferences has been obtained during the Doha ministerial, which will run out by the end of 2008. Offering trade preferences to the non-LDC-ACPs, but not to other developing countries, would violate the MFN principle in the WTO. Thus, EPAs have to be reciprocal and count as normal regions (RTA). This can involve large adjustments in small economies, particularly in non-LDC ACPs (who may decide not to join EPAs). There have been various discussions whether EPAs are WTO compatible. Most discussions so far have dealt with EPAs in trade in goods. For goods trade, RTAs amongst developed countries can be concluded and grant trade preferences to each other, provided that they are notified under GATT Art. XXIV, which includes a requirement that RTAs include liberalisation of ‘substantially’ all trade. RTAs among developing countries can be notified under the enabling clause which includes more flexible provisions in order to grant to parties of the RTA special and differential trade preferences. This does not depend on liberalisation of ‘substantially’ all trade. Crucially, RTAs on goods amongst developed and developing countries (such as EPAs) would fall under Art. XXIV (e.g. NAFTA), and not the enabling clause, which would imply the absence of significant flexibility in violating the non-reciprocity principles, at least as far as non-LDC developing countries are concerned. Some argue that this article needs reviewing for the purposed of EPAs, see e.g. Onguglo and Ito (2003). While there are similar issues at stake in trade in services, there appears to be added flexibility in the possibility of granting trade preferences in RTAs, such as the proposed EPAs between the EU and ACP regions. Trade preferences in the GATS context refers to an exemption of the general obligation to adhere to MFN (GATS Art. II). The GATS allows for exceptions to the MFN principle by virtue of two provisions: • Exemptions granted, subject to revision, in conformity with the annex on exemptions of the general obligations of Article II of GATS. An example of an EU MFN exemption offer is that Commonwealth citizens do not need a work permit in services sectors in the UK. When GATS came into force in 1995, members were allowed a once-only opportunity to take an exemption from the MFN principle of non-discrimination between a member’s trading partners. In principle, exemptions should not last for more than ten years (although in practice the EU is already asking in GATS 2000 for extensions of the MFN exemptions). Preferential treatment among WTO Members can be notified under Article V on economic integration (i.e. an RTA with provisions on services). This should be compatible with the provisions of Article V, and communicated to the Council for Trade in Services (V: 7 and 8), which refers them to the Committee on Regional Trade Agreements (CRTA). The Council, based on the examination of the agreement, may, if appropriate, make recommendations • 33 to the parties. In order to be compatible with GATS Art. V, an agreement must fulfil two basic conditions: • it must have ‘substantial’ sectoral coverage, in terms of sectors, volume of trade, and modes of delivery, V:(1a), and • it has to provide for national treatment for services providers of the parties eliminating ‘substantially’ all discrimination, V(1b). These conditions should be met when the agreement comes into force, or on the basis of a ‘reasonable’ time frame. Both of these conditions are subject to interpretation, and less clear than the goods case (GATT Art. XXIV, where ‘reasonable’ is ten years). Importantly, GATS Article V:3 provides for flexibility with respect to these two requirements (substantial coverage and eliminating all discrimination) in two cases: o GATS Article V:3(a) provides that where developing countries are parties to an agreement, flexibility shall be provided regarding conditions set out in GATS Art. V:1a and V:1b. o GATS Article V:3(b) stipulates that more favourable treatment is to be accorded to legal persons of developing countries in the GATS of RTAs that involve only developing countries. The first of these provisions would seem to relate to North-South arrangements, such as EPAs between the EU and ACP regions. It would allow flexibility for developing countries in EPAs in terms of coverage and removal of discrimination, while the EU could liberalise more sectors and modes to ACP regions (while not doing the same to other WTO members). This flexibility could go beyond the current flexibilities and hence be termed S&D. Such flexibilities do not arise in the goods case. Table 5.1 summarises the important points (for further details, see Onguglo and Ito, 2003). Table 5.1 S&D in RTAs Services trade GATS Article V GATS Article V:3(a and b) GATS Article V:3(a) Goods trade RTA notification GATT Article XXIV S&D in RTAs among Enabling cause developing countries S&D in RTAs involving Not possible developed and developing countries Ultimately the CTS / CRTA would decide on the compatibility of RTAs with GATS Article V. So far the CTS has not reached any conclusions on RTAs in particular relating to this article. The table in Appendix G on Regional Trade Agreements Notified (and in Force) to the WTO under GATS Article V reveals that, as of October 2003 not a single report of the CRTA on services agreements had been accepted (or rejected). For instance, consultations on NAFTA and EU (enlargement with Austria, Finland and Sweden) are still ongoing, and these agreements were notified almost a decade ago. The conclusion is that, legally and practically, the EU can offer certain types of S&D to the ACP in an EPA which would be WTO-compatible. 34 Chapter 6 ACP Exports of Services to the EU: Performance and Barriers This section focuses explicitly on the second objective in the Terms of Reference, to provide an overview of possible benefits to ACP countries of EU liberalisation sectors, regulations and modes of supply. The methodology to approach this is first to describe the export capacity in the ACP by region, country and sector (section 6.1). Then we describe EU barriers to ACP exports of services on the basis of existing GATS commitments (section 6.2). Finally, we attempt to link the ACP export capacity with the removal of EU trade barriers (section 6.3). It should be noted that in practice it will be difficult to predict an ACP supply response after the removal of EU trade barriers without more detailed discussion with key stakeholders including the ACP private sector. 6.1 Performance of ACP trade in services There are significant data limitations when it comes to the analysis of trade in services in developing countries. In particular, data on bilateral trade flows are scarce. This is one of the reasons why this section has devoted part of the analysis to total ACP exports. The data sources we can use include • • • • UNCTAD services trade statistics IMF Balance of Payments OECD database World Development Indicators However we should bear in mind that the quality of data on services in the ACP is not adequate. 6.1.1 Share of services in GDP Chart 6.1: Services as a Percentage of GDP for ACP 52 50 48 46 44 % 42 40 38 1960 1970 1980 1990 2000 Source: WDI (2003) 35 Between 1980 and 2000, low and middle-income countries increased their services production by almost 25 percent. Services accounted for about two-thirds of global GDP in 1995, but this proportion varies greatly between developed and developing countries. The share of services in economic activity currently ranges from around 38% in developing countries to 65% in developed countries. The higher share in industrial countries reflects the fact that demand for services tends to be incomeelastic, i.e. that richer countries tend to spend proportionally more on services. In both developing and developed countries the share of services in total activity has been growing. For the ACP group of countries eligible to form EPAs (we exclude Cuba and South Africa) the average share of services in GDP is about 50 percent (see Chart 6.1) although there are wide variations among individual countries ranging from five percent for Equatorial Guinea to 84 percent for Palau (see Appendix Table I.1). 6.1.2 Share of services in total trade A growing importance of the services sector in national output in many ACP countries has been accompanied by an expansion of the share of commercial services in world exports of goods and services. Since the early 1980s, international services transactions have increased more rapidly than trade in goods. That trade in services has comprised 20 percent of global trade (although this is more for the ACP). On the export side, North America (23.7 percent) and Western Europe (21.8 percent) continued to record above-average shares of services in their total exports, while Latin America (14.9 percent) and Asia (14.7 percent) remained below the global average. For Africa (20 percent) and the ACP group eligible to form EPAs (22 percent), the share of services in total exports of goods and services exceeds the world average. However, this is not necessarily indicative of a particularly dynamic services sector, but may be attributed as well to weak world markets. On the import side, Africa (22 percent), Asia (21 percent) and Western Europe (21.6 percent) record services shares in their total trade above the world average, while the Americas (14.9 percent) remain below. Within the ACP group of countries there is a wide variation in the share of services in total exports ranging from over 75 percent for a number of Caribbean countries (typically high because of tourism) to under five percent for Niger, Burundi, Angola, Liberia, Mauritania, Guinea and Sudan (see Appendix Table I.2, based on UNCTAD data). 6.1.3 Growth in services trade Between 1990 and 2001, world trade in services increased at an annual rate of 6.2 percent, with the growth rate in the first half of the decade significantly higher than in the second half, due to developments in information and communications technologies. Deregulation and privatisation have contributed to this trend. Despite this increase, the share of services in world trade has been smaller than its share in world production. Developing countries saw their services exports boom in the first part of the 1990s attaining average growth rates of over 13 percent. In the second part of the decade, services growth fell to levels below that registered by developed countries. This reversal in growth is mainly attributable to the Asian financial crisis. 36 Looking at individual geographic regions, a somewhat different picture emerges. Latin America showed strong export and import growth in the early 1990s, with imports growing faster than exports. During the second half of the decade the growth of both exports and imports decelerated, but exports were less affected than imports. Although Africa’s export growth in the second half of the 1990s declined, it was still above the world average. By contrast, its imports of services almost stagnated in the second half of the decade. Asia showed strong growth during 1990-95, but because of the financial crisis, growth rates of exports and imports of services fell steeply, to below one percent, in the second half of the 1990s. China and India, which were less affected by the crisis, sustained high growth rates. India, in particular, had an average growth rate of almost 20 percent for exports, reflecting its specialisation in computer and information services. Looking at the full period 1990-99 one sees that the Americas and Asia were growing at above-average rates, whereas Africa had belowaverage growth rates. ACP imports of services grew, on average, 2.3 percent per year from US$18 billion in 1980 to US$26.4 billion in 2000. ACP exports of services have grown, on average, five percent per year from $8 billion in 1980 to $20.8 billion in 2000 (see Chart 6.2, based on the 67 ACP countries for which data are available). Despite strong growth in exports of services, the world share of ACP exports dropped from 2.4 percent in 1980 to 1.5 percent in 2000 (see Chart 6.3), but with most of the drop occurring in the 1980s. Chart 6.2 ACP Imports and Exports of Services 1980-2000 30000 Imports Exports 25000 20000 $ Millions 15000 10000 5000 1980 1985 1990 1995 2000 Source: UNCTAD services trade statistics 37 Chart 6.3 6.1.4 The composition of ACP services exports In 2000, the largest eight exporters of services in the ACP group accounted for more than half of total ACP services exports – see Appendix Table I.3. These include the Dominican Republic, Bahamas, Jamaica, Mauritius, and Barbados (owing to exports of tourism) as well as Kenya, Zimbabwe (owing to exports of transport) and Nigeria (owing to exports of business services) – see Appendix Table I.4. More than half of total world trade in commercial services is made up of travel and transportation services. In recent years, however, other commercial services (insurance, banking, telecommunication and so on) have tended to expand faster than these two categories. For the ACP group of countries the largest export sector is travel, accounting for more than half of all ACP services exports, followed by transport, business services and government services – see Chart 6.4. Breakdowns by country can be seen in Appendix Table I.10. The largest ACP exporters of the main services sectors are illustrated in Table 6.1. The travel category covers all spending by travellers abroad, including purchases of goods. Transportation consists of passenger and freight sea, air and land transport. Other business services is a catch-all for all unreported sectors. Communication services groups together postal, courier and telecommunication services. 38 Chart 6.4 Composition of ACP exports Government services 8% Other 21% Transport 16% Travel 55% Table 6.1: Main ACP Exporters of Services (2000) Sector Total ACP exports (US$ Millions) 11,110 Top 5 ACP exporters Country’s share in total ACP exports in respective sectors 26% 16% 12% 7% 5% 13% 10% 7% 7% 6% 15% 9% 7% 7% 6% Travel/Tourism Transport 3,250 Government Services 1,740 Dominican Republic Bahamas Jamaica Barbados Mauritius Kenya Jamaica Mauritius Ethiopia Trinidad and Tobago Kenya Senegal Djibouti Ethiopia Guinea Depending on reporting: Countries reporting on Other Business Services 2,850 Countries reporting on Communications 613 Countries reporting on Insurance 334 Countries reporting on Financial Services 213 Nigeria Papua New Guinea Mauritius Côte d’Ivoire Mozambique Jamaica Dominican Republic Guyana Côte d’Ivoire Barbados Barbados Mauritius Trinidad and Tobago Côte d’Ivoire Antigua and Barbuda Barbados Mauritius Tanzania Côte d’Ivoire St. Vincent 17% 9% 7% 5% 5% 34% 23% 10% 6% 5% 24% 13% 9% 7% 5% 35% 10% 10% 9% 7% Source: UNCTAD 39 It is important to note that a few ACP countries have a high share of total ACP services exports across a number of sectors: Jamaica (tourism, transport, communications); Barbados (tourism, communications, insurance, financial services); Mauritius (tourism, transport, other business services, insurance, financial services); Kenya (transport, government services); Trinidad and Tobago (transport, insurance); and Côte d’Ivoire (other business services, communications, insurance, financial services). Note, however, that in some cases a high share reflects the way countries report the composition of services. 6.1.5 ACP regional exports Appendix Table I.5 illustrates services exports from ACP countries eligible for EPAs summed across various regional groupings – these are not necessarily the same regions that will actually negotiate EPAs with the EU (EAC,10 ECOWAS,11 SADC,12 COMESA,13 UEMOA14 and CEMAC15). In value terms, COMESA is the largest services exporter of the five regions. However, between 1980 and 2000 SADC has experienced the highest growth in services exports (221 percent), followed by COMESA (147 percent) and EAC (120 percent). In 2000, services exports from ECOWAS and UEMOA have grown by 28 percent and 20 percent, respectively, over their values in 1980. In contrast, services exports from CEMAC in 2000 were only one percent higher than their value in 1980. Table 6.2 illustrates the average annual growth between 1980 and 2000 in services exports from the five ACP regional groupings. Table 6.2: Average annual Growth in Services Exports CEMAC COMESA EAC ECOWAS SADC UEMOA 1980-2000 1980-1985 1986-1990 1991-1995 1996-2000 Source: UNCTAD 0% -3% 1% -8% 4% 5% 1% 9% 7% 1% 4% -5% 10% 11% 0% 1% -11% 13% -2% 4% 6% -5% 11% 10% 3% 1% -3% 5% 1% -2% ACP regional groups have experienced differential average annual growth in services exports over the past two decades. Over the period 1980-2000 SADC exports of services grew at an annual rate of 6 percent with most of the growth in the period 1986-95. The financial crises in East Asia and elsewhere and the global downturn probably accounted for the slowdown in the late 1990s. 10 11 Kenya, Tanzania, Uganda. Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, Togo. 12 Excludes South Africa. Includes Angola, Botswana, Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, Swaziland, Tanzania, Zambia, Zimbabwe. 13 Excludes Egypt, but includes Namibia and Swaziland in addition to Angola, Burundi, Comoros, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Uganda, Zambia, Zimbabwe. 14 Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, Togo. 15 Cameroon, Central African Republic , Chad, Congo, Equatorial Guinea, Gabon. 40 6.1.6 The composition of services exports from ACP regional groups The composition of services exports from the various ACP regional groupings is illustrated in Chart 6.5. With the exception of ECOWAS, the largest export sectors are travel and transport which, combined, are responsible for between 45 percent (CEMAC) and 69 percent (SADC) of total services exports. The largest services export sector for UEMOA and ECOWAS is business services (because of its importance to the Côte d’Ivoire and Nigeria, respectively). Chart 6.5 ACP Regional Exports by Sector 2000 8000 Government services n.i.e Personal, cultural and recreational services Other business services Royalties and license fees 6000 Financial services Insurance 5000 $ Millions 4000 Computer and information services Construction Communications Travel Transport 3000 7000 2000 1000 0 CARICOM Pacific ECOWAS SADC EAC COMESA UEMOA CEMAC Source: UNCTAD Note: sectoral shares are distorted as some countries do not report value for all sectors 6.1.7 ACP trade in services with the EU In recent years a high share of ACP services exports has been to the EU (e.g. about three-quarters of African exports in 2000). This compares with only 38 percent in the case of ACO exports of goods (table 6.4). Exports of services now account for a third of total ACP exports to the EU. In 2001 EU imports and exports of services from the rest of the world were US$604 billion and US$615 billion respectively – see Appendix 6. Germany is the largest importer of services in the EU accounting for nearly one-quarter of all imports. The UK is the largest exporter of services, accounting for 19 percent of all exports – see Appendix I.7. In 2001 the EU imports and exports of services from the ACP group of countries were US$14.3 billion and US$13.4 billion respectively. As such, EU trade in services with the ACP represents 41 about two percent of total EU trade in services and about seven percent of extra-EU trade in services. Appendix I.9 shows that the main importer of services in the EU is Germany (onefourth), followed by the UK (a fifth), France, Netherlands, Italy, Spain, Belgium and Luxemburg, Greece, Portugal, Sweden, Finland and Austria. Hence, the ACP group would need to examine markets in Germany and the UK (and France and the Netherlands) most closely, but the specific EU destinations may vary by ACP country. In 2001, 28 percent of total EU imports of services from the rest of the world were in tourism-related services. In contrast, 35 percent of EU imports of services from ACP states were tourism-related (39 percent from African ACP, 28 percent from Caribbean ACP and 41 percent from Pacific ACP) – see Appendix 9. Table 6.3 ACP exports of services to the EU, US$ billion, 2001 Total Transport Travel Government services African 8.863 2.483 3.487 0.647 ACP Caribbean 5.241 1.267 1.460 0.157 Pacific 0.201 0.074 0.082 0.003 Total ACP 14.305 3.824 5.029 0.807 exports to EU Other 1.224 2.136 0.047 3.407 Data are best available proxies: African ACP = Africa-Maghreb-South Africa-Egypt, Caribbean includes some of Central America. Table 6.4: EU Imports of Goods from ACP Countries 2002 EU country Goods imports from ACP (US$1000s) Average annual growth in value 1998-2003 % 14 ACP goods exports to world (US$1000s) 76,868,773 76,868,773 76,868,773 76,868,773 76,868,773 76,868,773 76,868,773 76,868,773 76,868,773 76,868,773 76,868,773 76,868,773 76,868,773 76,868,773 76,868,773 Share of ACP goods exports to EU country (%) 1% 1% 0% 0% 7% 3% 0% 0% 5% 3% 1% 5% 0% 11% 38% Austria 486,235 BelgiumLuxembourg 1,011,833 Denmark 179,133 Finland 107,997 France 5,034,994 Germany 2,162,667 Greece 63,298 Ireland 269,634 Italy 3,637,567 Netherlands 2,366,367 Portugal 1,022,914 Spain 3,935,983 Sweden 205,273 UK 8,489,822 Total EU 28,973,717 Source: COMTRADE database (2003). 8 -9 2 -1 -5 3 7 8 5 14 42 6.1.8 ACP exports and imports of services by mode of supply Table 6.5 shows ACP exports and imports of services by modes of supply namely mode 1, cross border supply; mode 2, consumption abroad; mode 3, commercial presence; and mode 4, presence of natural persons. It should be noted that services data used to compute exports by mode are often based on proxies. For instance, mode 3 exports of services are sometimes proxied by FDI. A better indicator would be sales of services MNE affiliates abroad, but this is not always available. Similarly, mode 4 exports of services should reflect sales by natural persons temporarily abroad, but this is proxied by either remittances (which may understate the true value because sales my be higher than what is sent abroad; or overstate as remittances includes permanents migrants) or by compensation of employees in subsidiaries of services MNE, neither of which are correct. Bearing this in mind, globally, trade in services is dominated by commercial presence and cross-border exports (Table 6.6). In contrast, for ACP countries, consumption abroad constitutes the largest source of services exports followed by cross border exports and temporary movement of natural persons. However, most services imports to ACP countries eligible for EPAs are cross-border imports, followed by commercial presence (Table 6.5 below). It would be of interest to see whether this would differ across ACP regions. The final column of Table 6.6 provides some data on exports of services from Africa to Germany by mode, confirming the patterns observed before. Such data will also be available for the UK and France, but not for elsewhere in the EU. Table 6.5: ACP Services Imports and Exports by Mode of Supply US$ Millions Year Exports Mode 1 Mode 2 Mode 3 Mode 4 Total Imports Mode 1 Mode 2 Mode 3 Mode 4 Total 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 4345 4952 4807 5191 5102 5366 5419 5610 5406 5288 5617 6201 6130 6629 7375 8052 8788 9114 8868 9156 88 114 140 178 152 81 123 85 69 133 821 946 900 918 913 859 1044 992 991 924 10871 12213 11977 12917 13541 14358 15374 15800 15334 15501 12221 14722 15021 15189 16253 15552 17397 16864 16083 16478 2962 3239 3644 3031 2991 3618 3998 4336 4873 4731 2163 2767 2510 2712 3789 4295 4911 5453 5209 4756 187 249 292 275 247 258 335 356 445 470 17533 20975 21467 21207 23280 23724 26641 27008 26610 26434 Note: Mode 1= Cross Border Supply (BOP Services – Travel – Government Services); Mode 2= Consumption Abroad (Travel); Mode 3= Commercial Presence (Direct Investment); Mode 4 = Presence of Natural Persons (Compensation to Employees); the totals are a proxy only, since mode 3 and mode 4 are also proxies. In growth terms, cross-border exports rose 22 percent between 1989 and 1998 while consumption abroad (foreigners in the ACP) grew 63 percent. In contrast, investment in the ACP countries eligible for EPAs has not been stable, falling in 1993, 1996 and 1997. Movement of natural persons abroad grew 13 percent between 1989 and 1998. In the case of services imports, the ACP countries have witnessed steady growth across all four modes of supply. 43 Table 6.6 Sales by GATS modes of supply (world total and Africa-Germany) Mode Proxy Rough estimate (Total – WTO) $ 1000 billion Rough estimate (Africa- Germany, 2001) Euro 1620 million Cross-border supply Consumption abroad Commercial presence Movement of natural persons BOP: services exports (note this excludes travel) BOP: travel (possibly excludes health, education etc) FATS: turnover $ 500 billion Euro 2195 million $ 2000 billion BOP: compensation of employees (understatement) $ 50 billion Euro 1100 million (this includes goods and services) Euro 3 million Sources: WTO and Bundesbank 6.1.9 ACP services companies exporting to the EU OECD (2003) provides an inventory of successful developing country services companies. While many examples relate to countries such as India (major IT consulting firms), there are also some examples of ACP services companies exporting to the EU. ACP services exporters encompass many sectors and all four modes. • • • • • The Caribbean countries are major providers of back-office services (often through mode 1). Jamerican Associates is a Jamaican company specialising in data processing servicing customers in New York, Toronto and London. Performance Management Consulting from Senegal (Dakar) is a small consulting firm with offices in Dakar, Ouagadougou and Paris. Sales destinations include France (mode 3). A company in Africa exporting secure payments services in the EU (mode 1). Non-EPA-eligible but ACP-member South Africa, offers surgery more cheaply than the UK private sector. The company Surgeon and Safari has had hundreds of UK customers (The Guardian, 17/12/2002), mode 2. Non-UK health care providers, including Netcare of South Africa, were selected for fast-track centres offering surgery to NHS patients, a total of £2 billion (mode 3 exports with some commercial presence). The providers will also run mobile operating units. Netcare planned to bring over surgical teams from South Africa on rotation once every 11 weeks (mode 4), which would avoid poaching from the NHS or permanent jobs loss in South Africa. UK bids were rejected because they could not provide quality service at an acceptable price. (The Guardian, various dates). Call centres and other back-office jobs are not limited to India. Bowman International Sports, operating under a UK license, built a 200 job call centre in Mauritius in 1996 from which it supplies mode 1 exports of services (UNCTAD’s Investment Policy Review for Mauritius). 44 • • Health tourism (surgery in combination with cruise holidays, mode 2) is well documented in the case of the Caribbean (Gonzales, et al., 2001). Lyford Cay hospital in the Bahamas serves UK patients; around two percent of hospital visits in Queen Elizabeth Hospital in Barbados originated from the UK, etc. But often ACP exporters are not the clearly visible larger exporter firms and include many small services suppliers using mode 4. All CARICOM countries are already exporting a wide range of ‘other’ services such as accountancy, architectural and engineering services, computer and database services, Internet-related services, data processing, legal services, consultancy, education, health, financial etc. (Riddle 2002). Without detailed studies, it is not easy to answer which countries have a comparative advantage in which services sectors and modes. There are, however, some general observations. We first consider exports by mode. ACP exports are not concentrated in mode 3, partly because this requires access to capital, which is not relatively abundant in the ACP. By contrast, ACP countries have abundant labour, on lower wages, so their comparative advantage should be in mode 4. Thanks to technical change and lower transport costs, exports of services by the ACP in mode 1 (e.g. call centres) and 2 (health and education, travel) have become easier. Examining comparative advantage by sector, the tourism sector is the best example of a comparative advantage for many ACP countries. It is the biggest services export in all regions. It is also labour intensive. Beyond tourism, there are specific ACP sectors in certain countries that are more efficient than the EU. The health services sector is also one example, as indicated by health tourism in the Caribbean or South African surgeons (temporarily) operating in the UK. Back-office operations in the financial services industry is another; we have mentioned call centres in the Caribbean and Mauritius. Appendix J discusses outsourcing of back-office services in UK financial services mainly to India, where a well qualified English-speaking labour force is available at a tenth the wage costs. Similar opportunities in call centres would seem possible in many parts in the ACP: the Commonwealth ACP (e.g. Ghana) for the UK, Francophone ACP (e.g. Senegal, Mauritius) for France, Lusophone ACP for Portugal, and Surinam for the Netherlands. There are also some top services exporters in the ACP which have built some capacity and experience in exporting services. Jamaica (tourism, transport, communications); Barbados (tourism, communications, insurance, financial services); Mauritius (tourism, transport, other business services, insurance, financial services); Kenya (transport, government services); Trinidad and Tobago (transport, insurance); and, Côte d’Ivoire (other business services, communications, insurance, financial services). 6.1.10 Conclusions • For the ACP group (we exclude Cuba and South Africa) the average share of services in GDP is about 50 percent but with wide variations ranging from five percent for Equatorial Guinea to 84 percent for Palau. • Within the ACP group of countries there is also a wide variation in the share of services in total exports ranging from over 75 percent for a number of Caribbean countries (typically high because of tourism) to under 5 percent for Niger, Burundi, Angola, Liberia, Mauritania, Guinea and Sudan. 45 • ACP imports of services have grown, on average, 2.3 percent per year from US$18 billion in 1980 to US$26.4 billion in 2000. ACP exports of services have grown, on average, 5 percent per year from US$8 billion in 1980 to US$20.8 billion in 2000. Despite strong growth in exports of services, the world share of ACP exports dropped from 2.4 percent in 1980 to 1.5 percent in 2000. In 2000, the largest eight exporters of services in the ACP group accounted for more than half of total ACP services exports. These include the Dominican Republic, Bahamas, Jamaica, Mauritius and Barbados (owing to exports of tourism services) as well as Kenya, Zimbabwe (owing to exports of transport) and Nigeria (owing to exports of business services). For the ACP group of countries the largest export sector is travel, which accounts for more than half of all ACP services exports, followed by transport, business services and government services. A few ACP countries have a high share of total ACP services exports across a number of sectors: Jamaica (tourism, transport, communications); Barbados (tourism, communications, insurance, financial services); Mauritius (tourism, transport, other business services, insurance, financial services); Kenya (transport, government services); Trinidad and Tobago (transport, insurance); and, Côte d’Ivoire (other business services, communications, insurance, financial services). These countries will have built up the best capacity to export, including to the EU. With the exception of UEMOA and ECOWAS, the largest export sectors are travel and transport which combined are responsible for between 45 percent (CEMAC) and 69 percent (SADC) of total services exports. The largest services export sector for UEMOA and ECOWAS is business services (because of its importance to Côte d’Ivoire and Nigeria respectively). In 2001 the EU imports and exports of services from the ACP group of countries were US$14.3 billion and US$13.4 billion, respectively. As such, EU trade in services with the ACP represents about two percent of total EU trade in services and about seven percent of extra-EU trade in services. In recent years almost three-quarters of recorded African ACP exports of services has gone to the EU. Exports of services now account for one-third of total ACP exports to the EU. Globally, trade in services is dominated by commercial presence and crossborder exports. In contrast, for ACP countries, consumption abroad constitutes the largest source of services exports followed by cross border exports and probably temporary movement of natural persons. ACP services exporters encompass many sectors and all four modes. More detailed studies can indicate more specifically what are sub-sectors of comparative advantage. 46 • • • • • • • • 6.2 EU barriers to ACP exports 6.2.1 General barriers to trade in services There are many barriers to the development and export of services. Some are general across all products, and some are specific to services. Some are trade related. Barriers often mentioned include: • • • • Limited size of the domestic market (especially in small and poorer countries) and so there is a need to raise market access to reap economies of scale. Limited access to (new) technology. Lack of available financial resources. Services products often being ‘experience’ goods, so that sales depend on a track record of international credibility and profile. It can take time to build up international credibility. By contrast, raw materials are relatively homogenous. Some services, such as business or financial services, are skill intensive, but there are only limited human resources available. Various government departments being involved in developing services and promoting exports of services. There are various public policy concerns, including equity considerations, related to private sector participation in the supply of (social) services. Many (new) domestic regulations, often for good intentions of prudence or protection of consumers, can become significant trade barriers. Trade barriers, including (Hoekman and Braga, 1997): quotas (number of flights on a route), local content and prohibitions (some supplies for nationals only, some regulations become trade barriers); price-based instruments (visa fees and entry/exit taxes, or subsidies); standards (non-recognition of diplomas obtained in foreign countries), licensing and procurement (lack of transparency, outside GATS); discriminatory access to distribution networks (not being listed in computer reservation systems), The small size of services exporters in many ACP countries. They also face a lack of information on markets and regulations and may rely on mode 4 to export services, in which few countries are very open. • • • • Obviously there are differences in key market-access barriers across sectors. Butkeviciene et al. (2002) summarise experience gained by UNCTAD at sectoral level. • In construction services, key barriers to further market access include transfer of technology, recognition of qualification for architectural and engineering services, restrictions on mode 4 and subsidies in developed countries. • In energy services, trade barriers relate to mode 3 due to monopolies and non-transparent transmission fees, mode 1, which can be subject to commercial presence and mode 4, including obtaining visa and work permits. For oil services, volatility of the market is a problem, because this requires diversification and hence the need for financial services to cover many countries. 47 • • • In environmental services, mode 3 supplies may be required to invest in a capital intensive commercial presence. Mode 1 supplies can be subject to commercial presence, and are limited through certificates to local firms only. Legislation may require the need for various permits. It may also create liability, which is more difficult to cope with for small or inexperienced suppliers. Health services may depend on cultural and linguistic affinities. For mode 1 supplies (telemedicine), access to good quality and affordable telecommunications networks and to health networks is essential. For some countries, health insurance in developed countries may not cover developing countries which may discourage mode 2 supplies of health services. There are various mode 4 restrictions, including economicneeds tests, licensing, recognition of qualification, and nationality and residency requirements. Tourism services depend in part on good access to the world information network in order to facilitate mode 2 exports. 6.2.2 Trade barriers to ACP-EU trade in services: anecdotes There are several anecdotes in the EU that seem to highlight the barriers in the EU to further ACP exports of services. In the UK, two examples illustrate this: (i) Based on local autonomy, one UK primary care trust rejected the UK’s scheme to contract out cataract surgery to the South African company Netcare amidst reports that it would ‘steal’ one- third of patients and lead to redundancies in the NHS while waiting lists were, supposedly, on track of being cut. (ii) A World Bank funded play recommended to the Edinburgh Festival by the British army in Sierra Leone was cancelled because the UK Home Office refused to let the actors into the country. Visas for the cast of ten who were to perform in Edinburgh were refused on the grounds that they might claim political asylum once they arrived. 6.2.3 EU GATS schedules Trade barriers to trade in services with the EU-15 can be found in the GATS schedules. So far, there exists one schedule of commitments for the EC-12. The schedules of commitments for Austria, Finland and Sweden are separate because commitments were made before they joined the EU in 1995. The EC is currently in the process of consolidating these schedules into one for EC-15 and until this process has been completed there is no official single EU schedule. The existing commitments for any Member of the WTO can be obtained from http://www.wto.org/english/tratop_e/serv_e/serv_commitments_e.htm. However, the document called ‘Conditional offer from the EC and its Member States’ contains the initial offer of the EC-15 and can be found on the web. This is a negotiation document and does not constitute the legal binding commitments of the EC-15 in the WTO. However, the document is based on a consolidated schedule which has been notified to the CTS. We have used this to describe the EU GATS schedule. In order to read GATS schedules we need to explain a few basic elements. There are horizontal commitments by mode and these apply to all sectors; then there are specific 48 sectoral commitments including limitations on market access (MA) and national treatment (NT); there are also unbound commitments where regulations have not been bound (but could be); there are also (sensitive) sectors with no commitments at all; finally there are MFN exemptions. Making this distinction, the EU commitments are summarised in Appendix Table K. The table should be read as follows. When a sector has been fully committed in all modes with no restrictions on MA and NT the cells in the matrix should be empty. If sectors have not been (fully) committed this is indicated in a number of ways. Most simple is when the sector has not been committed at all in GATS schedules, then there will be a cross in the ‘No com’ column. If the EU or its MS include unbound sectors, this has been indicated by a letter in the final columns in mode 1 or mode 3, MA or NT. It would not make sense to include mode 4 (this is not unbound), or mode 2 (usually unbound). The letter indicates which country includes this sector as unbound, e.g. D for Germany, FIN for Finland, I for Italy, EU for EU-wide). Similarly, if a sector has been scheduled, but with limitations on market access or national treatment, this would appear in the first few columns marked mode 1 - mode 4. There are two types of horizontal limitations across all sectors. First, a market access limitation on mode 3 states that in all EC Member States services considered as public utilities at a national or local level may be subject to public monopolies or to exclusive rights granted to private operators. There are also individual MS limitations on real estate purchase or a maximum number of voting rights or shares in a company (e.g. Finland). The second type of horizontal limitations, and potentially more relevant for the ACP, lies in the treatment of temporary movement of natural persons (mode 4). Commitments for market access (MA) are unbound except for • Intra-corporate transferees (hence based on commercial presence) where the person involved has worked for the company for at least a year, and who is a • Person working in a senior position who primarily directs the management of the establishment (managers), or • Person who possesses uncommon knowledge essential to the establishment’s service (specialists). • Representatives of a service supplier to negotiate sales but not to be engaged in making direct sales. • Senior person of a service responsible for setting up of a commercial presence in the EU but not engaged in making direct sales. • Suppliers of a service on a temporary basis while not having a commercial presence, when the service contract has been obtained within the past three months following tendering procedures, where the person has supplied the service for at least a year (two years in Greece), for a period of not more than three months in 12 months (24 months in Netherlands), and where the person must possess the necessary academic qualifications and professional experience. An important limitation on national treatment (NT) in mode 4 relates to ‘EC directives on mutual recognition of diplomas do not apply to nationals of third countries’. And recognition of the diplomas which are required in order to practice 49 regulated professional services remains within the competence of each MS. There are some further MS specific limitations on MA and NT. EU and national working conditions, minimum wage requirements, and any collective wage agreements apply. There are various commitments and limitations by sector: Business services Commitments for most EU member states in mode 1 are unbound. Few member states have bound their commitments. One exception is Sweden which does include limitations on mode 1 in various sub-sectors. For instance, it states that ‘only auditors approved in Sweden may perform legal auditing services’. Germany ‘states that ‘application of the national rules on fees and emoluments for all services which are performed from abroad’ in the case of architectural services. Most bound commitments, with limitations on MA and NT, are for mode 3 and 4. While there appear to be no EU-wide restrictions, many individual member states include requirements for a university degree, professional qualifications and several years’ professional experience, for accountants, lawyers, etc. In the case of medical and dental services, access is restricted to natural persons and often includes economic-needs testing and a residence requirement. A few sub-sectors do not contain liberalising commitments e.g. ‘services incidental to manufacturing’. Communication services Few sub-sectors have been scheduled. There are no commitments for postal, courier and audiovisual services, and some are unbound. Portugal requires residence for telecommunication services, MA in mode 1. There are some other MS MA limitations for mode 3 of telecommunication services. Construction and related engineering services There are no EU-wide limitations, but there are nationality requirements (Greece) in market access under mode 3, or qualification requirements in mode 4. For example the Netherlands requires a university degree and three years’ professional experience in the sector. Mode 1 is largely unbound. France has an economic-needs test. Distribution services In mode 4, several MS include residence requirements (e.g. wholesale trade). For mode 3, there are several state monopolies (wholesale, tobacco). Educational services Finland and Sweden have many unbound commitments in this sector (MA and NT) in modes 1-4. France (and Denmark and Ireland) includes a nationality condition, but subject to authorisation. Greece has mode 3 (MA) unbound for higher education. Environmental services Commitments in mode 1 are not feasible. Most subsectors are unbound. There is a Swedish monopoly for controlling exhaust gases. 50 Financial services Various EU directives and MS limitations to commitments affecting trade in financial services. These cover all modes. For instance, Austria, Denmark, Spain and Italy include a nationality or residence requirement in mode 4. Very detailed limitations on banking and finance companies. EU-wide, mode 3 (MA and NT), only firms having their registered office in the Communities can act as depositories of the assets of investment funds. Health-related and social services Health services in mode 3 are often limited by economic-needs tests or national health services plans. There are also sub-sectors with no commitments at all, or where commitments are unbound (particularly mode 1). Tourism and travel-related services Economic-needs tests for mode 3 commitments are included as limitations (e.g. tour operators in Italy). Mode 4 providers are often subject to nationality condition (tourist guide services in Greece, Spain, France Italy and Portugal) or need a professional certificate and three years’ experience (Italy and Sweden). Recreational, cultural and sporting services Some subsectors have been excluded from commitments. Mode 4 commitments are limited by economic-needs tests (Italy), main profession (Austria), employment contract with authorised enterprise (France). There are residency requirements for publishers and owners of publishing or printing companies (mode 3). France allows a maximum of 20 percent capital/voting rights in new and press agency services. Transport services Many subsectors have been excluded from commitments. There are also various unbound sectors (particularly mode 1). Only road transport services include commitments, subject to limitations such economic-needs tests (mode 3 and 4) Other services Most sectors and modes are unbound. There are ten MFN exemptions in audiovisual services, two in maritime transport, one in road transport services (freight), computerised reservation systems, rent/leasing services, publishing, news-agency services, financial services, press-agency services, real estate purchase (Italy), waiver of nationality requirement (Portugal versus. Portuguese speaking countries), facilitation of access (France to francophone African countries), extension of NT to investment (Sweden to three African countries), and work permit waiver (UK to Commonwealth). The EU’s conditional (summary) offer can be found on the web: http://trade-info. cec.eu.int/doclib/cfm/doclib_section.cfm?sec=176&lev=2&order=date. A summary of this proposal is also available. It is useful to restate this here as it is possible that the EU offer will translate, albeit with changes, into GATS commitments, or at least that there will be a willingness on the side of the EU to liberalise in these areas and perhaps in the Cotonou context 51 • • • • • • • • • • The EU does not intend to make new offers in health-related, social-services sector or the education sector. There are no new commitments in audiovisual services. The EU wants to retain MFN exemptions; there are changes to the current EU limitations in favour of public utilities within the EU are introduced. There are no new rules on subsidies and they can thus be maintained. There are new offers in legal services and allowing for accountants and architects and engineers without discrimination. There is full market access to foreign service providers of computer and related services. In business services, specific limitations by Member States are removed on packaging services, and printing and publishing on a fee or contract basis. Furthermore, some nationality, residence and commercial presence conditions are also removed in some sub-sectors. On postal and courier services, the proposal confirms foreign operators access to markets which have already been opened to competition by the first postal directive of 1997 (EC 97/67) – notably parcels, express delivery, letters above 350 grams. The universal service provisions existing within the EC are fully safeguarded. In telecommunications services, the Commission proposes to guarantee to third countries’ operators full access to the EU’s internal market, while fully safeguarding the EU’s right, for example, to define its universal service objectives for those services. The Commission proposes to eliminate some national limitations to market access and national treatment in construction and engineering-related service. It removes obstacles for foreign companies to set up and develop their business in the EU. The proposal confers on non-EU nationals the same treatment as granted to EU nationals when applying for the opening of new department stores. Thus, the granting of licences for new department stores will be done on the merits of each application, including its compliance with non-discriminatory national regulations such as land-use planning laws etc., regardless of the nationality of the companies. In addition, it is proposed to allow commissioning agents to provide services cross border in some Member States and to liberalise franchising. The EU proposes market access and national treatment for providers of noise and vibration abatement services. The offer also foresees that advisory services for the protection of biodiversity and landscape could be offered by foreign companies to EU clients on a ‘cross-border’ basis, without the foreign company having to establish a presence in the EU. Foreign companies who have a contract to provide environmental services with a client in the EU will be able to send skilled personnel to the EU to provide these services for up to six months at a time (relevant in consulting and environmental impact assessments) On financial services, it is proposed to do away with a number of limitations pertaining for instance to the legal form of establishment or to the scope of business. The proposal would grant non-EU nationals wishing to establish travel agencies in the territory of the European Union the same treatment as EU 52 • • • • • nationals. The nationality of the companies or their managers will not be considered for the authorisation of new travel agencies. With respect to news agencies the proposal lifts some of the limitations (e.g. foreign-ownership limitations and nationality requirements) in some Member States. In entertainment services, it is proposed that one Member State broadens its commitments in line with the rest of the EU. The main changes in the offer for transport services are: • Maritime transport –reintroducing the 1996 EU offer withdrawn at the end of the post Uruguay Round maritime negotiations. In addition, the proposal guarantees access to ‘‘feeder of international cargo’ and ‘movement of empty containers’ in accordance with existing EU and national legislation. • Air transport: including ‘groundhandling’ and ‘ airport management’. There is to be removal of some horizontal limitations relating to the purchase and/or rental of real estate. The limitations essentially relate to authorisation procedures that foreign nationals have to pursue prior to acquiring and/or renting real estate, converting a scheduled limitation for foreigners in acquiring property into an authorisation procedure for the acquisition of property. Several changes to the EU’s commitments are proposed for mode 4: • A service company with a graduate-training programme will be able to transfer its ‘managers of the future’ for up to one year to obtain work experience with an affiliated company in the EU. • Overseas companies, who have a contract to provide certain services to a client in the EU, will be able to send skilled personnel to the EU to provide these services for up to six months at a time. The EU already has commitments in this area, but the proposal extends the number of sectors that are covered, as well as the permitted length of stay and length of the underlying contract. • Self-employed skilled professionals working in certain sectors and based overseas will be able to enter the EU for up to six months at a time to provide services to EU clients. In all these cases, EU and national working conditions, minimum wage requirements, and any collective wage agreements will continue to apply (effectively undermining the comparative advantage of ACP labour in mode 4). EU Member States will continue to be able to refuse entry to persons that pose a security threat or are considered to be at risk of abusing the terms of their entry. Quotas with regard to entry of certain categories of workers will also need to be determined. 53 6.3 Possible benefits to ACP of removing EU barriers to ACP exports The possible benefits to the ACP of removing EU barriers to ACP exports depend on the identification and linking of two issues: • the EU barriers to trade in services (sectors, modes, and specific regulations) that are to be liberalised, and • the supply response of the ACP (by mode, sector, country and region), in other words, whether ACP counties are sufficiently competitive and have the domestic capacity to supply the EU. The present study is a scoping study, so answers to these questions are preliminary and need further refinement. We discussed EU trade barriers to trade in Section 6.2 and discussed current capacity in exports of services by the ACP in Section 6.1. There is however a lack of precise data. Moreover, there is a very patchy picture on the competitive strengths of services exports in ACP regions, individual countries and individual sectors. For this we would need more detailed studies involving discussion with the ACP private sector. By mode of delivery Strengths of services exports in many ACP countries are based on mode 1, mode 2 and mode 4 delivery. Mode 4 is by definition labour intensive, and, vis-à-vis the EU, the ACP has a comparative advantage in labour due to relative labour abundance (it should be noted that the EU would have a comparative advantage in highly skilled services operations). Mode 4 delivery however is seriously hampered by the current EU trade regime. Some of this is related to recognition of diplomas (particularly in business services: medical, architectural and engineering services), some of it is related to economic-needs test and nationality requirements, and all countries restrict less-skilled workers or those that have worked for an ACP company for only a short time if there is no commercial presence. Linking mode 4 delivery to commercial presence (mode 3), or mode 1 delivery to mode 3, constitutes another barrier to the ACP, particularly because the ACP would have a comparative disadvantage in capital necessary to set up a commercial presence. Mode 1 delivery has become more important over time owing to technical improvements in telecommunications and information networks across countries. However, there are several unbound mode 1 commitments. One example of a commitment in mode 1 could undermine the comparative advantage in labour: in the case of architectural services in Germany ‘application of the national rules on fees and emoluments for all services which are performed from abroad’. It is understandable to apply minimum wage considerations in mode 3 delivery (as this would directly compete in the domestic labour market), but regulating pay of services originating in a foreign country e.g. through mode 1 or mode 4, is less so. More generally, bound commitments would safeguard mode 1 services, and this may for example be relevant for call centres or back-office operations. Mode 1 delivery would benefit those ACP countries that are culturally and linguistically linked to EU countries (e.g. UK and Commonwealth ACP, France to Francophone ACP and Portugal to Lusophone ACP, Netherlands to Surinam, Germany to e.g. Namibia, Italy to Somalia, etc.) and have the right supply capacity (the example of India being the ‘back office’ of the world, see Appendix J, also depends on there being sufficient IT skills, and this may apply to ACP countries such as Mauritius, Senegal, Ghana and Caribbean countries). Most 54 back office sectors have been fully committed (e.g. computer-related services CPC 84), but not all, for example collection, telephone answering and duplicating services (see WTO members’ requests to the EC Consultation document). Mode 2 is (probably) the main mode of delivery for the ACP, but there appear to be no major barriers in tourism, with the possible exception of computer reservation systems, and other provisions to safeguard health and safety of tourists. Similarly, consumption abroad of private health services is up to consumers (e.g. health tourism). On the other hand, coverage of national health insurance for EU nationals to non-EU countries may hamper mode 2 delivery of health services. By sector and type of regulation Business services Many individual member states include requirements (sometimes for reasons of prudence) for a university degree, professional qualifications and several years’ professional experience, for accountants, lawyers, etc. In the case of medical and dental services, access is restricted to natural persons and often includes economicneeds testing and a residence requirement. Removing these restrictions would benefit those countries that have a supply capacity of these business services (e.g. the category other business services exports in Nigeria is a substantial category, although it declined markedly from 1990-2000.) See also comments on mode 1 restrictions as that is particularly relevant for business services (e.g. telephone answering). Communication services The inclusion of postal, courier and particularly audiovisual services would benefit ACP exporters. Portugal’s mode 1 limitation requiring residence in telecommunication services could also restrict ACP exporters. Appendix Table I.4 shows that various countries have built up a significant supply capacity (from high to low reported values: Jamaica, Dominican Republic, Guyana, Côte d’Ivoire, Barbados, Tanzania, Kenya, Ethiopia, Mauritius, etc.). Construction and related engineering services There are nationality requirements (Greece) in market access under mode 3, or qualification requirements in mode 4. For example the Netherlands requires a university degree and three years’ professional experience in the sector. Mode 1 is largely unbound. France has an economic-needs test. Removing some of these restrictions would benefit ACP countries, possibly those that have built up some export capacity (from high to low reported values in Section 6.1: Tanzania, Madagascar, Cameroon, Ethiopia, Mauritius, Côte d’Ivoire, Barbados and Cape Verde). Distribution services In mode 4, several MS include residence requirements (e.g. wholesale trade). For mode 3, there are several state monopolies (wholesale, tobacco). Removing residence requirements could benefit ACP countries. Educational services France (and Denmark and Ireland) includes a nationality condition, but this is subject to authorisation in mode 1. Removing this restriction could help countries that are 55 exporting education services (e.g. universities in the Caribbean now and in African ACP countries in the past). Environmental services There would be few restrictions with significant benefits to the ACP, partly because of capital requirements. Financial services Removal of a nationality or residence requirement in mode 4 in Austria, Denmark, Spain and Italy could lead to benefits for ACP countries, but these are not expected to be big. Countries with reported export values in insurance service, ranking from high to low, are: Barbados, Mauritius, Trinidad and Tobago, Côte d’Ivoire, Antigua and Barbuda, Cameroon, Tanzania, Bahamas, Jamaica and Botswana. But there is a question as to whether ACP insurance firms can compete on the EU market with EU firms. Regarding financial services (not insurance), ACP banks and financial institutions may not be able to compete in EU markets. Banks in Trinidad and Tobago may be able to withstand such competition. Obstacles more difficult to overcome (for reasons of prudence) relate to depository assets and transparency requirements for offshore banking (resulting in blacklisting of certain ACP countries). On the other hand, certain labour-intensive financial services such as data processing and call centres could be done more cheaply in the labour abundant countries. For this, safeguards regarding mode 1 would be effective (although many such services would fall under CPC 84, or business services). Health-related and social services Removing restrictions in health services in mode 3 and 4 (economic-needs tests) or including it as committed sectors (there are many unbound, or uncommitted sectors) could help health-services exports. There are also EU-wide and MS-specific regulations that may be relevant, particularly relating to health tourism and cutting waiting lists. However, most of this would fall under government procurement (we have shown the case of Netcare) and hence not under normal services negotiations. Some ACP health operation can be more competitive (i.e., offering cheaper surgery) than EU operations. Tourism and travel-related services The main source of ACP exports to the EU is through EU consumption of services in mode 2. This is already relatively free of restrictions in the EU. Removing restrictions on tourist guides (mode 4) could give marginal benefits to ACP countries. Recreational, cultural and sporting services It would appear (see anecdotes) that removing Mode 4 restrictions, economic-needs tests (Italy), main professions (Austria), employment contract with authorised enterprise (France), etc, would facilitate ACP exports of services, including African and Caribbean entertainment groups. Removing residency requirements for publishers and owners of publishing or printing companies (mode 3) would be of less benefit to ACP companies. 56 Transport services Many sub-sectors have been excluded from commitments. New commitments e.g. in maritime shipping could benefit ACP countries such as Kenya. There are also various unbound sectors (particularly mode 1). Only road-transport services include commitments, subject to limitations such as economic-needs tests (mode 3 and 4). However, it would appear the removal of mode 3 restrictions is not of major interest to the ACP (due to capital requirement). By region and country It would be of some interest to examine which regions are expected to gain and which countries within regions. Again, we would need more detailed studies for this, and we provided some speculative findings. But given the widely varying performance in exports of services across regions, it could be expected that different regions gain. For instance, CEMAC and ECOWAS did not report high increases in exports of services, while EAC, SADC and COMESA did. It is also clear that specific countries within regions are expected to gain, depending on sectoral composition and other issues, such as cultural and linguistic links with the export market. 57 Chapter 7 Special and Differential Treatment in post-Cotonou Negotiations 7.1 Negotiations so far Preliminary discussions on the development dimension of EPAs in the area of services have taken place, see Joint Report on the dedicated session on the development dimension of EPAS in the area of services held on 25 June 2003. Both parties agreed to the importance of the services sector to their economy. But there was some disagreement over the development issue. The report states that: • The ACP requested support for tackling their capacity and supply-side constraints; strengthening their immediate services; increasing the efficiency and competitiveness of their domestic services and services suppliers; and developing appropriate policies as well as legal and regulatory frameworks. EPAs should include provisions for resources additional to EDF, which was found to be too slow to provide a boost to the services sector on time. • The EC responded that funds should not be additional, but that concrete programmes should be designed for the development of the services sector. It also mentioned the set-up of an additional €20 million facility for EPA negotiations, as well as a new €50 million intra-ACP facility for trade-related needs. • The ACP thought it could not liberalise sectors unless they had become competitive. The EC would not force the ACP to liberalise services trade, but thought it was in the best interest of the ACP. • The Parties should undertake to start negotiations in services in 2006 at the latest. The Joint Report ACP-EU negotiations on Economic Partnership Agreements 7th allECP-EU Ambassadorial level meeting at 11 July 2003, states that: • • Support for services sector has to be seen in context of CPA Art. 34. Objectives for the services sector under EPAs should include: (a) to strengthen capacity, efficiency and competitiveness of ACP services; (b) improve access to the EU of services originating in ACP countries (particularly mode 4); and (c) to increase ACP participation in world trade of services through access to technology, and access to distribution channels and information. Negotiations, if at all decided upon, based on CPA Art. 41(4), could start during or after phase 2 depending on whether national assessments of the services sector in ACP have been carried out. Liberalisation should be based on S&D, asymmetry and positive discrimination and should include balanceof-payments safeguards. Liberalisation of trade in services should be based on the following modalities: it should (a) be progressive depending on level of development; (b) be based on a positive list; (c) include a special safeguard mechanism; (d) include of measures to deal with anti-competitive behaviour. The ACP proposed that the EU should remove barriers to entry into the EU of ACP service providers in mode 4; the EU should be more transparent, and use less time-consuming visa procedures for ACP services suppliers; and mutual recognition agreements should be negotiated. • • • 58 • The EC replied that the proposals and objectives were defensive, but it stressed that it was willing to discuss the issue of mode 4 liberalisation within EPA negotiations, as it was an issue of mutual interest (though it is not clear if this refers to the interest of EU services suppliers, or simply the benefits that the EU derives from inward temporary movement. The EC was willing to apply asymmetric transition periods, to maintain intra-regional preferences, but it stressed the technical difficulties in achieving safeguard measures. Beyond this, the EC and ACP have tabled few detailed proposals to obtain S&D, although desires have been expressed (e.g. at a COMESA workshop). It would appear that given the emphasis on S&D in services in Cotonou, it is important to consider more concrete options. 7.2 Options Below we list 10 options for S&D in post-Cotonou services negotiations. (S&D 1) Financial support for capacity building Resources are available within the EDF and for EPA negotiations, but one question is whether there are additional resources available within services negotiations under CPA art 41 (5). So far the EU has refused. In any case, countries and regions would need to indicate where, how and how many resources, with noticeable impact on ACP sectors, can be made available. Riddle (2002) discusses measures to boost SME service providers: • special provisions in government procurement; • subsidies for export development and innovation activities; • universal access to public goods; • offering training; • government loan-guarantee programme for export-development financing to small service suppliers; • provision of banking services to SMEs at standard rate; • trade conditions including improving the entry conditions for temporary business travel, removing local-presence requirements for mode 1 supply of services, accelerating development of mutualrecognition agreements and of possibilities of freer movement of consumers to support mode 2 exports. (S&D 2) Facilitating the recognition of professional credentials Several sectors (e.g. business services) require certain diplomas, and EC directives on mutual recognition of diplomas do not apply to nationals of third countries. The ACP regions could ask for ways in which their diplomas could be recognised in the EU. Similar intentions, such as mutual-recognition agreements, are already covered in regional agreements, including by the EU. Establishing ‘one-stop shops’ in EU member states could be considered to facilitate quick recognitions of qualification of ACP services suppliers. The EU has recently announced to introduce EUROPASS. ACPPASS could also help. 59 (S&D 3) Information centre The ACP could ask for increased supply of information regarding exports of services to the EU, in particular regarding barriers to trade (similar to the GATS information centre). Importantly, it could hold regional seminars in the ACP to create awareness of what kind of trade is and what kind is not restricted. Information centres could also be merged into the one-stop shops as discussed before. (S&D 4) Increased technology transfer Many studies (for example, George and Kirkpatrick, 2003) that show gains from services liberalisation indicate that most gains come from own liberalisation. In particular, opening up to foreign direct investment can be beneficial to the ACP under the right (policy) conditions. One of the benefits from FDI could be productivity and technological spillovers. Thus the EU could increase its support to stimulate FDI in the ACP, using so-called home country measures (Te Velde and Bilal, 2003). (S&D 5) Full credit for autonomous liberalisation To provide the ACP with full credit for autonomous liberalisation. (S&D 6) Fewer services commitments ACP/LDC ACP countries could ask not to be forced to make any new commitments over and above commitments made in GATS (and, if finished on time, GATS 2000). Developing countries are allowed flexibility in scope and coverage of commitments under a regional agreement consistent with Gats Article V. GATS S&D includes special provisions for LDCs to offer fewer sectors. (S&D 7) EU commitments over and above GATS To be consistent with GATS Article V, the scope and coverage of services commitments for a developed country member needs to include substantially all sectors and modes and remove virtually all restrictions to trade. Of particular importance to the ACP are mode 4 commitments. It has so far not been advanced, but a proposal to set up an ACP business travel card may help to facilitate and operationalise market access in mode 4. The APEC business travel card has been successfully introduced. Under an ACP business travel card there could be • Visa free or visa-at-border entry for business development purposes, • Create multiple-entry visa, • Common service standards for processing (minimum time) of temporary entry visa, • An expanded range of professions under ‘business visitor’, • An expanded range of support staff, in particular applying to less-skilled workers. There could be a pilot scheme running for a number of years (in regions, countries or sectors). Cardholders would be required to present their passports, but are not required to submit separate applications for business visitor visas. Participating economies would commit to implementing the scheme and would be free to maintain existing visa requirements for business visitors. They would also have the responsibility of avoiding abuse of the ACP business travel cards by registering bona fide ACP employers. All economies retain the right to refuse an individual without providing 60 reasons, or to refuse entry to ACP Business Travel Card-holders at the border. The concept could be introduced at the ACP level, but the precise implementation could be left to regional negotiations, as ACP regions are interested in different services sectors. Besides mode 4, the EU could safeguard the interest of ACP exporters by giving more bound commitments in mode 1 for various sectors, and removal of restrictions which refer to (labour) conditions surrounding supplies in ACP countries. It could also remove mode 3 and mode 4 in specific sectors (see section 6.3) • Business services, • Construction and related services, • Health and education services, • Recreational, cultural and sporting services, • Tourism services. (S&D 8) Government procurement The ACP could ask for the inclusion (e.g. health and IT services) of transparency in government procurement by the EU and its member states. Government procurement is a significant part of national income, but only part is imported, and the sector has so far been excluded from the GATS. Regional agreements, i.e. the EU-Chile and EUMexico, include government procurement. Health and IT services could be supplied by Caribbean countries who would have the capacity to do so. (S&D 9) Emergency safeguards If there are significant ACP commitments, the ACP may need certain emergency safeguards in case of balance of payments problems. Work on emergency safeguards has not been finalised in GATS and RTAs do not seem to include many relevant examples. One safeguard could include the right of ACP members to develop and implement new regulations, while the EU would obey to a standstill. (S&D 10) Flexible time periods Article V:3 (a) also allows flexibility to developing countries in RTAs with regard to implementation issues. This could apply to mutual recognition of qualifications, and to possible requirements to make inventories of services restrictions among ACP and EU countries. 7.3 Political and negotiating issues The list of S&D options in Section 7.2 is diverse and not yet very precise. It is also possible that some options are more likely to be met by an ACP supply response than others. We would also need to sketch some of the political and negotiating realities to examine whether certain options are more feasible. As mentioned before, phase 2 EPA negotiations have not yet begun for all ACP countries/regions. But this is not an issue specific to services negotiations. We foresee four options with regard to post-Cotonou services negotiations: 1. No services agreement. Restatement of partnership character as in CPA Art. 41:4. Channelling of current EDF resources to strengthen ACP capacity in the 61 supply of services related to labour, business, distribution, finance, tourism, culture and construction and related engineering services (CPA Art. 41:5). 2. No services agreement, with some S&D options, such as additional resources, to satisfy 41:2 allowing for special and differential treatment of ACP suppliers. 3. Limited services agreement. No ACP commitments beyond GATS (CPA Art. 41:2), but with (significant) new EU commitments and inclusion of other S&D options while possible services EPAs satisfy the requirements of GATS Art. V as well as special and differential treatment in CPA Arts 41:2 and 41:5. 4. Advanced services agreement, with both the ACP and EU participating and giving more commitments than under GATS. There would need to be regional coordination of services commitments within ACP regions (this report has not discussed ACP commitments and possible responses to EU requests, see Arkell and Johnson, 2003) before engaging with the EU (while overcoming problems relating to asymmetry as in the EU-MERCOSUR negotiations), and further discussion of liberalising principles and rules, as these are in principle negotiable (see Section 3.2) as witnessed by widely varying rules in different EU free-trade agreements. While the EU-South Africa agreement can form a model, this agreement is the least extensive in terms of all EU FTAs that include services. S&D would also need to be an integral part of the negotiations. In the background, there are various other types of negotiations on services that may demand priority. These include regional negotiations (e.g. SADC), and GATS 2000 negotiations (which may be ongoing for some time). However, it is possible that few additional negotiating resources are required, as some of the ground work is the same (what the ACP can offer to anybody and to the EU, and what the ACP wants from the EU, over and above what has been achieved in GATS 2000). Importantly, it is possible that the EU will be willing to operationalise some of the S&D options to maintain the Cotonou partnership character. It could also be easier (economically and politically) to liberalise sectors and modes (particularly mode 4) to a selected group of countries. Imports of services from the ACP account for just seven percent with half of that in tourism, and the EU does have more advanced cultural and linguistic links with some ACP countries than with other non-ACPs. On the other hand, ACP regions contain diversified economies. 62 Chapter 8 Conclusions and areas for further work This report has highlighted the issue of post-Cotonou negotiations on services. The Cotonou Partnership Agreement allows the partnership between the EU and the ACP to be extended to services. It emphasises the need for applying special and differential treatment to services negotiations with the ACP. After resolving general issues, such as agreeing on who will negotiate EPAs, we suggest at least four ways forward 1. No services agreement or new resources. 2. No services agreement, with some S&D options such as additional resources. 3. A limited services agreement. No ACP commitments beyond GATS, but with (significant) new EU commitments and inclusion of several S&D options. 4. Advanced services agreement, with both the ACP and EU participating and giving more commitments than under GATS. There would need to be regional coordination of services commitments within ACP regions before engaging with the EU (while overcoming problems relating to asymmetry as in the EUMERCOSUR negotiations), and further discussion of liberalising principles and rules, as these are in principle negotiable, as witnessed by widely varying rules in different EU free trade agreement and inclusion of S&D. We discussed 10 S&D options: 1. Financial support for services export capacity building; 2. Facilitation of the recognition of professional credentials by setting up one-stop shops in ACP countries – called ACPPASS (similar to a recent EUROPASS initiative); 3. Information centres for ACP exporters of services; 4. Increase in technology transfer to the ACP using “home country measures” (e.g. PROINVEST, EIB Investment Facility); 5. Full credit for autonomous ACP liberalisation of services; 6. Fewer or no services commitments by ACP/LDC countries; 7. EU commitments over and above GATS. This should cover more liberal mode 4 conditions (e.g. an ACP business travel card, see box 1), safeguarding of mode 1 supplies, and removal of restrictions in mode 3 and mode 4 in specific sectors such as business services, construction and related services, health and education services, recreational, cultural and sporting services, and tourism services. Lifting of some restrictions can be achieved more easily at ACP level than in the GATS, and the formation of EPAs under GATS article V would be key. It would be more difficult to schedule new MFN exemptions; 8. Inclusion of (parts of) EU government procurement (e.g. health and IT); 9. Operationalise Emergency Safeguards Measures for the ACP; 10. Flexible implementation time period (this could apply to mutual recognition of qualifications and inventories of restrictions). The need for more detailed research will depend on which option will be chosen, as we indicate in Table 8.1 below. It should be noted that in order to obtain at least modest gains from a services agreement, the ACP would need to table specific S&D options (request the lifting of certain barriers in the EU, or for EDF resources in specific areas, etc.). Now is the time to begin to consider which specific options will be most effective. It is not possible to wait until current GATS 2000 negotiations have been finalised as different requests (for lifting of barriers, or other S&D options) can be made under Cotonou and GATS 2000 negotiations may not have finished by 2005, while possible services negotiations could start in 2006. 63 Table 8.1 Option 1. No action 2. New resources Negotiating options and capacity needs Capacity Needs (studies) o Identify country and sector specific options how financial resources can raise productivity and export capacity in the ACP. Identify country and sector specific options how financial resources can raise productivity and export capacity in the ACP. Identify, at the country/sector level effectiveness of other S&D options, such as EU funded ACP based information centres, or centres to enhance mutual recognition of qualifications. Initiate public-private dialogue to examine which trade barriers should lifted by the EU to result in a supply response in the ACP. Initiate a mode 4 study to examine feasibility and precise effects of an ACP travel card; Initiate a regional study to examine effect of various S&D options in more detail. Possible costs and benefits No costs or benefits Minor gains, few costs 3. Limited services agreement with several S&D options o Gains, few costs o Gains, few costs o Gains, particularly by obtaining better access in mode 4 (e.g. ACP business travel card), and safeguarding mode 1 supply without restrictions. Relevant sectors would include: Business services, Construction and related services, Health and education services, Recreational, cultural and sporting services. Substantial possible gains, but increased possibility of losses and risks that commitments and liberalising principles do not fit the ACP. 4 Advanced services agreement o o o Identify country and sector specific options how financial resources can raise productivity and export capacity in the ACP. Examine the full range of liberalising principles (as in other RTAs) and how S&D can be an integral part of this at the regional level (e.g. emergency safeguards, flexibility to ACP in services commitments, targeted fund, mutual recognition agreements, transparency in EU’s government procurement, etc.) Initiate public-private dialogue to examine which trade barriers should lifted by the EU to result in a supply response in the ACP; Initiate a mode 4 study to examine feasibility and precise effects of an ACP travel card; Initiate a regional study to examine effect of various S&D options in more detail; also to conduct and assessment whether and how the ACP can make new commitments, first regionally and then to the EU. 64 References Arkell, J and M. Johnson (2003), Trade in Services, London: Commonwealth Secretariat. Butkeviciene, J, B.B. Benadives and M. Tortora et al. (2002), ‘Services Performance in Developing Countries: Elements of the Assessment’, draft for WTO symposium 14-15 March 2002. ECDPM (2003), ‘Comparing EU Free Trade Agreements: Investment’, draft. George, C. and C. Kirkpatrick (2003), ‘Sustainability Impact Assessment of Proposed WTO negotiations’, report by IDPM, 4 June 2003. Gillson, I and O. Ojuwu (2003), ‘Nigeria ATTP: Assistance to Nigeria’s Preparations for Cancún. Negotiating Brief 3. Services.’. Gonzales, A., L. Brenzel and J. Sancho (2001), ‘Health tourism and related Services: Caribbean development and international trade submitted to the regional negotiating machinery (RNM). Hoekman, B and C.A. P. Braga (1997), ‘Protection and Trade in Services’, World Bank Policy Research Working Paper 1747. Hoekman, B. C. Michalopoulos and L.A. Winters (2003), ‘More Favorable and Differential Treatment of Developing Countries: Towards a New Approach in the WTO’, World Bank Policy Research Working Paper 3107. Nikomboriak, D. and S.M. Stephenson (2001), ‘Liberalization of Trade in Services: East Asia and the Western Hemisphere’, draft report. OECD (2002a), ‘The Relationship between regional trade agreements and the multilateral trading system: Services’, TD/TC/WP(2002)27/FINAL OECD (2002b), ‘Quantification of costs to national welfare from barriers to services trade: a literature review’, TD/TC/WP(2000)24/FINAL OECD (2003), ‘Services Trade Liberalisation: Identifying Opportunities and Gains. Key Findings’ TD/TC/WP(2003)25/FINAL. Onguglo, B. and T. Ito (2003), ‘How to make EPAs WTO compatible? Reforming the rules on regional trade agreements’, ECDPM discussion paper 40. Riddle, D. (2002), ‘Issues Regarding Small Service Suppliers for CARICOM negotiations in GATS and FTAA’, prepared for the CARICOM Regional Negotiating Machinery Stephenson, S.M and F.J. Prieto (2002), ‘Evaluating Approaches to the Liberalization of Trade in Services: Insights from regional Experience in the Americas’, draft report. Stephenson, S.M. (2002), ‘Can Regional Liberalization of Sevices go further than Multilateral Liberalization under the GATS?’ to appear in World Trade Review, volume 1, July 2002. Stephenson, S.M. and P. Contreras (2001), ‘An asymmetric approach to services liberalisation: The European Union- Mercosur Case’, draft report for experts workshop/ Velde, D.W. te and M. Fahnbulleh (2003), ‘Investment Related Provisions in Regional Trade Agreements’ background paper available from http://www.odi.org.uk/iedg/projects/ec_prep.html. Velde, D.W. te and S. Bilal (2003), ‘Foreign Direct Investment and Home Country Measures in the Lomé Conventions and Cotonou Agreement’ report for UNCTAD. Whalley, J. and J.C. Clark (2003), ‘Competitive liberalisation and a US-SACU FTA’, NBER working paper 10168. 65 Winters, L.A. (2002) , ‘The Economic Implications of Liberalising Mode 4 Trade’ , paper per prepared for the joint WTO-World Bank symposium on ‘The movement of natural persons (mode 4) under the GATS’, WTO, Geneva, 11-12 April 2002 World Bank (2002), Global Economic Prospects, Washington. WTO (1998), ‘Presence of natural persons (mode 4)’, S/C/W/75. WTO (1999), ‘Structure of Commitments for modes 1, 2 and 3’, S/C/W/99. 66 Appendix A: Services Sectoral Classification List SECTORS AND SUB-SECTORS 1. A. a. b. c. d. e. f. g. h. i. j. k. B. a. b. c. d. e. C. a. b. c. D. a. b. E. a. b. c. d. e. F. a. b. BUSINESS SERVICES CORRESPONDING CPC Section B Professional Services Legal Services Accounting, auditing and bookkeeping services Taxation Services Architectural services Engineering services Integrated engineering services Urban planning and landscape architectural services Medical and dental services Veterinary services Services provided by midwives, nurses, physiotherapists and para-medical personnel Other Computer and Related Services Consultancy services related to the installation of computer hardware Software implementation services Data processing services Data base services Other Research and Development Services R&D services on natural sciences R&D services on social sciences and humanities Interdisciplinary R&D services Real Estate Services Involving own or leased property On a fee or contract basis Rental/Leasing Services without Operators Relating to ships Relating to aircraft Relating to other transport equipment Relating to other machinery and equipment Other Other Business Services Advertising services Market research and public opinion polling services 863 8671 8672 8673 8674 9312 932 93191 841 842 843 844 851 853 821 822 83103 83104 83101+83102+ 83106-83109 871 864 67 c. d. e. f. g. h. i. j. k. l. m. n. Management consulting service Services related to man. consulting Technical testing and analysis serv. Services incidental to agriculture, hunting and forestry Services incidental to fishing Services incidental to mining Services incidental to manufacturing Services incidental to energy distribution Placement and supply services of Personnel Investigation and security Related scientific and technical consulting services Maintenance and repair of equipment (not including maritime vessels, aircraft or other transport equipment) Building-cleaning services Photographic services Packaging services Printing, publishing Convention services Other 865 866 8676 882 883+5115 884+885 887 872 873 8675 o. p. q. r. s. t. 633+ 8861-8866 874 875 876 88442 87909* 2. A. B. C. a. b. c. d. e. f. g. h. i. j. k. l. * COMMUNICATION SERVICES Postal services Courier services Telecommunication services Voice telephone services Packet-switched data transmission services Circuit-switched data transmission services Telex services Telegraph services Facsimile services Private leased circuit services Electronic mail Voice mail On-line information and data base retrieval electronic data interchange (EDI) enhanced/value-added facsimile services, incl. 7511 7512 7521 7523** 7523** 7523** 7522 7521**+7529** 7522**+7523** 7523** 7523** 7523** 7523** The (*) indicates that the service specified is a component of a more aggregated CPC item specified elsewhere in this classification list. The (**) indicates that the service specified constitutes only a part of the total range of activities covered by the CPC concordance (e.g. voice mail is only a component of CPC item 7523). ** 68 m. n. o. store and forward, store and retrieve code and protocol conversion on-line information and/or data processing (incl.transaction processing) other n.a. 843** D. a. b. c. d. e. f. E. Audiovisual services Motion picture and video tape production and distribution services Motion picture projection service Radio and television services Radio and television transmission services Sound recording Other Other 9611 9612 9613 7524 n.a. 3. A. B. C. D. E. CONSTRUCTION AND RELATED ENGINEERING SERVICES General construction work for buildings General construction work for civil engineering Installation and assembly work Building completion and finishing work Other 514+516 517 512 4. A. B. C. DISTRIBUTION SERVICES Commission agents' services Wholesale trade services Retailing services 621 622 631+632 D. E. Franchising Other 8929 5. A. B. EDUCATIONAL SERVICES Primary education services Secondary education services 921 922 69 C. D. E. Higher education services Adult education Other education services 923 924 929 6. A. B. C. D. ENVIRONMENTAL SERVICES Sewage services Refuse disposal services Sanitation and similar services Other 9401 9402 9403 7. A. a. b. c. d. FINANCIAL SERVICES All insurance and insurance-related services Life, accident and health insurance services Non-life insurance services Reinsurance and retrocession Services auxiliary to insurance (including broking and agency services) 812** 8121 8129 81299* 8140 B. a. b. c. d. e. f. Banking and other financial services (excl. insurance) Acceptance of deposits and other repayable funds from the public Lending of all types, incl., inter alia, consumer credit, mortgage credit, factoring and financing of commercial transaction Financial leasing 8112 All payment and money transmission services Guarantees and commitments 81199** Trading for own account or for account of customers, whether on an exchange, in an over-the-counter market or otherwise, the following: - money market instruments (cheques, bills, 81339** certificate of deposits, etc.) - foreign exchange 81333 - derivative products incl., but not limited to, 81339** futures and options - exchange rate and interest rate instruments, 81339** inclu. products such as swaps, forward rate agreements, etc. - transferable securities 81321* - other negotiable instruments and financial 81339** 70 g. h. i. j. k. l. assets, incl. bullion Participation in issues of all kinds of 8132 securities, incl. under-writing and placement as agent (whether publicly or privately) and provision of service related to such issues Money broking 81339** Asset management, such as cash or portfolio 8119+** management, all forms of collective 81323* investment management, pension fund management, custodial depository and trust services Settlement and clearing services for financial 81339** assets, incl. securities, derivative products, or 81319** and other negotiable instruments Advisory and other auxiliary financial 8131 services on all the activities listed in or 8133 Article 1B of MTN.TNC/W/50, incl. credit reference and analysis, investment and portfolio research and advice, advice on acquisitions and on corporate restructuring and strategy Provision and transfer of financial information, and financial data processing and related software by providers of other financial services Other HEALTH RELATED AND SOCIAL SERVICES (other than those listed under 1.A.h-j.) Hospital services Other Human Health Services 9311 9319 (other than 93191) 933 C. 8. A. B. C. D. Social Services Other 9. A. B. C. D. TOURISM AND TRAVEL RELATED SERVICES Hotels and restaurants (incl. catering) Travel agencies and tour operators services Tourist guides services Other 641-643 7471 7472 71 10. RECREATIONAL, CULTURAL AND SPORTING SERVICES (other than audiovisual services) Entertainment services (including theatre, live bands and circus services) News agency services Libraries, archives, museums and other cultural services Sporting and other recreational services Other A. 9619 962 B. C. 963 964 D. E. 11. A. a. b. c. d. e. f. B. a. b. c. d. e. f. TRANSPORT SERVICES Maritime Transport Services Passenger transportation Freight transportation Rental of vessels with crew Maintenance and repair of vessels Pushing and towing services Supporting services for maritime transport Internal Waterways Transport Passenger transportation Freight transportation Rental of vessels with crew Maintenance and repair of vessels Pushing and towing services Supporting services for internal waterway transport Air Transport Services Passenger transportation Freight transportation Rental of aircraft with crew Maintenance and repair of aircraft Supporting services for air transport Space Transport Rail Transport Services Passenger transportation Freight transportation Pushing and towing services Maintenance and repair of rail transport equipment Supporting services for rail transport services 7211 7212 7213 8868** 7214 745** 7221 7222 7223 8868** 7224 745** C. a. b. c. d. e. D. E. a. b. c. d. e. 731 732 734 8868** 746 733 7111 7112 7113 743 72 F. a. b. c. d. e. G. a. b. H. a. b. c. d. I. 12. Road Transport Services Passenger transportation Freight transportation Rental of commercial vehicles with operator Maintenance and repair of road transport equipment Supporting services for road transport services Pipeline Transport Transportation of fuels Transportation of other goods Services auxiliary to all modes of transport Cargo-handling services Storage and warehouse services Freight transport agency services Other Other Transport Services 7121+7122 7123 7124 6112+8867 7131 7139 741 742 748 OTHER SERVICES NOT INCLUDED ELSEWHERE 73 Appendix B: GATS commitments Countries Angola Antigua and Barbuda Argentina Australia Austria Bahrain Bangladesh Barbados Belize Benin Bolivia Botswana Brazil Brunei Darussalam Burkina Faso Burundi Cameroon Canada Central African Rep. Chad Chile Colombia Congo Congo RP Costa Rica Côte d'Ivoire Cuba Cyprus Djibouti Dominica Dominican Republic Ecuador Egypt El Salvador European Community 12 Fiji Finland Gabon Gambia Ghana Grenada Guatemala Guinea Guinea-Bissau Guyana Haiti Honduras 1 X X X X X X X X X X X X X X X 2 3 4 5 6 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 7 8 X X X X X X X X X X X 9 10 X X X X 11 X X X 12 Total 3 6 6 11 12 1 2 4 2 4 4 3 7 4 1 5 2 8 5 1 5 5 2 6 7 6 7 3 4 4 6 10 4 6 11 1 9 4 12 6 4 5 5 2 5 5 4 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 74 Hong Kong Iceland India Indonesia Israel Jamaica Japan Kenya Korea RP Kuwait Lesotho Liechtenstein Macau Madagascar Malawi Malaysia Maldives Mali Malta Mauritania Mauritius Mexico Mongolia Morocco Mozambique Myanmar Namibia New Zealand Nicaragua Niger Nigeria Norway Pakistan Panama Papua New Guinea Paraguay Peru Philippines Qatar Rwanda Saint Kitts & Nevis Saint Lucia Saint Vinc. & Gren. Senegal Sierra Leone Singapore Solomon Islands South Africa Sri Lanka Suriname X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 8 9 6 6 5 8 11 5 8 8 10 9 3 1 5 9 1 2 3 1 3 10 6 7 1 2 2 8 5 2 4 10 6 11 6 2 7 4 6 5 5 5 5 7 10 7 4 9 3 3 75 X Swaziland X Sweden X Switzerland Tanzania X Thailand Togo X Trinidad and Tobago Tunisia X Turkey Uganda X United Arab Emirates X Uruguay X USA X Venezuela X Zambia Zimbabwe Source: GATS schedules X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 3 9 10 1 10 3 9 3 9 2 6 6 11 8 4 3 76 Appendix C: EC requests in GATS 2000 Number of LDC countries (out of 29) where sector has been requested 9 23 29 0 5 0 7 0 20 0 5 1 17 1 Number of low income countries where sector has been requested (out of 41) 21 36 38 3 17 6 14 0 30 0 9 7 26 6 Service sector Professional Business Telecommunications Communication Construction Distribution Environmental Education Financial Health Tourism Culture Transport Energy Source: http://www.wdm.org.uk/action/EUleaksmedia.htm 77 Appendix D: Types of natural persons supplying services (horizontal commitments) No. of entries Intra-company transferees Executives Managers Specialists Others 45 44 45 1 22 40 42 30 70 Sale Negotiations 40 3 3 13 328 3 3 13 328 12.2% 0.9% 0.9% 4.0% 100.0% 0.9% 0.9% 4.0% 100.0% 104 135 No. of aggregate entries % of total entries 13.7% 13.4% 13.7% 0.3% 6.7% 12.2% 12.8% 9.1% 21.3% 31.7% 41.1% % of aggregate entries Executives Managers Specialists Business visitors Other Not Specified Totala a Commercial Presence Independent Contract Suppliers Total number of entries by those 100 WTO Members that have included commitments on Mode 4 in the horizontal section of their schedules. Source: WTO (1998) 78 Appendix E: Cotonou Partnership Agreement: services related articles. CHAPTER 4: TRADE IN SERVICES ARTICLE 41 General Provisions 1. The Parties underline the growing importance of services in international trade and their major contribution to economic and social development. 2. They reaffirm their respective commitments under the General Agreement on Trade in Services (GATS), and underline the need for special and differential treatment to ACP suppliers of services; 3. In the framework of the negotiations for progressive liberalisation in trade and services, as provided for in Article XIX of GATS, the Community undertakes to give sympathetic consideration to the ACP States' priorities for improvement in the EC schedule, with a view to meeting their specific interests. 4. The Parties further agree on the objective of extending under the economic partnership agreements, and after they have acquired some experience in applying the Most Favoured Nation (MFN) treatment under GATS, their partnership to encompass the liberalisation of services in accordance with the provisions of GATS and particularly those relating to the participation of developing countries in liberalisation agreements. 5. The Community shall support the ACP States' efforts to strengthen their capacity in the supply of services. Particular attention shall be paid to services related to labour, business, distribution, finance, tourism, culture and construction and related engineering services with a view to enhancing their competitiveness and thereby increasing the value and the volume of their trade in goods and services. ARTICLE 42 Maritime Transport 1. The Parties acknowledge the importance of cost-effective and efficient maritime transport services in a safe and clean marine environment as the main mode of transportation facilitating international trade and thereby constituting one of the forces behind economic development and the development of trade. 2. They undertake to promote the liberalisation of maritime transport and to this end apply effectively the principle of unrestricted access to the international maritime transport market on a non-discriminatory and commercial basis. 3. Each Party shall grant, inter alia, a treatment no less favourable than that accorded to its own ships, for ships operated by nationals or companies of the other Party, and for ships registered in the territory of either party, with respect to access to ports, the use of infrastructure and auxiliary maritime services of those ports, as well as related fees and charges, customs facilities and the assignment of berths and facilities for loading and unloading. 4. The Community shall support the ACP States' efforts to develop and promote costeffective and efficient maritime transport services in the ACP States with a view to increasing the participation of ACP operators in international shipping services. 79 ARTICLE 43 Information and Communication Technologies, and Information Society 1. The Parties recognise the important role of information and communication technologies, as well as the active participation in the Information Society, as a prerequisite for the successful integration of the ACP countries into the world economy. 2. They therefore reconfirm their respective commitments under existing multilateral agreements, in particular the protocol on Basic Telecommunications attached to the GATS, and invite those ACP countries, which are not yet members of these agreements, to accede to them. 3. They furthermore agree to participate fully and actively in any future international negotiation, which might be conducted in this area. 4. The Parties will therefore take measures that will enable inhabitants of ACP countries easy access to information and communication technologies, through, amongst other, the following measures: • the development and encouragement of the use of affordable renewable energy resources; • the development and deployment of more extensive low-cost wireless networks. 5. The Parties also agree to step up cooperation between them in the area of information and communication technologies, and the Information Society. This cooperation shall, in particular, be directed towards greater complementarity and harmonisation of communication systems, at national, regional and international level and their adaptation to new technologies. ARTICLE 24 Tourism Cooperation will aim at the sustainable development of the tourism industry in ACP countries and sub-regions, recognising its increasing importance to the growth of the services sector in ACP countries and to the expansion of their global trade, its ability to stimulate other sectors of economic activity, and the role it can play in poverty eradication. Cooperation programmes and projects will support the efforts of ACP countries to establish and improve the countries legal and institutional framework and resources for the development and implementation of sustainable tourism policies and programmes, as well as inter alia, improving the competitive position of the sector, especially small and medium-sized enterprises (SMEs), investment support and promotion, product development including the development of indigenous cultures in ACP countries, and strengthening linkages between tourism and other sectors of economic activity. ARTICLE 34 Objectives 1. Economic and trade cooperation shall aim at fostering the smooth and gradual integration of the ACP States into the world economy, with due regard for their political choices and development priorities, thereby promoting their sustainable development and contributing to poverty eradication in the ACP countries. 80 2. The ultimate objective of economic and trade cooperation is to enable the ACP States to play a full part in international trade. In this context, particular regard shall be had to the need for the ACP States to participate actively in multilateral trade negotiations. Given the current level of development of the ACP countries, economic and trade cooperation shall be directed at enabling the ACP States to manage the challenges of globalisation and to adapt progressively to new conditions of international trade thereby facilitating their transition to the liberalised global economy. 3. To this end economic and trade cooperation shall aim at enhancing the production, supply and trading capacity of the ACP countries as well as their capacity to attract investment. It shall further aim at creating a new trading dynamic between the Parties, at strengthening the ACP countries trade and investment policies and at improving the ACP countries' capacity to handle all issues related to trade. 4. Economic and trade cooperation shall be implemented in full conformity with the provisions of the WTO, including special and differential treatment, taking account of the Parties' mutual interests and their respective levels of development. ARTICLE 52 Tax Carve-out Clause 1. Without prejudice to the provisions of Article 31 of Annex IV, the Most Favoured Nation treatment granted in accordance with the provisions of this Agreement, or any arrangement adopted under this Agreement, does not apply to tax advantages which the Parties are providing or may provide in the future on the basis of agreements to avoid double taxation or other tax arrangements, or domestic fiscal legislation. 2. Nothing in this Agreement, or in any arrangements adopted under this Agreement, may be construed to prevent the adoption or enforcement of any measure aimed at preventing the avoidance or evasion of taxes pursuant to the tax provisions of agreements to avoid double taxation or other tax arrangements, or domestic fiscal legislation. 3. Nothing in this Agreement, or in any arrangements adopted under this Agreement, shall be construed to prevent the Parties from distinguishing, in the application of the relevant provisions of their fiscal legislation, between taxpayers who are not in the same situation, in particular with regard to their place of residence, or with regard to the place where their capital is invested. 81 Appendix F: EU trade with ACP, list of ACP countries Table F1: EU trade with ACP EU TRADE WITH ACP (incl. S. Africa) (Mio ecu/euro and %) IMPORTS Share of EU Total (%) 1980 28,590 1990 27,864 2001 47,514 EXPORTS Share of EU Total (%) 1980 23,293 1990 22,716 2001 40,007 Trade balance 10.4 -5,297 6.4 -5,148 4.6 -7,507 11.5 5.8 4.1 MAIN PRODUCTS IN 2001 (Mio euro and %) EU Imports Products Agricultural products Energy Machinery Transport. Material Chemical products Textiles and clothings ACP share of EU total by products EU Exports Products Agricultural products Energy Machinery Transport. Material Chemical products Textiles and clothings Value 12,164 11,290 1,766 4,501 768 1,373 Value 4,471 924 10,776 9,761 4,807 854 ACP share of EU total by products Balance 14.7 7.8 0.6 4.1 1.0 1.9 7.3 3.9 3.6 6.0 3.4 2.0 -7,693 -10,366 9,011 5,260 4,039 -519 EU TRADE IN SERVICES WITH ACP (incl. S. Africa) (Mio ecu/euro and %) 1998 8,254 1999 8,918 2000 9,582 1998 6,576 1999 9,747 2000 10,666 Imports Share of EU Total (%) Trade balance: Exports Share of EU Total (%) 3.7 -1,678 3.7 829 3.4 1,084 2.9 3.9 3.7 EU FOREIGN DIRECT INVESTMENT WITH ACP (incl. S. Africa) (Mio ecu/euro and %) 1998 1,794 1999 -100 2000 1,035 1998 3,140 1999 5,070 2000 8,047 Inflows Share of EU Total (%) Inward Stocks Share of EU Total (%) Outflows Share of EU Total (%) Outward Stocks Share of EU Total (%) 1.7 5,706 0.9 -0.1 5,445 0.8 0.6 6,480 0.7 1.4 19,360 2.3 1.6 32,880 2.8 2.2 40,927 2.6 Source: web-site of DG trade. 82 Table F2: List of ACP countries with WTO and LDC status ACP country WTO member LDC Angola Yes Yes Antigua and Barbuda Yes Bahamas No Barbados Yes Belize Yes Benin Yes Yes Botswana Yes Burkina Faso Yes Yes Burundi Yes Yes Cameroon Yes Cape Verde No Yes Central African Republic Yes Yes Chad Yes Yes Comoros No Yes Congo (Brazzaville) Yes Congo (Kinshasa) Yes Yes Cook Islands No Côte d'Ivoire Yes Djibouti Yes Yes Dominica Yes Dominican Republic Yes East Timor No Equatorial Guinea No Yes Eritrea No Yes Ethiopia No Yes Fiji Yes Gabon Yes Gambia Yes Yes Ghana Yes Grenada Yes Guinea Yes Yes Guinea-Bissau Yes Yes Guyana Yes Haiti Yes Yes Jamaica Yes Kenya Yes Kiribati No Yes Lesotho Yes Yes Liberia No Yes Madagascar Yes Yes Malawi Yes Yes Mali Yes Yes Marshall Islands No Mauritania Yes Yes Mauritius Yes Federal States of Micronesia No 83 Mozambique Namibia Nauru Niger Nigeria Niue Palau Papua New Guinea Rwanda Saint Kitts and Nevis Saint Lucia Saint Vincent and the Grenadines Samoa São Tomé and Principe Senegal Seychelles Sierra Leone Solomon Islands Somalia Sudan Suriname Swaziland Tanzania Togo Tonga Trinidad and Tobago Tuvalu Uganda Vanuatu Zambia Zimbabwe Yes Yes No Yes Yes No No Yes Yes Yes Yes Yes No No Yes No Yes Yes No No Yes Yes Yes Yes No Yes No Yes No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 84 Appendix G: Regional Trade Agreements Notified (and in Force) to the WTO under GATS article V (13 October 2003) Examination process Agreement Date of entry into force 5-Jul-97 1-Jul-97 1-Jan-89 15-Feb-02 1-Aug-99 1-Feb-95 1-Feb-95 1-Feb-98 1-Feb-94 1-Feb-99 1-Feb-98 1-Mar-01 1-Feb-94 1-Feb-95 1-Feb-95 1-Feb-99 1-Jan-58 1-Jan-95 1-Jan-94 1-Jun-02 1-Jul-01 1-Jan-03 30-Nov-02 1-Apr-94 1-Jan-01 28-Jul-03 17-Dec-01 Date Document series Status Canada — Chile CARICOM CER Chile — Costa Rica Chile — Mexico EC — Bulgaria EC — Czech Republic EC — Estonia EC — Hungary EC — Latvia EC — Lithuania EC — Mexico EC — Poland EC — Romania EC — Slovak Republic EC — Slovenia EC (Treaty of Rome) EC accession of Austria, Finland and Sweden EEA EFTA EFTA - Mexico EFTA - Singapore Japan - Singapore NAFTA New Zealand - Singapore Singapore - Australia United States — Jordan 13-Nov-97 19-Feb-03 22-Nov-95 24-May-02 14-Mar-01 25-Apr-97 9-Oct-96 11-Feb-02 27-Aug-96 11-Feb-02 11-Feb-02 21-Jun-02 27-Aug-96 9-Oct-96 27-Aug-96 11-Feb-02 10-Nov-95 20-Jan-95 10-Oct-96 3-Dec-02 25-Jul-01 24-Jan-03 14-Nov-02 1-Mar-95 4-Sep-01 1-Oct-03 18-Oct-02 WT/REG38 S/C/N/65 WT/REG155 S/C/N/229 WT/REG40 S/C/N/7 WT/REG136 S/C/N/191 WT/REG125 S/C/N/142 WT/REG1 S/C/N/55 WT/REG139 S/C/N/26 WT/REG144 S/C/N/188 WT/REG50 S/C/N/24 WT/REG143 S/C/N/187 WT/REG145 S/C/N/189 WT/REG109 S/C/N/192 WT/REG51 S/C/N/25 WT/REG2 S/C/N/27 WT/REG52 S/C/N/23 WT/REG146 S/C/N/190 WT/REG39 S/C/N/6 WT/REG3 S/C/N/6 WT/REG138 S/C/N/28 WT/REG154 S/C/N/207 WT/REG126 S/C/N/166 WT/REG148 S/C/N/226 WT/REG140 S/C/N/206 WT/REG4 S/C/N/4 WT/REG127 S/C/N/169 WT/REG158 S/C/N/233 WT/REG134 S/C/N/193 Under factual examination Factual examination not started Consultations on draft report Factual examination not started Under factual examination Under factual examination Under factual examination Under factual examination Consultations on draft report Under factual examination Under factual examination Under factual examination Factual examination concluded Under factual examination Factual examination concluded Under factual examination Under factual examination Consultations on draft report Under factual examination Factual examination not started Under factual examination Factual examination not started Factual examination not started Consultations on draft report Under factual examination Examination not requested Factual examination not started Source: www.wto.org 85 Appendix H: S&D in GATS African group proposal: TN/CTD/W/28 (February 2003) The General Council agrees that: The Committee on Trade and Development shall set periodic benchmarks on financial and technical cooperation and other mutual arrangements under which developed country Members shall accord to developing country Members special and differential treatment and undertake commitments in negotiations as and when held designed to ensure: (a) The strengthening of the capacity, efficiency and competitiveness of domestic service industries of developing country Members and designed to effect technology transfer to developing country Members; (b) Access by domestic service industries of developing country Members to distribution channels and information networks of developed country markets; and (c) Liberalisation of market access in sectors and modes of supply of export interest to developing country Members. Developed country Members shall reserve quotas for supply of services by developing country suppliers as may be appropriate in sectors that developing country suppliers have interests, and that developed country Members shall not adopt horizontal limitations with respect to movement of natural persons and shall over a period of two years phase out the limitations they maintain at the adoption of this decision. (see www.wto.org) Provision Comment Provisions aimed at increasing trade opportunities Article IV:1 The increasing participation of A developing country member stated that developed countries should adopt developing country Members in commercially meaningful commitments in areas of interest to developing world trade shall be facilitated countries to make Article IV meaningful and effective (S/C/M/38, through negotiated specific paragraph 42). Some developing country Members stated that developing commitments, by different Members countries had experienced serious difficulties in participating in the pursuant to Parts III and IV of this international trade in services. (S/C/M/39 paragraphs 10,11, 17, 20, 21, 23, Agreement, relating to: (a) the 24). strengthening of their domestic services capacity and its efficiency One developing country Member stated that it appeared that developed and competitiveness, inter alia countries continued to dominate services trade and that the expected through access to technology on a improvement in participation of developing countries had not taken place. commercial basis; (b) the This indicated the need for special and more favourable treatment of improvement of their access to developing countries and suggested that developed countries had offered distribution channels and service providers of developing countries inadequate access, whereas those of information networks; and (c) the developed countries had been able to penetrate developing countries' markets. liberalisation of market access in (S/C/M/34, paragraph 37). Data indicate that there were 100 horizontal sectors and modes of supply of limitations with respect to mode 4, compared to 20 for Mode 2. export interest to them A developed country member expressed the view that it was important that developing countries identified sectors of interest to them and that Members considered the role of market opening in services for the growth and the integration of a country in the global economy. (S/C/M/35 paragraph 36, and S/C/M/38, paragraph 35). Developed country Members shall twice every 12 months: (i) report to the Council for Trade in Services on how they are implementing and complying with targets set by the Committee on Trade and Development for the operationalisation of Article IV; (ii) the Council for Trade in Services and the Committee on Trade and Development shall make recommendations to developed country Members to ensure the implementation of Article IV. Commitments or concessions under the General Agreement on Trade in Services, shall reflect a proportion of, at least 40 to 60 in short term actual gains, for developing and developed country Members respectively, provided that special attention shall be demonstrably accorded to the interests of developing and least-developed country Members. Other developing country Members pointed to the need to make Article IV operational. A developed country Member stated that the primary means of accomplishing the objectives of Article IV was to ensure that consumers in developing countries – service suppliers, manufacturers, and farmers, as well as individuals – had to affordable, high-quality, innovative services that meet their needs and budgets. Some of these services will be provided on a crossborder basis, but most will be provided through commercial presence. For this reason, it should be in a country’s economic interest to remove restrictions and provide guaranteed access for foreign service providers to enter its market through branches, subsidiaries, representative offices, and other forms of commercial presence. (S/C/W/119) 86 Article IV:2 Developed country Members, and to All developed country Members, and many developing country Members the extent possible other Members, have established contact points. shall establish contact points within A developed country Member expressed the view that not all relevant two years from the date of entry into Members had complied with the notification provision in Article IV:2, force of the WTO Agreement to regarding contact points. (S/C/M/43, paragraph 41 and S/C/W/ 148). Two facilitate the access of developing developing country Members stated that for example, it may be useful for country Members' service suppliers Members to review the operation of the contact points provided for in Article to information, related to their IV.2. (S/C/W/120) At meeting of the Council for Trade in Services on 26 respective markets, May it had been agreed that, based on notifications by Members, the concerning:(a)commercial and Secretariat would produce a listing of enquiry points as required by Article technical aspects of the supply of III:4 and of contact points as required by Article IV:2 of the GATS. It had services; (b)registration, recognition also been agreed that such listings would be placed on the WTO Internet site. and obtaining of professional qualifications; and (c)the availability of services technology. Provisions under which WTO Members should safeguard the interests of developing country Members Article XIX:3 For each round, negotiating At the request of the Council, the Secretariat prepared a background note on guidelines and procedures shall be the assessment of trade, to complement its work on statistics (S/C/W/27) and established. For purposes of the economic effects of services liberalisation (S/C/W/26 and establishing such guidelines, the S/C/W/26/Add.1). Accordingly, the Secretariat prepared a note on Recent Council for Trade in Services shall Developments in Services Trade (S/W/C/94), which together with other carry out an assessment of trade in existing documents was meant to assist the Council in its assessment of trade services in overall terms and on a in services. sectoral basis with reference to the objectives of this Agreement, The Secretariat also produced an informal note on ‘Developmental Aspects of including those set out in paragraph Services Liberalization.’ Several delegations also presented written 1 of Article IV. Negotiating submissions. On the basis of these documents Members had been conducting guidelines shall establish modalities an assessment of trade at the Council meetings held between December 1998 for the treatment of liberalisation and October 1999. undertaken autonomously by Members since previous negotiations, as well as for the special treatment for least-developed country Members under the provisions of paragraph 3 of Article IV. 87 Flexibility of commitments, of action, and use of policy instruments Article V:3 Economic Integration (a) Where It was felt that there was no need to clarify what was meant by special and developing countries are parties to an differential treatment of developing countries in Article V. (S/C/M/35 agreement of the type referred to in paragraph 46) Article V:1, flexibility shall be In response to a question, it was clarified that the need for flexibility with provided for regarding the conditions respect to coverage of such agreements when a developing country was set out in Article V:1, particularly with involved was a point certainly raised and taken note of in the reports of the reference to Article V:1(b) thereof, in CRTA. (S/C/M/46, paragraph 35) accordance with the level of development of the countries concerned, both overall and in individual sectors and sub-sectors. (b) Notwithstanding Article V:6, in the case of an agreement of the type referred to in Article V:1 involving only developing countries, more favourable treatment may be granted to juridical persons owned or controlled by natural persons of the parties to such an agreement. 88 Article XIX:2 Negotiation of Specific Commitments The process of liberalisation shall take place with due respect for national policy objectives and the level of development of individual Members, both overall and in individual sectors. There shall be appropriate flexibility for individual developing country Members for opening fewer sectors, liberalising fewer types of transactions, progressively extending market access in line with their development situation and, when making access to their markets available to foreign service suppliers, attaching to such access conditions aimed at achieving the objectives referred to in Article IV. (see section on Article IV). Article XV Members recognize that, in certain circumstances, subsidies may have distortive effects on trade in services. Members shall enter into negotiations with a view to developing the necessary multilateral disciplines to avoid such tradedistortive effects. The negotiations shall also address the appropriateness of countervailing procedures. Such negotiations shall recognize the role of subsidies in relation to the development programmes of developing countries and take into account the needs of Members, particularly developing country Members, for flexibility in this area. For the purpose of such negotiations, Members shall exchange information concerning all subsidies related to trade in services that they provide to their domestic service suppliers. In the Uruguay Round, and the follow up negotiations on basic telecommunications and financial services, developing country Members. have made use of flexibility appropriate to their level of development by in the making of commitments. For instance, of the 99 Members who have made commitments on 80 sectors or fewer of the Sectoral Classification List, 98 are developing country Members. (S/C/W/94). Use has been made of timedelayed commitments (phase ins) in some sectors. 89 Article III: 4 Each Member shall respond promptly to all requests by any other Member for specific information on any of its measures of general application or international agreements within the meaning of paragraph 1. Each Member shall also establish one or more enquiry points to provide specific information to other Members, upon request, on all such matters as well as those subject to the notification requirement in paragraph 3. Such enquiry points shall be established within two years from the date of entry into force of the Agreement Establishing the WTO (referred to in this Agreement as the ‘WTO Agreement’). Appropriate flexibility with respect to the time-limit within which such enquiry points are to be established may be agreed upon for individual developing country Members. Enquiry points need not be depositories of laws and regulations. Technical assistance 90 Article XXV:2 Technical Co-operation Technical assistance to developing countries shall be provided at the multilateral level by the Secretariat and shall be decided upon by the Council for Trade in Services. On 25 June 1999, the Services Council held a special Information Session on Telecommunication Services. The Information Session examined in depth technical assistance to developing countries on regulatory issues such as the establishment of an independent regulator, interconnection and competitive safeguards. Experts from other international intergovernmental organizations including the International Telecommunications Union and the World Bank participated as well as national regulators from capitals. On 26 May 2000, the Council for Trade in Services adopted the text of the cooperation agreement between the International Telecommunication Union and the World Trade Organization (S/C/9/Rev.1). Subsequently, the ITU Council also adopted the text at its annual session held on 19-28 July. Paragraph 6 of the agreement states that the WTO and ITU secretariats will endeavour to cooperate on matters relating to technical assistance and technical cooperation. A developing country Member stressed the importance of technical assistance, which should not only be a donor/recipient process, but also a sharing of resources and a cooperative commitment. XXV:2. (S/C/M/39, paragraph 24). One delegation stressed that technical assistance was particularly needed by those Members who were undertaking regulatory reforms. That delegation was already involved in providing technical assistance in the telecommunications sector. (S/C/M/31 paragraph 28) The draft report of the CTD (TN/CTD/W/25/Rev.1) suggests that ‘The General Council instructs the WTO Secretariat to pursue with a view to concluding arrangements with relevant international institutions that have the technical assistance capacity to assist developing and least-developed country Members in addressing their supply-side and infrastructural constraints and their development needs in the services sector. This shall be without prejudice to the prerogative of the Council for Trade in Services to decide upon technical assistance to developing countries which shall be provided at the multilateral level by the Secretariat, in accordance with Article XXV.2.’ Annex on Telecommunications: paragraph 6(c) In cooperation with relevant international organizations, Members shall make available, where practicable, to developing countries information with respect to telecommunications services and developments in telecommunications and information technology to assist in strengthening their domestic telecommunications services sector. 91 Provisions relating to least-developed country Members Article IV:3 Increasing Participation of Developing Countries .Special priority shall be given to the leastdeveloped country Members in the implementation of Article IV:1 and 2. Particular account shall be taken of the serious difficulty of the leastdeveloped countries in accepting negotiated specific commitments in view of their special economic situation and their development, trade and financial needs. The General Council agrees that the references to ‘flexibility’ and ‘more favourable treatment’ with respect to agreements for liberalisation of trade in services among developing country Members, shall mean that the agreements shall not be required to comply with the rules set out in Article V provided that the agreements are entered into within the framework of or form part of wider economic liberalisation or regional integration programmes. Sources: www.wto.org and official documents 92 Appendix I: Background data Table I.1: Services as a Percentage of GDP for ACP Countries 2000 Country Palau Djibouti Antigua and Barbuda Barbados St. Lucia Vanuatu Marshall Islands Seychelles Cape Verde Suriname St. Kitts and Nevis Grenada St. Vincent and the Jamaica Mauritius São Tomé and Principe Eritrea Kenya Dominica Zimbabwe Madagascar Tonga Trinidad and Tobago Namibia Senegal Dominican Republic Gambia, The Cote d'Ivoire Belize Fiji Zambia Botswana Services as % of GSP 84 82 76 73 72 72 71 71 71 70 68 68 66 63 63 62 62 62 58 57 56 56 55 55 55 55 54 54 54 53 52 51 Country Mozambique Mauritania Benin Comoros Chad Malawi Niger Lesotho Uganda Burkina Faso Sudan Gabon Togo Guinea Guyana Ghana Tanzania Swaziland Rwanda Cameroon Mali Ethiopia Papua New Guinea Burundi Guinea-Bissau Congo, Dem. Rep. Central African Republic Nigeria Congo, Rep. Angola Sierra Leone Equatorial Guinea Services as % of GSP 50 50 50 47 47 46 44 43 42 41 40 40 40 40 40 39 39 39 38 38 38 37 31 31 29 27 25 25 23 21 19 5 93 Table I.2: ACP Services Exports as Percentage of Total Exports16 1980 Antigua and Barbuda Cape Verde Saint Lucia Bahamas Samoa Seychelles Barbados Dominican Republic Saint Kitts and Nevis Grenada Vanuatu Kiribati Saint Vincent and the Grenadines Comoros Gambia Djibouti Sierra Leone Dominica Jamaica Madagascar Tonga United Republic of Tanzania Haiti Mozambique Fiji Ethiopia Belize Rwanda Mauritius São Tomé and Principe Kenya Benin Senegal Ghana 63 70 41 13 31 80 59 24 26 54 54 54 53 17 37 67 14 37 28 12 56 1985 90 79 55 29 38 79 54 44 53 58 54 52 23 13 36 67 12 26 50 15 66 1990 94 84 54 86 79 74 74 60 66 69 75 72 33 26 63 67 25 37 46 29 49 1995 87 87 68 90 86 79 78 68 81 82 73 72 63 70 70 67 63 58 52 37 52 2000 91 90 87 83 81 79 79 76 76 74 73 72 72 70 70 67 63 62 61 55 52 Guyana Burkina Faso Uganda Zimbabwe Suriname Namibia Solomon Islands Cameroon Togo Lesotho Mali Zambia Trinidad and Tobago Chad Papua New Guinea Botswana Somalia Côte d'Ivoire Malawi Swaziland Central African Republic Gabon GuineaBissau Nigeria Congo Niger Burundi Angola Equatorial Guinea Liberia Mauritania Guinea Sudan ACP 1980 4 16 1 9 24 9 14 20 15 27 16 9 9 1 3 13 23 13 10 8 6 1985 22 14 6 20 18 9 10 39 27 39 27 7 10 19 5 6 9 10 10 12 11 1990 25 18 18 13 6 9 21 16 30 36 16 7 14 11 14 9 9 12 8 15 13 1995 22 18 18 18 17 17 17 13 14 16 13 7 12 11 11 10 9 10 4 14 11 2000 22 18 18 18 18 17 17 17 14 14 13 13 12 11 11 10 9 9 8 8 6 24 27 30 28 19 19 14 23 6 29 45 29 8 30 39 46 43 38 19 17 21 17 30 15 27 5 24 21 45 43 47 43 22 29 40 43 47 32 8 45 47 59 46 42 45 17 33 40 31 28 27 7 48 47 47 46 44 44 42 41 40 29 28 27 23 12 32 4 10 5 2 5 6 2 11 12 32 11 6 32 2 5 10 2 5 6 3 4 12 46 15 9 16 7 6 7 8 2 6 3 3 12 26 20 7 5 5 5 4 4 3 3 3 3 2 13 22 6 5 5 5 4 4 3 3 3 3 2 1 22 16 Source: UNCTAD Handbook of Statistics, 2003. 94 Table I.3: ACP Services Exports ($ Millions)17 1980 Dominican Republic Bahamas Jamaica Mauritius Barbados Nigeria Kenya Zimbabwe United Republic of Tanzania Trinidad and Tobago Fiji Ghana Antigua and Barbuda Ethiopia Cameroon Côte d'Ivoire Senegal Botswana Mozambique Namibia Madagascar Saint Lucia Seychelles Papua New Guinea Gabon Uganda Haiti Angola Benin Belize Grenada Guyana Congo Saint Vincent and the Grenadines 305 731 375 132 332 1,127 511 145 165 383 179 102 45 100 348 477 191 74 118 106 55 41 87 36 294 4 84 93 52 18 21 18 104 18 1985 579 1,104 564 116 420 316 411 271 106 246 230 31 150 203 456 343 206 52 66 106 49 70 105 48 119 23 106 129 26 22 31 47 55 19 1990 1,086 1,465 976 478 627 965 774 253 131 322 377 79 308 261 369 425 356 183 103 106 129 149 162 198 214 12 43 65 109 83 63 85 65 41 1995 1,894 1,523 1,568 773 844 608 851 469 566 331 524 139 348 310 242 426 364 236 242 301 219 264 200 321 191 104 98 113 159 117 98 130 55 72 2000 3,143 1,995 1,988 1,067 1,055 980 701 646 615 574 505 490 406 387 383 369 351 346 325 315 314 307 298 248 221 182 178 155 155 152 145 144 128 124 Zambia Vanuatu Cape Verde Gambia Saint Kitts and Nevis Dominica Suriname Sierra Leone Swaziland Mali Samoa Togo Solomon Islands Rwanda Burkina Faso Lesotho Liberia Malawi Comoros Djibouti Mauritania Sudan Chad Guinea Kiribati Tonga Niger Central African Republic Somalia GuineaBissau Equatorial Guinea São Tomé and Principe Burundi Total 1980 126 36 10 18 8 6 166 37 32 39 8 61 12 18 17 22 13 32 2 34 25 250 0 52 4 9 30 8 42 2 6 1 2 7999 1985 57 36 25 24 23 10 70 18 24 46 10 71 8 26 11 14 15 26 2 34 15 315 14 52 5 10 29 12 9 6 6 1 3 7852 1990 94 56 30 53 54 33 31 45 102 71 34 114 19 31 34 34 33 37 6 34 14 134 23 91 8 11 22 17 9 4 5 3 7 12355 1995 77 75 57 38 80 61 101 71 150 68 53 64 35 11 38 30 33 19 27 28 19 82 23 17 17 15 12 17 9 2 4 3 4 16040 2000 114 106 99 99 93 86 85 73 72 61 61 54 51 39 38 36 33 31 27 26 24 24 23 17 17 14 12 10 9 6 5 3 2 20842 17 Source: UNCTAD Handbook of Statistics, 2003. 95 Table I.4: ACP Services Exports by Sector 2000 ($ millions) Communications Insurance Construction Computer and information services Financial services 7 5 75 0 0 Royalties and license fees Other business services Government services n.i.e Personal, cultural and recreational services Country Total services Transport Travel 28 7 0 3 1 0 15 2 0 0 3 0 2 9 0 9 10 3 17 10 16 13 80 2 10 13 2 36 1 3 139 18 5 1 10 0 4 1 0 9 0 23 19 0 1 6 291 1,814 723 122 85 162 11 1 36 10 3 8 21 5 57 4 47 2,860 57 291 17 28 335 93 1 7 0 61 209 22 0 40 0 1 12 4 0 6 20 3 0 3 1 13 0 6 7 3 12 1 1 7 6 0 5 3 0 59 30 114 104 12 22 14 10 0 57 1 2 11 2 18 149 6 28 72 80 52 71 2 52 36 3 2 3 2 36 10 0 Angola Antigua and Barbuda Bahamas Barbados Belize Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Côte d'Ivoire Djibouti Dominica Dominican Republic Ethiopia Fiji Gabon Gambia Ghana Grenada Guinea Guinea-Bissau Guyana Haiti Jamaica Kenya Kiribati Lesotho Liberia Madagascar Malawi Mali Mauritania 0 1 109 4 17 6 0 8 27 35 20 35 24 35 4 62 9 52 17 7 21 67 124 2 85 119 40 26 15 15 6 101 3 4 6 38 266 0 7 20 50 19 9 113 415 2,023 1,090 172 194 260 69 6 304 67 69 41 35 76 436 151 88 3,228 506 564 217 54 504 151 117 6 133 104 2,026 968 8 43 35 364 37 88 28 36 64 54 25 11 41 38 12 1 117 34 9 4 4 32 75 16 6 71 215 170 89 8 98 6 13 0 33 5 329 411 3 1 9 51 17 22 2 33 90 1,333 257 1 24 5 121 16 25 11 96 ACP Services Exports by Sector 2000 ($ millions) contd. Communications Insurance Other business services Government services n.i.e Financial services Royalties and license fees 0 0 Personal, cultural and recreational services 2 4 14 21 Construction Computer and information services 3 0 2 0 4 4 3 4 15 7 3 43 21 Country Total services Transport Travel 223 98 16 8 9 0 9 0 0 1,071 325 315 33 608 321 62 97 309 1 0 100 35 12 9 10 542 74 278 7 17 25 24 58 277 207 146 9 5 488 258 3 14 16 23 3 1 0 2 0 0 2 0 0 1 0 2 0 0 1 0 30 0 3 2 126 56 4 512 87 42 36 27 91 74 87 26 343 104 377 45 13 64 27 23 0 13 4 3 21 0 11 2 0 56 10 1 1 15 37 15 22 3 194 19 75 35 2 168 57 16 6 5 16 34 13 7 77 78 22 16 1 137 4 18 2 0 32 19 28 0 29 7 1 2 3 1 148 16 6 27 3 6 3 24 16 12 Mauritius Mozambique Namibia Niger Nigeria Papua New Guinea Rwanda Saint Kitts and Nevis Saint Lucia Saint Vincent and the Grenadines Samoa São Tomé and Principe Senegal Sierra Leone Solomon Islands Somalia Sudan Suriname Swaziland Togo Tonga Trinidad and Tobago Uganda United Republic of Tanzania Vanuatu Zambia Zimbabwe 0 1 97 19 13 73 615 82 107 264 57 11 65 112 6 12 11 97 Table I.5: ACP Services Exports by Region, 1980 -2000, $ mn ACP Services Exports by Region 1980-2000 5000 4500 COMESA 4000 SADC 3500 3000 $ M illio n s ECOWAS 2500 2000 EAC 1500 1000 UEMOA 500 CEMAC 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 98 Table I.6: EU Trade in Services Intra- and Extra-EU Imports and Exports 2500000 Goods Exports Services Exports Goods Imports Services Imports 2000000 $ Millions 1500000 1000000 500000 0 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 Extra-EU Imports and Exports 1000000 Goods Exports Services Exports Goods Imports Services Imports 800000 $ Millions 600000 400000 200000 0 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 99 Table I.7: EU Member state trade in services Extra-EU Services Exports Extra-EU Services Imports Total Services Exports Total Services Imports Austria Services Trade 35000 60000 Belgium-Luxembourg Services Trade 30000 50000 25000 40000 $ Millions 20000 $ Millions 30000 15000 20000 10000 10000 5000 0 1992 0 1994 1996 1998 2000 1992 1994 1996 1998 2000 Denmark Services Trade 30000 12000 Finland Services Trade 25000 10000 20000 8000 $ Millions 15000 $ Millions 1994 1996 1998 2000 6000 10000 4000 5000 2000 0 0 1992 1994 1996 1998 2000 France Services Trade 100000 160000 140000 Germany Services Trade 80000 120000 100000 $ Millions $ Millions 60000 80000 60000 40000 40000 20000 20000 0 1986 1988 1990 1992 1994 1996 1998 2000 0 1986 1988 1990 1992 1994 1996 1998 2000 100 Greece Services Trade 25000 40000 Ireland Services Trade 20000 30000 $ Millions $ Millions 1986 1988 1990 1992 1994 1996 1998 2000 15000 20000 10000 10000 5000 0 0 1986 1988 1990 1992 1994 1996 1998 2000 Italy Services Trade 80000 60000 Netherlands Services Trade 50000 60000 40000 $ Millions 40000 $ Millions 1986 1988 1990 1992 1994 1996 1998 2000 30000 20000 20000 10000 0 0 1992 1994 1996 1998 2000 Portugal Services Trade 10000 70000 Spain Services Trade 60000 8000 50000 $ Millions $ Millions 1986 1988 1990 1992 1994 1996 1998 2000 6000 40000 4000 30000 20000 2000 10000 0 0 1986 1988 1990 1992 1994 1996 1998 2000 101 Sweden Services Trade 25000 140000 United Kingdom Services Trade 120000 20000 100000 $ Millions $ Millions 15000 80000 10000 60000 40000 5000 20000 0 1992 0 1994 1996 1998 2000 1986 1988 1990 1992 1994 1996 1998 2000 102 Table I.8: EU Services Trade with ACP as a Proportion of Total EU Services Trade 200118 Exports 0.2% 0.3% 0.0% 0.4% 0.6% 0.1% 0.3% 0.4% 0.0% 0.1% 0.1% 0.0% 4.3% 0.6% 0.0% 1.6% 1.2% 0.0% 2.2% 0.8% 0.2% Imports 0.1% 0.2% 0.0% 0.4% 1.2% 0.0% 0.4% 0.3% 0.0% 0.1% 0.0% 0.0% 3.5% 0.9% 0.0% 1.8% 0.5% 0.0% 2.1% 0.5% 0.1% Extra-EU EU United Kingdom Sweden Spain Portugal Netherlands Exports 1.0% 0.2% 0.0% 0.6% 1.1% 0.0% 2.8% 0.7% 0.0% 0.3% 1.0% n/a 0.5% 0.6% 0.0% 2.4% 1.2% 0.1% 1.3% 0.9% 0.0% 4.8% 1.7% 0.1% Imports 1.0% 1.0% 0.1% 1.2% 1.7% 0.1% 2.3% 0.8% 0.0% 1.0% 1.1% n/a 0.2% 0.6% 0.0% 1.8% 1.2% 0.0% 1.1% 1.0% 0.0% 4.2% 2.6% 0.1% Austria Africa Caribbean Pacific Italy Africa Caribbean Pacific Africa Caribbean Pacific Africa Caribbean Pacific Africa Caribbean Pacific Africa Caribbean Pacific Africa Caribbean Pacific Africa Caribbean Pacific Africa Caribbean Pacific BelgiumLuxembourg Africa Caribbean Pacific Denmark Africa Caribbean Pacific Finland Africa Caribbean Pacific France Africa Caribbean Pacific Germany Africa Caribbean Pacific Greece Africa Caribbean Pacific 18 Includes intra-EU trade except where specified. Data not available for Ireland. 103 Table I.9: EU Exports and Imports of Services 2001 ($ millions)19 Austria Belgium-Luxembourg Denmark EU Finland France Germany Greece World Africa Caribbean Pacific World Africa Caribbean Pacific World Africa Caribbean Pacific World Africa Caribbean Pacific World Africa Caribbean Pacific World Africa Caribbean Pacific World Africa Caribbean Pacific World Africa Caribbean Pacific TOTAL SERVICES Exports 32844 64 85 1 50286 181 326 38 26904 72 113 2 633170 9696 5120 223 5827 3 4 1 80161 3424 503 6 91394 1472 1084 36 19448 429 150 30 Transportation Exports 4969 5 41 0 10169 47 13 0 16136 41 97 1 144498 2373 1141 60 1562 1 2 0 18017 802 110 1 20722 266 238 3 8152 345 132 29 Transportation Imports 3342 4 10 0 8365 82 103 0 12262 37 35 1 142727 2483 1267 74 2572 0 2 0 17186 816 305 1 25360 243 276 17 4787 206 54 7 Travel Exports 10204 3 4 0 7616 71 27 5 4633 1 1 0 176198 1750 407 17 1440 0 0 0 30138 782 123 2 18421 71 0 0 9169 36 8 1 Travel Imports 8907 12 18 0 10586 52 201 3 5537 3 1 1 175823 3487 1460 82 1852 0 0 0 17946 712 131 13 51932 1508 0 0 4173 12 3 0 TOTAL SERVICES Imports 31551 36 71 3 43323 160 517 13 23529 93 63 1 628906 8863 5241 202 8097 5 4 0 62331 2173 578 18 145839 2685 720 27 11575 245 61 10 Government services Exports 358 5 0 0 1342 6 0 0 n/a n/a n/a n/a 11379 370 47 5 58 1 0 0 523 66 2 1 4446 25 8 0 72 1 0 0 Government services Imports 64 0 0 0 460 3 0 0 n/a n/a n/a n/a 13123 647 157 3 115 5 1 0 925 269 14 2 1322 44 16 0 396 1 0 0 Other commercial services Exports 9152 19 23 0 31159 56 285 33 n/a n/a n/a n/a 301097 4391 3058 140 2704 4 3 0 31483 1774 266 4 47804 518 838 33 2055 46 11 0 Other commercial services Imports 7301 19 43 2 23912 22 213 11 n/a n/a n/a n/a 297235 1224 2136 47 3513 0 2 0 26273 374 128 4 67226 286 428 10 2220 25 4 2 19 Source: OECD Statistics on International Trade in Services. Includes intra-EU trade. 104 EU Exports and Imports of Services 2001 ($ millions) contd. Ireland Italy Netherlands Portugal Spain Sweden United Kingdom World Africa Caribbean Pacific World Africa Caribbean Pacific World Africa Caribbean Pacific World Africa Caribbean Pacific World Africa Caribbean Pacific World Africa Caribbean Pacific World Africa Caribbean Pacific TOTAL SERVICES Exports 21303 n/a n/a n/a 57520 573 139 1 52913 319 585 13 8801 246 66 2 58264 162 586 n/a 21987 104 132 4 111884 2647 1347 89 Transportation Exports 1442 n/a n/a n/a 8176 85 21 0 19638 245 278 6 1579 31 2 0 8591 n/a 98 n/a 5186 4 4 1 17564 501 105 19 Transportation Imports 2619 n/a n/a n/a 11893 219 84 4 14082 290 227 27 1984 58 8 1 8643 n/a 59 n/a 3599 12 61 0 22683 516 43 16 Travel Exports 2762 n/a n/a n/a 25907 98 39 1 6717 0 19 0 5475 98 49 1 32753 n/a 52 n/a 4270 7 4 0 18873 583 81 7 Travel Imports 2877 n/a n/a n/a 14216 308 413 52 12005 9 43 0 2103 41 27 2 5961 n/a 132 n/a 6920 13 19 1 37970 817 472 10 TOTAL SERVICES Imports 36849 n/a n/a n/a 57196 596 583 55 54890 662 935 38 6190 140 51 2 33986 332 387 n/a 22933 53 127 2 95617 1683 1144 33 Government services Exports 199 n/a n/a n/a 575 0 0 0 957 4 12 0 112 10 0 0 n/a n/a n/a n/a 239 4 2 0 2191 248 23 4 Government services Imports 92 n/a n/a n/a 1655 1 0 0 1592 262 108 0 182 5 1 0 n/a n/a n/a n/a 98 n/a 1 0 2840 57 16 1 Other commercial services Exports 16901 n/a n/a n/a 22862 389 79 0 25601 70 277 7 1634 108 15 0 n/a n/a n/a n/a 12302 91 122 4 73257 1316 1139 59 Other commercial services Imports 31261 n/a n/a n/a 29431 68 85 0 27211 102 557 12 1921 36 16 0 n/a n/a n/a n/a 12315 n/a 47 0 32124 292 613 6 Africa = Africa – Egypt – Maghreb – South Africa 105 Table I.10: Composition of exports for selected ACP countries (where breakdown is available) Value, $, million, 2000 Communications Insurance 1% 7% 4% 0% 5% 2% 0% 0% 1% 1% 0% 1% 1% 16% 3% 3% 0% 16% 4% 0% 34% 0% 0% 0% 27% 24% 4% 0% 26% 2% 0% 19% 0% 7% 0% 10% 0% 1% 0% 2% 0% 10% 3% 1% 3% 8% 4% 2% 4% 3% 0% 0% 2% 0% 0% 4% 0% 2% 0% 3% 1% 0% 0% 2% 2% Construction Financial services 2% 3% 0% 4% 15% Other business services Transport Travel Computer and information services Government services n.i.e Royalties and license fees Personal, cultural and recreational services Jamaica 2,026 16% 66% Barbados 1,090 2% 66% Mauritius 1,071 21% 51% Swaziland Côte d'Ivoire 74 20% 46% 436 17% 13% Tanzania 615 9% 61% Kenya 968 42% 27% Ethiopia 506 42% 11% Namibia 315 88% 106 Appendix J: Business Process Outsourcing to Developing countries. Relocating call centres and back-office functions in the financial services industry to developing countries. (Based on draft note dated December 2003 on the same subject). The UK financial services industry is at the centre of the debate on outsourcing, with many major banks announcing that they will establish or use call centres in India. Outsourcing parts of the production process abroad is a relatively new phenomenon for the services sector but not for the goods sector. The globalisation of goods production has long been influenced by a number of factors such as liberalisation of economic policies; technical change, particularly in information and communication technologies; falling transport costs; and economies of scale. The search for cheaper production costs has led global firms to relocate parts of the production process abroad and thus to fragmentation of production (e.g. electronics, automobiles). Firms would maintain design, R&D or marketing functions in the headquarters in developed countries, and relocate labour and less skill-intensive production processes, such as assembly, to low-cost developing countries. Integrated production processes could be characterised by as series of production blocks which are connected by various service links. There has also been an increase in networks of firms across borders through the emergence of global value chains (in textile/clothing, flowers, canned fruit, coffee, furniture, etc.), often involving outsourcing rather than ownership of overseas subsidiaries. A value chain includes the full range of activities that are required to bring a product or service from conception, through the intermediary phases of production (transformation and producer services inputs) to delivery to final consumers and ultimate disposal after use. A chain consists of a number of different enterprises, each specialising in different functions, but linked to each other by certain ways of co-operation in a network facilitated by communication and services. While the services sector facilitated both fragmentation of the production process and the emergence of global value chains in the goods sector, the services sector itself has been less associated with global outsourcing. This was probably because services needed to be provided directly to customers, on site, or at least within the country of the customer. This has all changed, thanks mainly to rapid changes in information and communications technology. Outsourcing and the UK financial services industry Estimates vary, but analysts say that by 2010 between 100,000 (Troika)- 200,000 (Amicus) call centre jobs could be outsourced from the UK to India. There could also be a significant relocation of back-office functions in the financial services industry such as administration and data processing. A recent study found that 28 financial firms have over the past two years outsourced more than 50.000 jobs to India serving British customers. Deloitte estimates that 2mn of 13mn insurance and banking jobs in developed economies in North America, Europe and Asia could move to India by 2008. The 107 survey found that financial institutions expect to reduce costs by nearly $1.4 bn by 2008 by sending work to low-cost centres like India. Thirty percent of the survey respondents currently have existing offshore operations and that percentage is expected to reach 75 percent within two years. It also suggested that the firms achieve 39 percent cost savings from moving operations to low-cost centres. There are several reasons behind the growth in outsourcing, including: • Average cost savings of 40% on labour and administration costs. • The workforce willing to work for call centres in India is more skilled than in many developed countries • Improved communications technology lowering the costs of calls and other communication • Improved business climate in key developing countries The latter two may help to explain why the growth in outsourcing takes place now and not decades ago. There could also be unforeseen costs, e.g. • Different cultures leading to unsatisfied customers of call centres Table J.1 provides some recent examples of business process outsourcing in the UK financial services industry. It also shows that outsourcing has generated a lot of debate. Table J.1: Business Process Outsourcing in the UK financial services industry Recent examples. Function Country and number of jobs involved 4000 by the end of 2003 in India, China and Malaysia Company reasoning • HSBC Back-office processing jobs • Norwich Union / Aviva Administrative insurance jobs; 350 in call centres, 2000 in backoffice and administration Call centre jobs 2350 in India by end of 2004 • • HSBC defended transfer of work to India by arguing that the bank was a global company and insisting that it would not affect the quality of customer service and pointing out that jobs were being created in India. Quality of service provided from the subcontinent is better than in the UK Company in an ‘increasingly competitive environment’ Reduce labour and administration costs on every policy by 40 per cent Lloyds TSB 1500 jobs in India by end of 2004 500 • Lloyds said: ‘It has been very hard to recruit and retain staff for call centres around the UK.’ Barclays Back-office staff Effects of outsourcing on host countries (e.g. India) Call centres and back-office staff have been in growing demand in India through expansion of multinational operations but mainly through an increase in outsourcing arrangements. GE Capital Services opened India’s first international call centre in 1995. It now employs more than 5,000 people, whose jobs range from collecting money from delinquent credit-card users to data-mining. Swissair and British Airways have centres that run frequent-flyer programmes and the handling of errors in computer messages. American Express has a big back-office operation near Delhi. The main gain for the host-country seems to be the number of jobs and derived incomes. At present there are 650,000 workers employed in the Indian IT sector, of which around 275,000 in call centres, 200,000 in software and 175,000 in multinational operations. The fastest growth is in call-centres. The growth in 108 knowledge-based industries contributes to a focus on education, which can raise growth and investment. However, knowledge industries will not provide work to the poorest rural workers. More labour-intensive services such as call centres could provide many jobs, but not in the tens of millions. In addition, there are likely to be few externalities and productivity spillovers from call centres, making it difficult to rely on call centres as the main source of growth. Nevertheless, the growth in call centres provides a welcome source of employment. While pay is much lower than in the UK, reports suggest that pay in Indian call centres is high by national standards, e.g. double what a fully qualified local teacher can earn. The quality of work can be compromised particularly when workers need to work long shifts during the night to make up for differences in time zones. Some reports suggest that rate of attrition in this sector is high in India at 40%, but this problem is common to India and the UK 109 Appendix K: Consolidated EU GATS schedule Limitations on full commitments Mode 2 NT MA NT MA NT MA NT NT Mode 3 Mode 4 No Com Unbound commitments Mode 1 MA Mod e1 MA Mod e3 MA NT 1 ? D, FIN,F,S DK,S D, UK,DK,FIN,F,GR,S A,D,NL,UK,DK,F,I, S,E,GR,I,FIN,P BUSINESS SERVICES A. Professional Services a. Legal Services S F,P F,G, I F,P F,G, I A A b. Accounting, auditing and bookkeeping services S D,F,P, IRL,FIN,I A,DK,S,DK. S c. F,E,I,P E,I,P Taxation Services d. Architectural services D e. Engineering services f. I,P Integrated engineering services F B,G, I,P G,I, P G,I, P g. Urban planning and landscape D D, UK,DK,FIN,F, GR,S A,D,NL,UK,D K,F,I,S,E,GR,I, FIN,P A,B,NL,S,UK, D,F,I,P B,D,F,DK,NL, S,UK,E,GR,P,I B,DK,NL,S,UK ,E,GR,I,P,UK B,DK,NL,S,UK ,E,GR,I,P,UK DK,NL,S,UK,B ,D,E,GR,P,I A,B,NL,S,UK,D,F,I, P B,D,F,DK,NL,S,UK, E,GR,P,I B,DK,NL,S,UK,E,G R,I,P,UK B,DK,NL,S,UK,E,G R,I,P,UK DK,NL,S,UK,B,D,E, GR,P,I DK,I,DK,D,F,GR,P,S D,F,GR,P,I,S A,DK,GR,P,I A,DK,GR,P,I DK,I,DK,D,F,G R,P,S D,F,GR,P,I,S F B,G, I,P G,I, P G,I, P B,G, I,P architectural services S S EU EU EU EU EU EU h. Medical and dental services i. A,E,I,P,F Veterinary services E,I,IRL,P,D,F,S ,UK D,DK,E,I,IRL, P,UK,F,S j. k. EU EU B. a. Services provided by midwives, nurses, physiotherapists and paramedical personnel Other Computer and Related Servic es Consultancy services related to the installation of computer hardware B,DK,I,NL,S,G R 110 Limitations on full commitments Mode 2 NT MA NT MA NT NT NT Mode 3 Mode 4 No Com Unbound commitments Mode 1 MA Mod e1 MA Mod e3 MA NT b. Software implementation services c. Data processing services d. Data base services MA B,DK,I,NL,S,G R B,DK,I,NL,S,G R B,DK,I,NL,S,G R e. C. X I,P F,I,P X a. b. c. D. E,FIN,E,FIN F,I,P,GR DK DK,E,GR,F,I,P a. DK,E,GR,F,I,P F,I,P,GR b. IRL IRL IRL IRL E. F,S EU F,S EU a. b. F,S D D c. d. e. F. Other Research and Development S ervices R&D services on natural sciences R&D services on social sciences and humanities Interdisciplinary R&D services Real Estate Services Involving own or leased property On a fee or contract basis Rental/Leasing Services with out Operators Relating to ships Relating to aircraft Relating to other transport equipment Relating to other machinery and equipment Other Other Business Services B,D,I,S,UK,G R,I,UK a. Advertising services b. c. B,D,DK,I,S,UK d. Market research and public opinion polling services Management consulting service Services related to man. consulting 111 Limitations on full commitments Mode 2 NT E,I,P I I I I E,I,P I,P,A MA NT MA NT NT NT Mode 3 Mode 4 No Com Unbound commitments Mode 1 MA Mod e1 MA Mod e3 MA NT e. MA D,DK,S,UK,I,P ,UK f. g. h. E,P X X E,P,A P i. j. Technical testing and analysis serv. Services incidental to agriculture, hunting and forestry Services incidental to fishing Services incidental to mining Services incidental to manufacturing Services incidental to energy distribution k. Placement and supply services of Personnel E,B,F,I,D D,P D,P l. E,I,P,F,I F D,F,I,P Investigation and security A,E,DK,FIN DK B,DK,E,P,F,I D,E, IRL, P,E U,F, NL B,E, F,I,P D,E, IRL, P,E U,F, NL B,E, F,I,P m. D n. EU EU I S,FIN DK DK,A S,FIN DK,FIN,A EU EU o. p. q. r. s. t. S 2 A. B. Related scientific and technical consulting services Maintenance and repair of equipment (not including maritime vessels, aircraft or other transport equipment) Building-cleaning services Photographic services Packaging services Printing, publishing Convention services Other COMMUNICATION SERVI CES Postal services Courier services X X 112 Limitations on full commitments Mode 2 NT P,GR,F ,E,IRL (and below) A X X I,P,GR cpc 5111: B,DK,S,UK GR,NL,F,A EU EU A MA NT MA NT MA NT NT Mode 3 Mode 4 Mod e1 MA Mod e3 MA No Com Unbound commitments Mode 1 NT C. Telecommunication services MA P,GR, E,IRL (and below) D. E. 3 Audiovisual services Other CONSTRUCTION AND RE LATED ENGINEERING SE RVICES 4 DISTRIBUTION SERVICES F,I EU F,I EU E,I,P B,DK,F,I,P,S F E,I,P,F F E,I,P E,I,P,F A. B. C. D. E. 5 A. B. C. D. E. F,I F,I F,I GR GR E,I F,GR,I F,GR,I DK,F,I G 6 A. B. EU EU EU EU C. S A,DK,D,F IN,I,IP A,B,E,GR,FIN, F,I,IRL,P,S D. Commission agents' services Wholesale trade services Retailing services Franchising Other EDUCATIONAL SERVICES Primary education services Secondary education services Higher education services Adult education Other education services ENVIRONMENTAL SERVI CES Sewage services Refuse disposal services Sanitation and similar services Other A,B,E,GR,F IN,F,I,IRL,P ,S A,DK,I,E,GR EU EU A,DK,I,E,GR EU EU 7 FINANCIAL SERVICES A,DK, D,FIN, F,I,P,S A,DK, D,FIN, F,I,P,S A. All insurance and insurancerelated services 113 Limitations on full commitments Mode 2 NT D,FIN,G R,UK F,GR,I F,GR,I I MA NT MA NT NT Mode 3 Mode 4 No Com Unbound commitments Mode 1 MA Mod e1 MA Mod e3 MA NT B. Banking and other financial services B,IRL MA A,B,DK,E,FIN, F,GR,I,IRL,P, S,UK NT A,B,DK,E,FI N,F,GR,I,IR L,P,S,UK (excl. insurance) C. 8. L,P,B,A,E,F,I F F F,GR X A. B. C. D. EU A EU EU A EU 9. I B,FIN,I,P A,B,D,DK,I,IR L,S.F,GR,I,IR L GR,E,I,P,F F A. Other HEALTH RELATED AND SOCIAL SERVICES (other than those listed under 1.A.h-j.) Hospital services Other Human Health Services Social Services Other TOURISM AND TRAVEL RELATED SERVICES Hotels and restaurants (incl. catering) EU EU B. Travel agencies and tour oper ators services C. D. I,P 10. A. Tourist guides services Other RECREATIONAL, CULTURAL AND SPORTING SERVICES (other than audiovisual services) Entertainment services (including theatre, live bands and circus services) S F,I,P EU A,F,I EU F,I B. EU P EU X C. News agency services Libraries, archives, museums and other cultural services 114 Limitations on full commitments Mode 2 NT S I X MA NT MA NT MA NT NT Mode 3 Mode 4 No Com Unbound commitments Mode 1 MA Mod e1 MA Mod e3 MA NT D. E. 11. A. B. X X X X X D D S,E U EU EU Sporting and other recreational services Other TRANSPORT SERVICES Maritime Transport Services Internal Waterways Transport D D S,E U EU EU C. Air Transport Services D. E. F. S S DK,P DK,P Space Transport Rail Transport Services Road Transport Services a. Passenger transportation b. P,IRL,DK,I,P, E,DK,FIN,S,E U,A I,S EU EU F EU EU EU c. d. EU EU e. Freight transportation Rental of commercial vehicles with operator Maintenance and repair of road transport Supporting services for road transport services G. Pipeline Transport EU, A,S EU, A,S a. b. H. X X I. 12. Transportation of fuels Transportation of other goods Services auxiliary to all mode s of transport Other Transport Services OTHER SERVICES NOT IN CLUDED ELSEWHERE 115 Overseas Development Institute 111 Westminster Bridge Road London SE1 7JD Tel: +44 (0)20 7922 0300 Fax: +44 (0)20 7922 0399 odi@odi.org.uk www.odi.org.uk