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Wednesday, September 10, 2003

Bringing it All Back Home

This weeks meeting in Cancun on the Doha round is important for a number of reasons. Europe and the US are going to come under a lot of pressure to 'play fair' in the globalisation process. Having rightly emphasised the importance for third world economies of opening themselves up, and constructing solid and transparent institutions, the developed world is now finding that the third world (or at least parts of it) is bringing the argument 'home to mummy' and saying fine, but what about agriculture and services. I will try and post something on the agriculture debate in another moment, but for now, lets think the big topic of the week, and especially as far as India is concerned: services:

WTO negotiations in services and export prospects for services are complementary in nature. The Doha declaration states that negotiations on trade in services shall be conducted to promote economic growth of all members and in the development of developing and least-developed members. The Negotiating Guidelines recognise the primacy of the request-offer approach as the main method of negotiations.

The stand adopted by many developing countries is that issues related to them are not being adequately considered despite Article IV and Article XIX:2. Developing countries have been asked to give higher market access and national treatment commitments, while developed members are not giving adequate market access in sectors and modes of supply of export interest to them. The Prasad Committee on International Trade in Services has highlighted some important issues related to WTO Negotiations.

Issues important to the US in services negotiations and the steps taken by it which can help understand developed countries’ priorities include:

* Emphasis on deeper commitments in finance and telecommunications and better commitments of existing WTO members in distribution, travel and tourism, audio-visual, health, construction, education, and environmental services.

* Emphasis on the issue of government procurement.

* Promoting improved commitments on Mode 3 commercial presence so that US service suppliers can choose their preferred form of business.

* Using the new WTO Accessions and Regional Initiatives for immediate gains for the US.

* Strategy of gaining from initiatives like the Free Trade Areas of the Americas (FTAAs), the Transatlantic Economic Partnership (TEP) with EU, assisting the Japanese government’s efforts in financial services “Big Bang” and major capacity-building component to help Africa.

The US is pursuing a negotiating strategy designed to obtain maximum benefits for its suppliers of services. Developed countries have a headstart in making a proactive agenda, with the US having set up a Special Services Negotiating Committee. Developing countries like India, which have a potential in services sector, while being proactive, should also be cautious, so that they do not lose in sectors they are considered to have a potential, as the US and other developed nations have established a firm base in many WTO member nations. Thus, post-Doha negotiations will be a completely new ball game where economic details and market intelligence is more important.............

In case of supply of services, consumption abroad and movement of persons mode are important, while for others cross-border supply and commercial presence mode are important. The export potential in this sector has to be examined by taking note of the diversity in the services sector, the supply base for services and the status of commitments and WTO negotiations. Some examples which can help in showing these inter-relations between export prospects and WTO negotiations in services are as follows:

Super-specialty Hospital Services: India has a good supply base and can supply them under all modes, though consumption abroad is the most important mode. However, good marketing and publicity is needed. The HS System in countries like the UK virtually deny market access though their WTO commitments do not show any limitations. In the US, the main limitation is that medical expenditure incurred abroad is ineligible for government reimbursement. Besides, there are limitations like need-based quantitative limits, the need to be natural persons, accreditation rules, etc.

Satellite Mapping Services: India has a good supply base for economic application of SMP, which is also cost-competitive. Public sector institutions are the main suppliers of these services. But there are limitations due to defence reasons, non-inclusion of these services in commitments to WTO and the fact that these services cannot be viewed only from a commercial angle.

India has a good potential for exports of Printing Services. Efforts to be cost competitive and leveraging our capacities in the software sector can help.

In the case of Accounting, Auditing and Book-keeping Services, where India has a great potential for exports, the limitations are mainly in the form of licensing, accreditation, in-state residency and state-level restrictions in countries like the US. Horizontal limitations on entry for specialty occupations automatically restrict opportunities in this sector.
Source: H A C Prasad, Financial Express

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